5 Mistakes to avoid while filing your IT Returns!

                                                                  Prof. Bajaj

And now its that month of the year, when the running around starts for IT returns filing. With the advent of technology, and the initiatives taken by Income-Tax department, hopefully we will not see long queues in the Income Tax Office, for ITR filing.

You can conveniently file your IT returns online. Additionally, for those who are still not too tech-savvy, IT Department is coming up with innovative ideas like setting up kiosks in Malls, Societies etc. You can also submit your physical IT Return forms at the kiosks in your neighbourhood. What more can you ask for?

Now only thing you need to do, is to avoid some common mistakes while filing the ITR so that it saves lot of after-effort for the IT department as well as you to correct the errors.

1. Choose the correct ITR form

With a vast array of ITR forms (ITR 1, 2, 3, 4, 4S and V), people often get confused about which form to fill up. To pick up the right form for you, refer to below list:

A] ITR 1 (Sahaj): To be filled up by individuals with salary, pension, rental income from one property, tax-free capital gains and income from interest.

B] ITR 2 : To be filled by individual and HUFs with salary, pension, rental income from more than one property, taxable capital gains, income from interest and foreign assets.

C] ITR 3: To be filled by partners in a firm with interest, salary, bonus, commission, capital gains, more than one property.

D] ITR 4: To be filled up by individuals and HUFs with income from business / profession with gross receipts more than Rs. 60 Lakhs a year. (If gross receipts are less than Rs. 60 Lakhs, but the income is less than 8% of gross receipts, still ITR 4 to be used).

E] ITR 4S (Sugam): To be filled up by individuals and HUFs with income from business / profession and gross receipts upto Rs. 60 Lakhs a year.

F] ITR V: Remember this is “V” and not 5. This is an acknowledgment form and is to be filled by all the above mentioned categories.

2. Remove all TYPOs

The young generation is pretty familiar with the word “TYPO”. Any typing mistake they make, and excuse themselves by calling it a TYPO. Sorry friends, but you can't afford to make a TYPO in your ITR. There is a low chance of you getting an error at the time of filling it. But one TYPO can delay your refund by a pretty long time. So be doubly careful while filling up your information especially like PAN, Bank Details and other info too.

3. Verify tax paid data with form 26AS

Most people are only aware about Form 16 or Form 16A that they get from their employer / bank. However, it is equally important to verify the TDS details and the advance tax paid details in Form 26AS. There could be a possibility wherein, your bank / employer have deducted your TDS but it is not credited to your PAN due to some technical errors. It could be an error that the deductor has not quoted your PAN correctly in his TDS return. Also, we might forget to mention some FD interest in our return, which would be verified with 26AS.

4. Fill up the tax saving deductions with utmost care

The tax saving investments, you have done prior to 31^st March, need to be carefully mentioned in their respective sections. It is seen that while filling up information on 80C, sometimes people also include ‘employers’ contribution the PF. Remember, it's only the ‘employee’ contribution that qualifies for 80C.

Another common mistake is that some people write the entire EMI paid on home loan in 80C or 24B. Remember to put the principle in 80C and interest in 24B.

There are some other lesser known sections like 80E (payment of education loan interest), 80G (donations to charitable organisations), 80DD (expenses on a disabled dependent) etc. If you have made payments towards any of these, make sure that you mention them in your ITR, so that you get the deduction.

5. The last step

Do not forget to attach ITR V with your physical return. Chances of missing ITR V in physical return are less, as they would not accept your physical form without ITR V.

But if you are e-filing without digital signature, do not forget to send the signed ITR V to CPC Bangalore. If your ITR V does not reach CPC Bangalore within 120 days of e-filing your return, then your return is not considered to be complete.

You will observe that the way things are moving, you can be more self-dependent for filing of your returns. Taking professional help could definitely help, but now you need not depend on someone just to ‘stand in queue’ on your behalf. Filing IT returns is in your own interest. They help you for:

a. Availing any kind of loan like home, personal or education;

b. Visa and immigration processing;

c. Income proof / net worth certification;

d. Refund claims (in case of excess taxes paid); and

e. Applying for a higher insurance cover.

