Income Tax

Form 16 is a TDS certificate that an employer issues to you when TDS is deducted by the employer. An employer is required to deduct tax at source (therefore the name TDS - Tax Deducted at Source) when the employer pays salary to the employee (you). The employer deducts this tax on behalf of the Government and after deducting deposits the tax to the Government. The employer is then required to give a certificate to the employee giving the details of tax deducted. This certificate is called Form 16.

In case no TDS has been deducted by the employer they may not issue you a Form 16.

You will require Form 16 from your employer to file your tax return. You can directly upload your Form 16 and file your income tax return quickly.

TDS or Tax Deducted at Source is income tax reduced from the money paid at the time of making specified payments such as rent, commission, professional fees, salary, interest, etc. by the persons making such payments. Usually, the person receiving income is liable to pay income tax. But the government with the help of Tax Deducted at Source provisions makes sure that income tax is deducted in advance from the payments being made by you. The recipient of income receives the net amount (after reducing TDS). The recipient will add the gross amount to his income and the amount of TDS is adjusted against his final tax liability. The recipient takes credit for the amount already deducted and paid on his behalf.

An income tax (IT) return is an income tax form that you need to fill and submit it electronically to the Income tax Department. In this form, you need to give details of your income and taxes (taxes - that you may have paid or other people who may have deducted your tax). The income tax return forms are in various formats viz ITR-1, ITR-2, etc. Each form depicts a separate category of Income taxpayers. You need not worry of your category as Adventure Consultancy handles it for you automatically.

Remember, Income tax is a Direct tax and you need to only report Direct Income (salary, pension, interest, etc) and taxes paid on that Income. The tax return formats are predefined formats by the Central Board of Direct Taxes (CBDT- which is also called the Income tax Department).

The tax returns must be filed every year and must be filed by a specific date. If the return shows excess tax has been paid during a given year, you are eligible for an ‘income tax refund’, subject to the department’s interpretations and calculations.

Many think that filing tax returns is optional and therefore dismiss it as unnecessary and burdensome. Filing tax returns is an annual event and is a moral and social duty of every responsible citizen.

The government mandates that individuals who earn a specified amount of annual income must file a tax return. Failure to pay income tax and file the income tax return will invite penalties from the Income Tax Department.

Those who earn less than the prescribed level of income can file their income tax return voluntarily.

If you plan to apply for a home loan in the future it is a good idea to maintain a steady record of filing income tax returns as the home loan company will most likely insist on it as proof of steady income. In fact, you may even consider filing your spouse’s returns if you want to apply for a loan as a co-borrower. (Adventure Consultancy allows you to handle your family income tax returns from a single login.) Even a credit card company may insist on proof of income tax return before issuing a credit card.

Financial institutions may insist on seeing your returns over the past few years before transacting with you. In fact, the government may make it mandatory for them to do so, thereby indirectly nudging individuals to file returns regularly even when it’s voluntary.

Various losses incurred by an individual or a business cannot be shown for exemption in subsequent years for the purpose of tax calculation if your return is not filed. These losses could be both speculative as well as non-speculative, short-term as well as long-term capital losses, and various other types of losses not recorded in the income tax return in a financial year. So, it’s best to file returns regularly, because you never know when you may want to claim an adjustment against past losses.

In case the assesses has not filed the original return, he cannot later file a revised return. Under the Income Tax Act, non-filing of returns can attract a penalty of Rs 5,000.

In case you do not file, the Income tax Department will send you a notice asking you to file your return and may ask you to pay a penalty for not filing your income tax return. You will not be given your refund. If you are found to owe the government taxes, the interest on the base tax keeps adding up till you pay.

If you are found to owe the government taxes money, then the interest keeps adding up till you pay. A penalty may also be levied.

A new section 234F has been inserted in Income Tax Act, 1961 with effect from Assessment Year 2018-19 (Financial Year 2017-18). Under this section, the fee (penalty) is levied if the Income-tax return is not filed within the due date. Earlier penalty for delay in filing of return was levied at the discretion of Assessing Officer. But now, the same is payable before the filing of Income-tax returns.

Listed below are some of the most common tax filing mistakes you must avoid.

The most common mistake taxpayers make is failing to report all the sources of their income. One type of income that is forgotten by many individuals is interest earned on a bank savings account and on Fixed Deposits (FDs). This income is taxable according to your respective tax slab. Usually, banks deduct 10 percent as Tax Deductible at Source (TDS) on the interest income earned on FDs. However, if you fall under a higher tax slab of say, 30 percent, you are liable to pay tax accordingly. Not reporting these incomes might attract notice from the income tax department.

In addition, if you have changed your job recently, make sure that you report the income earned through your previous employer as well.

Also, any income earned by a minor through investments is taxable according to the tax slab of the parent with higher income. The income of the minor is clubbed with that parent’s income while computing the net taxable amount. In case you have made investments in your children’s names, keep this in mind while filing your taxes.

Many people assume that there is no income from multiple residential properties and thus there is no tax payable; however, this is a misconception. If you own more than one house, you are liable to pay a certain amount as tax, even if you have not earned any income from it or if it is unoccupied. Tax is not payable only for the house that you occupy. Income is to be attributed to all other houses and tax on house property is payable by you.

Since all the necessary information is communicated by the income tax department via email or post, it is extremely important to enter these details correctly before filing your taxes. A minor mistake in filling in these details means that you may miss important notifications. So, check and re-check your postal and email address when you file your income tax.

Many types of incomes like long-term gains, dividends, etc. are exempt from tax. Although you do not have to pay any taxes on such incomes, it is important to report them. Remember that the brokerage house or investment company will send these details to the income tax department.

Whether you have filled your forms manually or online, mistakes are bound to happen. It, therefore, makes sense to check the filled-up form thoroughly in order to avoid errors. Even if your tax consultant or accountant fills in the details on your behalf, you need to personally check the form to ensure the accuracy of the information.

Remember that simply taking a personal interest in the tax filing process can help you avoid most of these mistakes.