BankBazaar.com CEO Adhil Shetty explains why it is required to file income tax returns
Itís the tax season. Here are a few tips to ensure an error-free tax filing process.
File your returns
There is a misconception among some salaried individuals that because the employer has deducted tax at source they are not required to file returns. Even though tax has been deducted and there is no other source of income, or liability to pay tax, employees have to file income-tax returns. Every individual has to necessarily file the returns if the total income, before allowing any deduction, exceeds the exemption limit.
Even if your income is below the exemption limit, which is bound to happen at the beginning of oneís career, filing returns will help in the documentation process if you are taking a loan or an insurance policy or when you are applying for a visa.
Pick the correct form
There are different Indian Income Tax Return (ITR) forms. Depending on the various streams of income you have, you have to select the form accordingly. Make sure you select an appropriate form after taking into consideration the flow of income from various streams.
Disclose exempt income
Income such as dividend received on mutual funds and long-term capital gains on securities are exempt from tax. However, tax laws require you to report the same in your tax returns even though you do not have to pay any tax on them.
Annual information return
While filing income tax returns, it is essential to disclose any significant investments made during the year, transactions of immoveable property, cash deposits and credit card expenses aggregating or exceeding certain threshold limits. For example, credit card payments of R2 lakh or more, purchase of shares of a company of R1 lakh or more, and purchase of units of mutual funds of R2 lakh or more.
Consider income received by a minor child
A minor is not required to file a separate income-tax return. However, the income earned has to be included in the returns filed by the parents although the amount may be negligible for instance interest on savings in the bank account.
Avoid omission of interests received on bank accounts
Section 80L has been omitted from the statute effective April 1, 2006 and, therefore, any interest earned from a bank deposit is taxable in the hands of the taxpayer. Hence, interest received on the balance in your savings account is taxable. Make sure you take it into consideration