Tax return filing information

There is still a lot of confusion about filing of tax returns, so just wanted to share some information regarding tax returns filing. The last date for filing the tax returns have already passed (31st July 2007). However, you may still NOT have to pay any penalty for filing returns late.

Here’s the actual procedure for tax return filing and penalty:
• As per the rules of income tax department, the tax returns should be filed by 31st July 2007. Otherwise, an individual MAY have to pay penalty for filing late returns
• When will the penalty be imposed? Penalty on late filing of income tax returns will be imposed as follows:
o ONLY if there is an outstanding amount of tax that is due. Meaning: If you have NOT paid taxes by 31st July on your income in the financial year ending March 2007, then there will be a penalty imposed for filing late returns
• For salaried employees, where TDS (tax deducted at source) is already taken by the employer, should NOT worry at all. Such individuals can file their returns even till 31st March 2008, i.e. till the end of this current financial year without any penalty.
• However, in case you have an extra income which is other than your salary, like income from bank interest, mutual funds, stock trading, or other businesses, then you MUST pay interest on that on your own. This tax is to be paid in addition to the TDS by your employer, and should be paid before 31st July.
• Say, if my TDS (as mentioned in my form-16) issued by my employer is 20,000 Rs. Whatever is mentioned in form-16 is based upon my salary. However, I may have additional income from interest earned on the money in bank account and fixed deposit, short term capital gains for trading in stocks or income from other businesses. I HAVE THE RESPONSIBILITY TO DECLARE THIS ADDITIONAL INCOME AND PAY TAX ON THAT.
• There are 2 ways of paying taxes on this additional income
1. I declare to my employer that I have this additional income and ask him to deduct TDS on my total income (salary + this additional income). This additional income is quoted as “Income from other sources” in my form-16, and becomes taxable. So if it is included in my form-16, I DON’T have to do anything.
2. If I don’t declare this additional income to my employer and hence it is NOT mentioned in my form16, then I should deposit tax by filling a challan form and deposit it in any of the banks. I should then file my returns with a copy of this challan attached to my return form (ITR-1)
• In case I have deposited all my taxes before 31st July, then I need not worry about filing of taxes before 31st July, as there is NO outstanding taxes to be paid by me. I can as well file my returns till 31st March 2008 without any penalty.
• In case I’ve missed out paying taxes on some (or all) of my income: I was suppose to pay my taxes before 31st July. Since I’ve missed it, then I am required to pay a penalty of 1% PER MONTH on the OUTSTANDING AMOUNT ONLY (not on the entire amount). For e.g., my employer deducts 20,000 as TDS and mentions it in my form 16. I have additional income of 1000 Rs. on my trading and bank interest. I missed paying tax on this 1000 Rs. before 31st July. I realize my mistake later and I pay my taxes on this additional income of 1000 (say 20% i.e. 200 Rs.) in the month of August. So I should pay a 1% additional penalty since I am late by a month – i.e. I should pay 1% of 200 = 2 Rs, a total of 202 Rs. as my taxes and then file my returns.
• One very good way of filing the returns is online – BUT NOT on PAY websites (like moneycontrol or taxsmile). The official website of Income tax department is offering this service for free. I had filed my returns on 31st July, within a matter of just 5 minutes, that too FREE OF COST and avoiding lengthy queues. The website is quite clear and explains everything in easy steps.
• Let me know if you have any questions – please post them as comments.


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