(The views mentioned in the article are personal opinion of the author. The Author is Chief Investment Planner with Nidhi Investments, Mumbai.)

Submission of ITR-V for A.Y. 2011-12

The due date for submission of ITR-V for A.Y. 2011-12 has been extended upto 31.03.2012 or 120 days from the date of upload whichever is later (with no further extension likely).

Exemption from Filing ITR

Point to be kept in mind while planning Tax u/s 80C

By: Manish Negi

There are various significant points which must keep in mind while planning tax under section 80C of Income Tax Act, 1961. Following are some of them:

• If assessee surrender their Life Insurance Policy within three years, then assessee has to pay the tax on the amount of deduction claimed earlier under section 80C i.e. premium paid on insurance of life.
• Investment under Post Office Time Deposit Rules, 1981 and Senior Citizen Savings Scheme Rules, 2004 is a eligible deduction under section 80C but if assessee withdrawn any amount from his account under above mentioned scheme before the expiry of five years from the date of deposit, then the amount so withdrawn shall be deemed to be income and chargeable to tax.
• If assessee terminates his participation in any Unit Linked Insurance Plan within five years, then assessee has to pay the tax on the amount of deduction claimed earlier under section 80C i.e. Contribution in the Unit-linked Insurance Plan 1971 or any Unit linked Insurance Plan of LIC Mutual Fund.
• If assessee sell their house which was purchased through home loan within five years from the date of purchase, then assessee has to pay the tax on the amount of deduction claimed earlier under section 80C i.e. repayment of principle amount of loan.

Must Read : Exemption from Filing ITR

Free Download Tax Calculator

Shares held as investment & Shares held as Stock-in-Trade

By: Anooj

Distinction between shares held as stock-in-trade and shares held as investment - tests for such a distinction

1.The Income Tax Act, 1961 makes a distinction between a “capital asset” and a “trading asset”.

2. Capital asset is defined in Section 2(14) of the Act. Long-term capital assets and gains are dealt with under Section 2(29A) and Section 2(29B). Short-term capital assets and gains are dealt with under Section 2(42A) and Section 2(42B).

3. Trading asset is dealt with under Section 28 of the Act.

4. The Central Board of Direct Taxes (CBDT) through Instruction No.1827 dated August 31, 1989 had brought to the notice of the assessing officers that there is a distinction between shares held as investment (capital asset) and shares held as stock-in-trade (trading asset). In the light of a number of judicial decisions pronounced after the issue of the above instructions, it is proposed to update the above instructions for the information of assessees as well as for guidance of the assessing officers.

5. In the case of Commissioner of Income Tax (Central), Calcutta Vs Associated Industrial Development Company (P) Ltd (82 ITR 586), the Supreme Court observed that:

“Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is within the knowledge of the assessee who holds the shares and it should, in normal circumstances, be in a position to produce evidence from its records as to whether it has maintained any distinction between those shares which are its stock-in-trade and those which are held by way of investment.”

6. In the case of Commissioner of Income Tax, Bombay Vs H. Holck Larsen (160 ITR 67), the Supreme Court observed:

“The High Court, in our opinion, made a mistake in observing whether transactions of sale and purchase of shares were trading transactions or whether these were in the nature of investment was a question of law. This was a mixed question of law and fact.”

7. The principles laid down by the Supreme Court in the above two cases afford adequate guidance to the assessing officers.

8. The Authority for Advance Rulings (AAR) (288 ITR 641), referring to the decisions of the Supreme Court in several cases, has culled out the following principles:-

“(i) Where a company purchases and sells shares, it must be shown that they were held as stock-in-trade and that existence of the power to purchase and sell shares in the memorandum of association is not decisive of the nature of transaction;

(ii) the substantial nature of transactions, the manner of maintaining books of accounts, the magnitude of purchases and sales and the ratio between purchases and sales and the holding would furnish a good guide to determine the nature of transactions;

(iii) ordinarily the purchase and sale of shares with the motive of earning a profit, would result in the transaction being in the nature of trade/adventure in the nature of trade; but where the object of the investment in shares of a company is to derive income by way of dividend etc. then the profits accruing by change in such investment (by sale of shares) will yield capital gain and not revenue receipt”.

