"Your hard earned money slipping away? Plan your taxes"
What is Tax Return?
A tax return is a form(s) filed with a taxing authority that reports income, expenses and other pertinent tax information. Tax returns allow taxpayers to calculate their tax liability, schedule tax payments, or request refunds for the overpayment of taxes. In most countries, tax returns must be filed annually for an individual or business with reportable income (e.g., wages, interest, dividends, capital gains, or other profits).
Three Sections of Tax Returns
- The income section of the tax return lists all sources of income. The most common method of reporting is a W-2 tax form. Wages, dividends, self-employment income, royalties and in many countries, capital gains must also be reported.
- Deductions decrease tax liability. Tax deductions vary considerably among jurisdictions, but typical examples include contributions to retirement savings plans, alimony paid and interest deductions on some loans. For businesses, most expenses directly related to business operations are deductible. Taxpayers may itemize deductions or use the standard deduction for their filing status. Once the subtraction of all deductions is complete, the taxpayer may determine their tax rate on their adjusted gross income.
- Tax credits are amounts that offset tax liabilities or the taxes owed. Like deductions, these vary widely among jurisdictions. However, there are often credits attributed to the care of dependent children and seniors, pensions, education and many more.
After reporting income, deductions and credits, the taxpayer ends their tax return. The end of the return identifies the amount the taxpayer owes in taxes or the amount of tax over payment. Overpaid taxes may be refunded or rolled into the next tax year. Taxpayers may remit payment as a single sum or schedule tax payments on a periodic basis. Similarly, most self-employed individuals may make advance payments every quarter to reduce their tax burden.
Benefits of filing ITR:
- Easy Loan Approval
Filing the ITR will help individuals, when they have to apply fora vehicle loan (2-wheeler or 4-wheeler), House Loan etc. All major banks can ask for a copy of tax returns
- Claim Tax Refund
If you have a refund due from the Income Tax Department, you will have to file an Income Tax Return to claim the refund.
- Income & Address Proof
Income Tax Return can be used as a proof of your Income and Address.
- Quick Visa Processing
Most embassies & consulates require you to furnish copies of your tax returns for the past couple of years at the time of the visa application.
- Carry Forward Your Losses
If you file return within due date, you will be able to carry forward losses to subsequent years, which can be used to set off against income of subsequent years.
- Avoid Penalty
If you are required to file your Tax returns but didn’t, then the tax officer deserves the right to impose a penalty of up to Rs.5, 000.
- Documents for ITR Filing
31st July (31 August 2019 for FY 2018-19) is the last day to file your Income Tax Returns in any given financial year. The process of filing your Income Tax Returns in India takes some preparation. This is why the Government gives you four months’ window period to compile all documents like salary/income details, bank statements, previous tax statements, etc.
The procedure varies as per the income earned per year and income source like salary, business profit, investment profit and so on. Collating all your documents ready is just one aspect of it.
In this article, we will discuss in detail about the documents needed for filing Income Tax Returns in India.
- Choosing the applicable ITR form
- Link Aadhaar with PAN
- For Salaried Employees
- Documents related to interest income
- Form 26AS
- Section 80 Investments
- Documents Required to claim the section 80C Deductions
- Other Investment Documents
- Documents Required for Income Tax Returns Filing
What is TDS ?
Tax Deducted at Source (TDS) is a system introduced by Income Tax Department, where the person responsible for making specified payments such as salary, commission, professional fees, interest, rent, etc. is liable to deduct a certain percentage of tax before making payment in full to the receiver of the payment. As the name suggests, the concept of TDS is to deduct tax at its source. Let us take an example of TDS assuming the nature of payment is professional fees on which the specified rate is 10%.
Benefits Of TDS
- As tax deduction takes place throughout the year, it ensures a continuing flow of revenue to the Government.
- It is a measure to prevent tax evasion.
- It helps in increasing the tax reach as it is deducted at the time of payment itself preventing the commitment of fraud.
Documents Required for Filing TDS
- PAN card/Pan Number
- Tax payment challans (Self-assessment, advance tax, if you have deposited the same)
- TDS certificates (if TDS has been deducted by other)
- All Bank account information
- In response to a notice received from Department of Income Tax – You need the details of Original return/details of notice
- Form 16and a Salary Certificate received from the Employer by the employee.
- Form 26AS
It is a consolidated tax credit statement issued to a taxpayer and shows the Income tax that has been deposited with the government with respect to the taxpayer and Form 26AS is required to be issued Under Section 203AA of the Income-tax Act, 1961.
Form 26AS Contains all the details of the taxes paid and deposited with the Income Tax Department
- Interest Income
- Bank statement/passbook for interest on savings account.
- Interest income statement for fixed deposits.
- TDS certificate issued by banks and others.
- House Property
- Co-owner details (if property is co-owned)
- Address of the property.
- Rent details, Property Tax
- Interest certificate issued by the bank for housing loan
- Capital Gains
- Details of investment in Capital Gains Accounts Scheme
- Sale and Purchase Deed of the property including stamp valuation of the property (for land/building)
- Re-investment purchase deed for claiming exemption from Capital Gains
- Documents for cost of improvement on the property (if improvement is done)
- Details of expense that has been incurred on transfer
- Stock statement in case of trading in shares etc. (specifying sale and purchase value of shares)
- In case of other capital assets the cost of purchase, value of sale and cost of improvement if any
- Section 80C Invested Documents: The investment made under PPF, NSC, ULIPS, ELSS, LIC qualify for deductions under Section 80C.
Tax Saving Investments
- PPF passbook
- Repayment certificate for housing loan
- Tuition fees receipts
- Donation receipts (along with PAN of the donee)
- Deposit receipts for senior citizen saving scheme.
- Fixed deposit receipts
- Life and medical insurance payment receipt
- Other Sources
- Receipts of any income from winning the lottery, horse races etc.
- Details of accrued interest on NSC during the year.
- Dividend warrants/amount
- Bank Passbook/Statement or interest income certificate
- PPF passbook for interest
- Interest certificates on bonds
- Rent agreement for plant & machinery, building etc. given on rent (if any)
The above-mentioned documents are only for the purpose of reference. The users are recommended to gather other documents as required on the basis of the variable cases.