A dummy’s guide to tax returns

What is an assessment year?
An assessment year is the year when the income earned is assessed. So the income earned in the financial year 2009-10 (ie from April 1, 2009 to March 31, 2010) is assessed in 2010-11, which is the current assessment year.

I have not paid any tax for the year. Do I still need to file a tax return?
You need to file an income tax return if you have earned an income greater than the basic exemption limit. For the financial year 2009-10, or the assessment year 2010-11, the basic exemption limits is Rs1.60 lakh for men. For women and senior citizens, it is Rs1.90 lakh and Rs2.40 lakh, respectively. If you have earned an income greater than your exemption limit, you have to file a return, even if you have not paid any tax.

Where can I find the income-tax return forms?
You can find them on http://www.incometaxindia.gov.in/download_all.asp

Which form do I fill up?
There are eight income-tax return (ITR) forms. If you have income from salary, pension and interest income, and are in the process of repaying your home loan then Saral-2, also known as ITR-1, is the form for you. If apart from salary and interest income, you have capital gains on selling shares, gold, property, mutual funds etc, the form to use is ITR-2.

Also, during the course of the year, if you have received a dividend from a company whose shares you own or from a mutual fund, or made long-term capital gain on selling shares, you need to file ITR-2. This, despite the fact that dividend as well as long-term capital gains on selling shares are tax exempt in the hands of the investor. That’s because ITR-2 has an entry in which income exempt from tax needs to be filled up.

Other than this if, you have any business income, then ITR-4 is the form to fill up, notwithstanding any other type of income that you may have earned during the course of the year.

How do I fill up the form?
If you have only salary income, then the details in the Form 16 issued by the organisation you work for is enough to fill up the form. If you have income from other sources then you would need those details to file your returns.

What if my organisation still hasn’t issued the Form 16?
Form 16 has to be issued by April 30, within 30 days of the end of the financial year. Nevertheless, that rarely happens. If your organisation still hasn’t issued Form 16, ask them to do so immediately. Without Form 16, you will not have the necessary details required to file the income tax return. If your organisation is unlikely to issue a Form 16 in time, then write a registered letter to the organisation, a copy of which should be sent to your assessing officer.

I don’t have a PAN. Can I still file a return?
PAN is compulsory to file a tax return. If you do not have a PAN card, apply for one as soon as possible. You can initiate the process by downloading and filling up Form No 49A from the web at www.incometaxindia.gov.in/allforms.asp.

Do I need to attach annexures while filing the tax return?
ITR forms by their very definition are supposed to be annexure-less. As instruction number 4 in the ITR form points out, “No document (including TDS certificate) should be attached to this form. The official receiving the return has been instructed to detach all documents enclosed with this form and return the same to the assessee.

I had more than one job last year. How do I file my return?
You will need to get hold of all your Form 16s from your previous employers as well as the current employer. Fill up the relevant ITR form by aggregating the details available in all your Form 16s.

I don’t need to pay tax on dividend income and long-term capital gains. Do I need to disclose that?
Details of income that is exempt from tax also needs to be provided while filing up the return.

I have a cash deposit of Rs15 lakh in my bank account. Do I need to declare this?
You have to compulsorily make some disclosures while filing your tax return. These include cash deposits of Rs10 lakh or more in a savings account, credit card payments of Rs2 lakh or more on a credit card and purchase or sale of an immovable property at Rs30 lakh or more. Purchase of shares of a company of Rs1 lakh or more, and purchase of units of mutual funds of Rs2 lakh or more must also be disclosed. (For a complete list see instruction 9(ii) of ITR-2)

What about income earned by my child?
Income earned by your child is to be clubbed with the income of the parent whose income is higher. If, in the first year in which the child earns an income, the income is clubbed with the income of the father, then it has to be continued to be clubbed to the income of the father, even if next year, his mother might have a higher income.

The income cannot be clubbed with the parent’s income if the child earns the money from his own talent. So if your child has just won a reality show singing contest, then a separate return needs to be filed in his name.

I had gifted Rs1 lakh to my husband at the beginning of the financial year 2009-10. How do I account for that?
Income arising from gifts given to your spouse is taxed in your hands. Therefore, in this case, if your husband earns Rs8,000 as interest from your gift of Rs1 lakh, then Rs8,000 will be added to your income for the year. If in the year after, your husband reinvests this Rs8,000, then the interest earned on the Rs8,000 will be added to your husband’s income for that year and not yours.

I had to sell my shares for a loss. How do I adjust for the losses?
Capital losses can be adjusted only against capital gains and not against any other source of income. First and foremost, you need to figure out whether your have made a short-term capital loss or a long-term capital loss. If the loss is a short-term capital loss, that is, you sold the shares within a year of buying them, then you can set it off against any taxable short-term capital gain and any taxable long-term capital gain.

What about long-term capital loss on selling shares? 
Long-term capital gain on selling shares or units of equity mutual funds is tax-free. As a result, long-term capital loss on selling shares is also tax-free. Basically, what it means is that you will have to bear the loss.

If during a given year, you have made a capital loss and do not have enough capital gains to set it off, then you can carry it forward to the next year. The Income-Tax Act allows you carry forward this loss for the next eight years. If after eight years the loss is still not adjusted, it cannot be carried forward anymore.

I have already filed my return, but now I realise I made mistakes while filing it. What do I do now?
You can refile your return before July 31, 2010, provided the tax department has not  already completed the assessment.

The company I work for deducted excess tax, more than I am liable to pay. How will I get the excess money back?
After the tax department completes your assessment, the excess money will be either credited to your bank account (if you have opted for refunds to be directly deposited to your bank account) or a cheque will be sent across to you.

Can I pay taxes online?
Account holders of 30 banks can pay taxes online by filling up challans via a platform made available by the National Securities Depository Ltd at https://onlineservices.tin.nsdl.com/etaxnew/Index.html. You would need a net banking account with the listed banks to pay taxes online.

Where can I go if I have more doubts?
The IT department has a list of answers to FAQs on www.incometaxindia.gov.in/questionbank.htm