9. Dealing with the above three principles, the AAR has observed in the case of Fidelity group as under:-

“We shall revert to the aforementioned principles. The first principle requires us to ascertain whether the purchase of shares by a FII in exercise of the power in the memorandum of association/trust deed was as stockin-trade as the mere existence of the power to purchase and sell shares will not by itself be decisive of the nature of transaction. We have to verify as to how the shares were valued/held in the books of account i.e. whether they were valued as stock-in-trade at the end of the financial year for the purpose of arriving at business income or held as investment in capital assets. The second principle furnishes a guide for determining the nature of transaction by verifying whether there are substantial transactions, their magnitude, etc., maintenance of books of account and finding the ratio between purchases and sales. It will not be out of place to mention that regulation 18 of the SEBI Regulations enjoins upon every FII to keep and maintain books of account containing true and fair accounts relating to remittance of initial corpus of buying and selling and realizing capital gains on investments and accounts of remittance to India for investment in India and realizing capital gains on investment from such remittances. The third principle suggests that ordinarily purchases and sales of shares with the motive of realizing profit would lead to inference of trade/adventure in the nature of trade; where the object of the investment in shares of companies is to derive income by way of dividends etc., the transactions of purchases and sales of shares would yield capital gains and not business profits.”

10. CBDT also wishes to emphasise that it is possible for a tax payer to have two portfolios, i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads i.e., capital gains as well as business income.

11. Assessing officers are advised that the above principles should guide them in determining whether, in a given case, the shares are held by the assessee as investment (and therefore giving rise to capital gains) or as stock-in-trade (and therefore giving rise to business profits). The assessing officers are further advised that no single principle would be decisive and the total effect of all the principles should be considered to determine whether, in a given case, the shares are held by the assessee as investment or stock-in-trade.

12. These instructions shall supplement the earlier Instruction no. 1827 dated August 31, 1989.

Must Read : Exemption from Filing ITR

Free Download Tax Calculator

Exemption from Filing ITR

By: Raman Aggarwal

The CBDT has exempted certain class of assesses from filing the Income Tax Return after the accomplishment of following conditions:

Ø      Assessee should be an individual.

Ø      Income of the assessee does not exceed Rs. 5 Lac.

Ø      Income is chargeable under the head Income from Salaries.

Ø      Interest income should be less than Rs.10000 from the saving bank account. 

If any individual assessee has income from interest of Fixed Deposit or Rental Income from House Property or any Income from Capital Gain or Gain from Business or Profession or any Speculation Income from share transaction, then assessee will not be eligible to claim the benefit of “Exemption from filing Income Tax Return”. 

There are some other conditions also for availing this benefit-

Ø      Assessee has reported the Permanent Account Number (PAN) to the employer.

Ø      Assessee has reported all the income & full details of deduction under section 80C to the employer and employer has deducted the TDS.

Ø      Assessee has received TDS certificate in Form No. 16 from their Employer.

Ø      Employer has deposited the TDS amount to the Central Government.

Ø      Assessee has no claim of refund of taxes.

Ø      Assessee has received Salary only from one employer and if any assessee changes their job in middle of the Financial Year, assessee has to file the return. 

If any notice u/s 142(1), 148, 153A or 153C of the Income Tax Act, 1961 has been issued for filing an Income Tax Return for the relevant assessment year then the exemption from filing Income Tax Return will not available.

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FAQ / Oltas / e-TAX Payment

What is e-payment of taxes?

This is a facility provided to the taxpayers to make income tax payments through internet, using net-banking facility.

