In my several years of practice, I have interacted with different kinds of taxpayers. I have come to the conclusion that there are broadly three categories of people in the way they handle their tax compliance. I have classified them as Alpha, Beta and Gamma.
Alphas are those who are in full control. Such people are fully aware of compliance-related requirements, are meticulous about the details, maintain records and documents in a very organised manner, and are generally particular about filing their tax returns accurately, and on time.
Betas are those who are broadly aware of the requirements, but are also aware of their own limitations. They usually take the help of experienced people to maintain their records and file their tax returns. They understand the importance of meticulous collation of data and timely filing of tax returns, but know that they may not be competent to do this.
Gammas are those who are heavily reliant on others to prepare and file their tax returns, and usually trust such people to take full charge and do the needful.This article is meant primarily for the Gammas. While the Alphas may choose to read this because of a sense of responsibility, and the Betas may read it out of curiosity, it is the Gammas who need to read it. So here are some basic dos and don’ts for filing your tax returns.
The due date for the last financial year (ongoing assessment year) for individuals who are not subject to tax audit is July 31, 2018. This include people who earn from salaries and rental incomes, and incur expenditures such as capital gains, bank interest and dividends. It may also include business income below a certain threshold. In such cases, the form will depend on various factors. Please refer www.incometaxindiaefiling.gov.in to know which form is applicable to you.
Start the process of collating details at least a week before you actually file your return. Do have the following documents handy:
Form 16 and 12BA issued by your employer: If you have been employed by more than one employer during the financial year, you should have these forms issued by each employer.
Copy of form 26AS: This form is an online statement of tax deductions from payments made to you. You can download this statement from the income tax department's website by logging in with your PAN number and password (created by you).
Copies of bank statements: It is a good practice to go through your bank statement to ensure that all the entries are accounted for with respect to various income-related details (like bank interest, redemption proceeds and sale consideration).
Home loan statements, property tax receipts: Apart from the interest on a home loan and repayment certificates, if you have let out property, include the details of property tax paid during the year.
Copies of investment portfolio statements: If you have made investments in financial securities such as shares and mutual funds, collate the transaction statements that would have been shared with you from time to time. Please tally these statements with your bank entries and form 26AS to ensure that you are duly considering all the items of your income that need to be taxed and/or reported. These will include capital gains/loss, income from dividends and interest.
Tax deducted at source certificates: While these would typically appear in Form 26AS, it is a good idea to reconcile the two. Please remember that although all income is not subject to TDS, it is generally deducted at a fixed percentage that may be lower than the tax rate applicable to you. Hence, even for income subjected to TDS, there can be further tax payable.
Receipts for donations to approved charities: Please ensure that the organisation is approved for availing tax deduction under section 80G and that other details, including the full name, address and PAN of the entity, are provided in the receipt.
Tax-deductible investment receipts (like insurance premiums, PPF): If you have not provided these details to your employer, you can still include them in your tax return.
Sale of immovable property: If you have sold any property during the year, you could be liable for Capital Gains Tax unless you are in a position to claim exemption from long-term capital gains because of eligible investments. Moreover, please keep safe the details of purchase such as dates, costs and sales transactions, expenditure (like brokerage and legal fees), tax deducted by buyer and reinvestment details. Also, it is important to identify whether the asset is long-term or short-term in nature. Please remember that the tax implications would be quite different for them.
If you have made investments in the name of your spouse and child/children, clubbing provisions may be applicable for you with respect to income earned by them from these.
If you earn income in a foreign country, you may also be eligible for claiming relief against double taxation if there is a tax treaty between India and that country. However, in view of the complexity of the provisions, I recommend that you take professional help in these matters.
Details of tax payment: If you have paid advance tax during the year, please retain the details (including the challan numbers) of such payments. You can also refer to Form 26AS for these details.
The previous year’s income tax return form (not just the acknowledgement page): You may have brought forward losses from earlier years to be claimed in the current year. These will be visible in the last year’s form.
Today, tax returns are not just about reporting taxable income. Forms are becoming increasingly detailed. Please familiarise yourself with the tax return form in order to collate mandatory requirements applicable for you. Some examples of reporting requirements include details of movable and immovable assets, investments, jewellery, art collection and vehicles. Furthermore, if you have any foreign asset, specific reporting requirements (such as foreign bank accounts), capital assets, financial interests including foreign shares, immovable property, trusts and foreign income, those, too, will be applicable.
TAKE PROFESSIONAL HELP IF REQUIRED
The requirements given above is just the tip of the iceberg. Even if you cover most of these, it is a good idea to take professional help to file your return. But first do agree on how you will work together.
There is only one don’t. Please don’t be ignorant of the details in your tax return. Even if it is prepared by a professional, please review the return before it is filed, ensure you have checked the correctness of reporting and asked for clarifications if required. At the end of the day, it is your tax return and you sign on it.
So, what will you be this year: Alpha, Beta or Gamma?
The writer is partner, personal tax,PricewaterhouseCoopers India. The views expressed are personal.