Filing tax returns is very important for every earning individual. However, on one hand, where you need to be familiar with the process of filing taxes, on the other hand, you must also be updated and well versed about the changes or reforms introduced by the Government every year. This ensures that you make minimal mistakes and avoid reworking while filing your income tax returns. You also do not want to be in the bad books of the person who is assessing your IT returns because you ended up filing your returns just a day before the due date. Hence, you might miss out on certain important things, and you may end up claiming less or no returns and paying more tax.
Listed below are few things to remember when you file your income tax returns:
Link PAN number with Aadhar Number:
The Government introduced this important change wherein you will not be able to file your income tax returns if your PAN number is not linked to your Aadhar number. Also, your Aadhar number has to be quoted by you mandatorily in the ITR (Income Tax Return) form. In case you have the enrollment ID which is received on the form, after applying for your Aadhaar card, you can still file your tax returns. This is how- The ITR form will have 28-digits for the accommodation of the Aadhar enrollment number instead of the expected 12-digits for your Aadhar number. So, you can fill in the right details depending on the stage of your Aadhar card application.
Picking the right ITR Form and Filing your Returns Online:
You can opt to file your returns either online or offline. An individual or a Hindu Undivided Family (HUF) whose earnings do not exceed the limit of INR 5 lakhs and who has an unclaimed refund in the return of income can apply for paper or offline returns. Also, an individual who is 80 years of age or above can file offline returns anytime during the previous year.
Report Bank Accounts:
Any bank account held by an income tax payer has to be mentioned or declared in the ITR form. You have to mention the account type- whether the account was a savings account or a current account, along with the bank account number, IFSC code as well as the name of the bank. Having said that, there is no need to specify the details of the bank accounts that have not been in use for the last three financial years that have gone by. Additionally, you are required to mention any cash deposits made by you during the period of demonetization. The ITR form allows tax payers to report all cash deposits made during demonetization that is from 9th of December, 2016 to 30th of December, 2016. It has to be noted here that this column is required to be filled by only those taxpayers for whom any amount which is more than INR 2 lakhs was deposited in their account or accounts.
Report Exempt Income:
Exempt income was to be mentioned in a single column previously. The new ITR form has different columns to report your dividend income and long-term capital gains- Section 10(38) is meant for all dividend incomes and Section 10(34) for reporting any long-term capital gains.
For individuals with a long term capital gain, exceeding the amount of INR 2.5 lakhs, they have to compulsorily file their tax returns online even if their total taxable income exceeds 2.5 lakhs.
List all Sources of Income:
Along with all bank accounts, some of us also have a post office savings account or fixed deposits or any other alternate source of income. It must be noted that the interest earned from these accounts should also be mentioned on the form. Usually, tax payers are of the opinion that the financial institution has already made deductions on the interest earnings from such investments or assets. In all cases, you will have to show your interest earnings from the sources mentioned above. You will not be taxed again for the interest earnings at this stage. You can claim all Tax Deduction at Source (TDS) which will be deducted from your total taxable income.
E–Verify your return or send the ITR V acknowledgement on time:
In case of the tax returns that are not verified, your filing process will not be considered complete. You can either send the ITR V reports to the Government within 4 months or opt for the convenient option of online verification of your returns using e-verify. Once the online verification is complete, you will not need to send an acknowledgement for the same. The Government provides various ways in which you can e-verify your tax returns. E-verification can be done through your Demat account, Aadhaar number, Bank Account Number and even through the Net Banking option.
Hence, you should keep the points mentioned above in mind before filing your IT returns. Moreover, the revising of income tax return which was previously limited at 2 years has now been cut down to 1 year.
Know How to Protect your Retirement Funds from Tax Erosion
Retirement is often one of the most challenging phases in an individual’s life. The overall picture of retirement seems very good to an onlooker from a distance as he thinks of a person who is now going to stop working and start enjoying the rest of his/her life with the funds saved as retirement corpus. However, that is just an attraction for the investor and not for the individual who is retiring. Retiring as an event can be as challenging as when you appeared for your first interview. There is a lot of planning and assessment that needs to be done before an individual makes a move in the direction of building a retirement corpus. Furthermore, there are taxes which are constantly looming large over your investment strategy, almost risking your future financial security. A retiree often sees his retirement funds being gradually chipped away and reduced by income tax. However, the government realizes this harsh reality faced by the common man and hence has made provisions for quite a few options for the senior citizens of India to benefit and support them financially.