How can I use this facility to pay income tax?

You can use the facility if -

a) You have a bank account with net-banking facility, and

b) Your bank is amongst the banks that provide the e- payment facility.

Whether it is mandatory to pay tax online?

It is mandatory for the following types of assesses to pay tax online with effect from April 1,2008.

a) All the corporate assesses.

b) All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.

Whether it is mandatory to make the TDS/TCS payment (Challan 281) online?

Yes, it is mandatory for below Assessee to make the TDS/TCS payment online

a) All the corporate assesses.

b) All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.

How do I know whether my bank provide this facility?

The list of banks providing this facility is available on NSDL-TIN website. Alternatively you may get the information from your bank.

What should I do if my bank does not have an online payment facility or is not an authorized bank for etax ?

In case your bank doesnot have an online payment facility or is not an authorized bank then you can make electronic payment of tax from the account of any other person who has an account with the authorized bank having online facility. However, the challan for making such payment must clearly indicate your Permanent Account Number (PAN).

What is the procedure for entering the required data on the screen for paying tax online?

Follow the steps as under to pay tax online:-

Step 1

a) Log on to NSDL-TIN website (www.tin-nsdl.com).

b) Click on the icon e-payment: pay taxes online.

c) Click on 'Click to pay tax online'.

d) Select the required challan.

Step 2

After selecting the required challan, you will be directed to the screen for entering the following data:

a) PAN for non-TDS payments and TAN for TDS payments.

b) Address of the taxpayer.

c) Assessment Year.

d) Major Head Code.

e) Minor Head Code.

f) Type of payment.

g) Select the bank name from the drop down provided.

In case of challan no. 280, 282 and 283 the Permanent Account Number (PAN) needs to be entered. In case of challan no. 281 Tax Deduction/Collection Account Number (TAN) needs to be entered. Please ensure that you enter PAN/TAN correctly, as this is extremely important for further processing. The system will check the validity of PAN/TAN. In case PAN/TAN is not available in the database of the Income Tax Department then you cannot proceed with the payment of tax.

Step 3

After entering all the above detail, click on PROCEED button. TIN system will display the contents you have entered along with the “Name” appearing in the ITD database with respect the PAN/TAN entered by you.

Step 4

You can now verify the details entered by you. In case you have made a mistake in data entry, click on “EDIT” to correct the same. If all the detail and name as per ITD is correct, click on “SUBMIT” button. You will be directed to the net-banking site provided by your bank.

What is the procedure after being directed to the net banking site of the bank?

TIN system will direct you to net-banking facility of your bank. You will have to log on to the net banking site of your bank using your login ID and password/PIN provided by the bank. The particulars entered by you at TIN website will be displayed again.

You will now be required to enter the amount of tax you intend to pay and also select your bank account number from where you intend to pay the tax. After verifying the correctness, you can proceed with confirming the payment.

What will happen after I confirm the payment of tax at my bank’s site?

Your bank will process the transaction online by debiting the bank account indicated by you and generate a printable acknowledgment indicating the Challan Identification Number (CIN). You can verify the status of the challan in the “Challan Status Inquiry” at NSDL-TIN website using CIN after a week, after making payment.

How can I know that I have completed tax payment using this facility?

Apart from CIN given to you, you can check your online bank statement to verify the tax payment.

Do I have to attach the acknowledgment counterfoil with my return?

No, it will be considered sufficient proof if you quote your Challan Identification Number (CIN) as mentioned in your counterfoil in your return.

What is the timing for making payment through internet?

You will have to check the net-banking webpage of your bank’s website for this information.

If I encounter any problem while making payment through internet whom should I contact?

If any problem encountered at the NSDL website while entering non-financial data then contact the TIN Call Center at 022-24994650.

If any problem encountered while entering the financial details at the net-banking webpage of your bank, then you should contact your bank for assistance.

Where should I make enquiries about my tax payments through internet?

You should contact your bank for queries about your payment transaction through internet.

