We all need to be congratulated for surviving another tax season. As in the previous years, many of us must have rushed in on the last day and somehow managed to submit the income tax return forms. And like before you would have told yourself "I won't go through all this again next year". But then the year will roll on, you will get busy, and tax matters will get pushed back as out of sight is out of mind.
By 31 July 2009, when you would be filing tax returns for the assessment year 2009-10, advance preparation in this financial year 2008-09 itself can help you avoid the last-minute anxiety. Here are 12 must dos to reduce tax filing stress next year.
Look out for refund
Income tax authorities are supposed to send you the refund either electronically directly to your bank account, or by cheque to your address within 30 days of filing the return. Ideally, give 45-90 days for this to happen. Get in touch with the authorities in writing if the delay is longer.
Estimate the tax bill
For the current year, first estimate your tax liability. You may contact your account department to get a fix on the figure. Budget 2008 increased the income slabs, giving a relief of Rs 4,000 to every taxpayer. For an individual not a woman or a senior citizen, whose taxable income was Rs 800,000 in the previous year, the tax liability was Rs 1,94,670. Now, it is Rs 1,49,350. A net yearly savings of Rs 45,320.
As a part of your salary, you may get a reimbursement of medical expenses incurred by you on yourself and your family - Rs 15,000 would be tax-free per annum. You need to give bills or other documents to claim the amount. Preserve them carefully.
Leave travel allowance is paid every year, but it is tax-free only for two trips in a block of four years. The blocks are 2002-2005, 2006-2009 and so on. You may have to pay tax this year even after submitting the bills.
Organise and keep documents handy
Some investment-related proofs, such as statement of account of ELSS funds, can be stored electronically. Remember that interest income earned on all your savings bank accounts also needs to be disclosed and tax paid on them. Close dormant accounts and reduce tax liability. Collect all your bank statements and TDS certificates, if any. This will help you calculate your earning from bank interest. Deposit advance tax if required.
If you are claiming deduction on interest paid on an educational loan, collect a certificate of repayment for this financial year in which the interest is stated separately. Do the same for your home loan.
If you are claiming deduction for house rent allowance on actual rent paid, collect and keep the rent receipts. For any donations given to an approved charity, get a receipt and also a certificate that the trust gets deduction under Section 80G. If you are claiming a deduction for any medical disability under Section 80U, get a certificate of disability from the authorised doctor.
If you got any gifts during the year, collect the gift deeds in your favour, which should clearly state that you received money without any consideration. Keep all the receipts of contributions made towards health insurance, or to schemes under Section 80C such as LIC payment receipts, copy of the PPF pass book, and children's tuition fee receipts, among others.
Health for all
Even before thinking of any tax-saving investments, ensure adequate health cover for your family. Further, to the ded-uction of up to Rs 15,000, from this year you will get additional deduction of Rs 15,000 if your parents are also covered, and Rs 20,000 if they're senior citizens.
Pay in advance
If your employer does not deduct tax at source and your total tax liability this year is above Rs 5,000, you will have to pay tax in advance. Keep a copy of the challan safely for future reference.
Use capital losses
If you have sold any stocks at a loss, you can book a short-term capital loss, which can be set off against any capital gain - long-term or short-term.
If you have made any short-term capital gain during the year, you can set off the loss against the gain. If you book a long-term loss, it may not be of much use as it can be adjusted only against long-term gains, which are not taxable for shares.
Send all the details to your accounts department in the form of an investment declaration. This document normally states all the tax-saving investment and expenses you plan to undertake this year. This will allow your account department to calculate your taxes. Based on this, tax will be deducted at source.
Figure out the existing outgo
Work towards bringing down your tax outgo. Before blindly investing in tax-saving avenues, figure out how much tax you are already saving.
For salaried employees, 12 per cent of the basic salary goes towards Employees' Provident Fund, which qualifies for tax benefit. Life insurance premiums are also on the same list.
Further, principal repayments up to Rs 100,000 on existing home loans get tax relief under Section 80C and interest payments up to Rs 150,000 qualify for tax deduction under Section 24. Another deduction could be on the tuition fees, up to Rs 100,000, that you pay for a maximum of two children.
Add these figures to see how much of your tax liability is already covered.
Get the old Form 16
If you have moved jobs anytime after 1 April 2008, take a copy of the Form 16 from your previous employer. If you don't, you will lose the advantage of tax exemption. Taxable income is the aggregate of all income received during the year. If your earlier employer has not deducted any tax from your salary, you may get a salary certificate from him indicating the amount received by you as salary during the financial year.
Choosing your tax-saver heads under Section 80C should depend on its time horizon and your risk appetite. An increase in EMI or loan tenure is likely for floating rate home loans. Try to prepay the loan, either in parts or in a lump sum. These payments will also help you cut down your tax liability. For an equity-linked saving scheme, invest systematically to avoid a last-minute dash.
The final moments
Most employers ask for actual proof of investment and expenses by the first week of February. Once these documents are given, wait till May 2009 for the Form 16, based on which you can file your income tax return for the next year by 31 July 2009.