Tax erosion is a nationwide problem when it comes to investments and their earnings. Apart from that, a majority of these investment modes involve risk. For example- we have the very popular Mutual Funds that promise great returns for those who are willing to take certain degree of risk. Now, for a regular investor without too many worries, it is an option worth considering as he is open to taking financial risks. However, for retirees, putting all their hard earned money or accumulated funds online is not too wise a choice. There are better options available such as some government schemes where they can invest. One of the most popular schemes is a fixed deposit for senior citizens. Let’s look at the key features of a senior citizen fixed deposit scheme:
Senior Citizen Fixed Deposit Scheme: A senior citizen fixed deposit scheme is similar to that of a regular fixed deposit in its functioning. Under this option, an investor is required to invest a sum into an FD account with a bank or a Non-Banking Financial Company (NBFC). In this, the amount invested is locked in for a fixed tenure, and when the tenure gets over, the investor receives returns as per the rate determined by the bank or NBFC. The most beneficial part of this scheme is that the returns are not taxable. It has been specifically designed for the senior citizens and their financial requirements, and the government has done its bit to safeguard the best interests of investors who are 60 years or older. Under a Senior Citizen Fixed Deposit Scheme, a deposit can be made up to INR 1 crore or higher. The tenure usually lies between the range of 7 years to 10 years. The only drawback in this investment is that if you prematurely withdraw the amount, then it will attract a penalty.
The interest payout frequency can be chosen by the investor depending on his/her needs. The interest accrued is generally compounded every quarter and is payable on a monthly, quarterly, bi-annual or annual basis. Some lenders also provide the option of availing a loan against an FD.
Mutual Fund for Retirees: Quite similar to the classic mutual funds, the characteristics of this investment scheme have been adjusted to meet the needs of the retirees. Major benefits of mutual funds are that the dividends received from the investment are not taxable. As for the lock in period, it ranges between 5-7 years.
Pension Fund: Relatively similar to that of life insurance, except that this scheme caters to the retirees and not the beneficiaries. Pension helps a retiree to receive monetary help throughout the retirement life when he or she is insured. A pension is a great option for senior citizens who need to pay for their house, cover living expenses or pay for their children or grandchildren’s education.
Senior Citizens Saving Scheme: If you are a retiree seeking regular income after retirement, this option is quite favorable for you. Under a senior citizen savings scheme, investments of up to INR 15 lakhs can be made. In this scheme, a fixed rate of interest is provided on the investment. As announced by PM Narendra Modi last year, senior citizens are entitled to receive 8% rate of interest for the next 10 years. The most beneficial factor of this scheme is that the returns are guaranteed, and capital pay-out will be provided when the term ends. Furthermore, the tax is levied only for a year, after that, the deposition will help to make returns tax-free.
These are few of the options where you can protect your retirement funds from tax erosions. It is important that you research properly before making a move.
How to Save oneself from the Shock of Advance Tax?
The best way to prevent your account from incurring such a massive taxation setback is by keeping track of the following four dates:
- 15th June
- 15th September
- 15th December
- 15th March
These dates are to be kept in mind so that the advance tax can be paid before these deadlines. Of your total taxes, you need to pay an advance on these four dates. The percentage of taxes you need to pay can be classified as per the period:
- 15th June – 15%
- 15th September – 45%
- 15th December – 75%
- 15th March – 100%
15th March is when all tax payments are due. It is crucial that you pay the taxes before 15th March or else you will be penalized by the government for late payment. For instance, if the total tax amount that you need to pay is INR 2 Lakh, you will have to pay an amount of INR 30,000 by 15th June, INR 90,000 by September, INR 1,50,000 by December and finally INR 2,00,000 by 15th March. It is for this purpose, that the tax bill on the non-salary income be properly estimated. Based upon this, you will get a fair idea about whether or not you have to pay taxes or not.
To conclude the blog, we can draw up a summary by saying that paying tax in pieces helps the government to carry out tasks easily. It is a two-way process which is beneficial for both the masses and the government. As a taxpayer, you now have to pay taxes in bits and pieces rather than incurring a hefty payment at once which leads many people to commit tax fraud.