Whom should I contact if the counterfoil containing the CIN is not displayed on completion of the transaction and if I want duplicate counterfoil?

Your Bank provides facility for re-generation of electronic challan counterfoil kindly check the Bank website, if not then you should contact your bank request them for duplicate challan counterfoil.

If I have misplaced my counterfoil whom do I contact?

Your Bank provides facility for re-generation of electronic challan counterfoil kindly check the Bank website; if not then you should contact your bank and request them for duplicate challan counterfoil.

After making e-payment of direct tax if status of challan is not available under Challan Status Enquiry on NSDL site, what should I do?

You can verify the status of the challan in the “Challan Status Inquiry” at NSDL-TIN website after 5 to 7 days of making e-payment. In case of non availability of the challan status kindly contact your bank.

If I encountered any error on NSDL site while making e-tax payment what should I do?

If encountered any error on e-tax website kindly contact TIN call centre at 022-24994650.

If after entering challan details in NSDL site if Bank Name is not being displayed what should I do?

The problem may be encountered because of the following

Reason 1: If Assessee enters incorrect TAN / PAN in challan data entry screen.

Reason 2: If Assessee using Internet Explorer browser then temporary internet files should be deleted by following:

A. Open Internet Explorer window.

B. Go to “Tools” Menu.

C. Select “Internet Options”.

D. Delete cookies and Delete temporary Internet files on your machine.

E. Close the current Internet Explorer windows.

F. Again go to tin-nsdl site & make e-payment.

If still above raised problem not resolved then kindly contact the TIN Call Center at 022-24994650.

Account get debited more than once for the same e-tax transaction what should I do?

If during the transaction or after completing the transaction bank site encountered any error or get disconnected before generating Taxpayer counterfoil then instead of doing the same transaction again kindly check your Account, if account is being debited then contact your bank for regeneration of taxpayer counterfoil . Please note in the above case donot make the same transaction again which result in account debited more than once for same e-tax transaction.

How secure is the transmission of data to the website for e- payment?

All transmission through NSDL-TIN website is encrypted and is with Secure Socket Layer (SSL) authentication. With respect to the banks, it depends on the security measures provided by the bank for net-banking.

How does this system of payment of taxes through internet benefit me as a taxpayer?

This system is beneficial to you as you are not required to personally visit the bank to make the payments. Payment can be made electronically at your convenience from any place where an internet facility is available e.g. your office, residence, etc. Further, you get the Challan Identification Number (CIN) online, which is required by you when you file your return. 

Why we should file the return? If salary is less than 5 Lakh

By: Abhishek Ranjan Singh

Why we should file the return? If CBDT exempts return-filing for salaried having total income upto Rs 5 Lakh.

IN MY OPINION IT IS ALWAYS BETTER TO FILE THE RETURN

Some reasons:

1.The tax department has notified that individuals with salary income below Rs 5 lakh are not required to file their tax return subject to certain conditions* being met. Though this move would benefit the new entrants to employment, for others this rule is nothing but increased confusion in deciding whether to file tax return or not.

*Conditions for exemption from filing tax return under Rs 5 lakh rule:

A. Single employer income.

B. Savings account interest up to Rs 10,000.

C. PAN should be correctly declared to the employer.

D. Employer should have deducted tax on both salary & savings account interest.

Accordingly, an individual who has income from multiple employers or FD/term deposit interest or house, wherein she/he is claiming interest deduction would need to file her/his tax return.

2. How can you declare your Saving Bank Account Interest income of year ending March to your employer before year ending to deduct the TDS. 

3.When you file your tax returns every year, you manage to create your financial record with the tax department.

This financial/tax history is positively viewed and favourably used by most agencies with whom you may need to interact, such as when you avail any kind of loan (home, personal, vehicle loan, etc), when you apply for VISA etc.

4.Proof of (financial) life.

Income tax return is essential for making any investment and goes to prove that you have a valid source of income to make such investment.

Considering the above points, filing your tax return seems to be a GOOD IDEA.