Filing your tax returns every year can often be a very stressful and daunting task. If you want to get the entire benefits, avoiding any error is a must. Sometimes while we take care of the bigger details painstakingly, we often overlook the smaller, minute details. Here we warn you against some of the most common and easily made mistakes that you must avoid.
1. Select the right form There are several different forms available, depending on the kind of returns that you are filing. You may not have to fill the same form as your colleague, so double check about which is the right form as per your requirements.
2. Disclose all additional information Tax payers should disclose all additional information, for which provisions are available on the form. Interest from bank deposits, shares, bonds, mutual funds etc should also be disclosed as part of total income. If the tax payer is under scrutiny, he could get into a lot of trouble for not disclosing this information. While claiming tax deduction for these, care should be taken to include these in the total income. Failure to report all income information can lead to criminal charges against you.
3. Attach documents and provide receipts If you have made several donations to organisations, it is a must to include these receipts while filing tax returns. Several of these donations give you tax deduction and will be beneficial to you while filing your returns. It is extremely necessary to attach all other documents that back up your deductions/credits to your returns.
4. Enter precise details It is very important to enter the right amounts while filing your tax returns so as to avoid any legal issues later on. Correct PAN number and account number should be provided in case a return is being directly credited to your account. Also remember to always fill in your correct address as you donít want your refunds or any correspondence going to the wrong address. Finally remember to sign the returns.
4. Tax deductions on education, tuition fees Very often people lose a lot of money for the sole reason that they do not know that they are entitled to deductions for various things like student loans, education cess, tuition fees, home loans, dependant and child care expense etc. Be sure to list and itemise all the deductions/credits that you are entitled to.
5. Always make copies You may need to revert to these later to re-check something and hence having copies of everything is a sensible idea.
It's that time of the year, when everyone is hurrying and scurrying to file their tax returns. Some people start investing in tax deductible schemes at the very beginning of the year; however a lot of people are known to leave their tax burdens for the last minute. So, if you fall into the latter category too, these last-minute tax saving tips could prove handy for you:
1. Health Insurance Schemes If you have not availed of any health insurance schemes, you can still do so and enjoy tax deduction under Section 80 D. Make sure that your health insurance schemes will allow you to avail of the tax deduction. You can gain maximum tax returns with health insurance policies for yourself, your spouse, children and even your parents.
2. Bank Fixed Deposits Depositing a fixed amount of money for a particular time period with a fixed interest rate through RBI Bonds can also help you in availaing tax benefits. RBI Bonds are tax saving bonds that have a special provision allowing the investor to save on tax. These Bonds are instruments that are issued by the RBI.
3. Life Insurance Schemes You can avail of several government or private Life Insurance Schemes to get tax rebates. You need to have paid all the required premium payments before the end of the fiscal year to avail of this tax deduction scheme.
4. Infrastructure Bonds Several private as well as government banks provide Infrastructure Bonds like Safety Bonds, Flexbonds etc. that will help you save tax under Section 88 of the Income Tax Act, 1961. Tax payers can save up to Rs. 16000 per year with these bonds.
5. Tax Saving with Home Loans You can save tax, if you have availed of home loans under Section 24(B) and Section 80(C), Indian Income Tax Act 1961. If you have availed of a home loan for a legitimate house, construction of property, repairs, renewal etc., you can avail of tax deduction worth Rs.1-1.5 lakhs.
Always read the fine print and find out whether you will be able to actually save tax through these investment schemes while availing them. Remember, money saved in money earned.
Plan your investments at the beginning of every financial year and not at the end of it when you find yourself overburdened to make investments. As per Budget 2003, it is proposed that the following investment avenues be considered for tax exemtions:
- Life Insurance Premium paid
- Contribution to Provident Fund
- Contribution to approved Super Annuation Fund
- Subscription to National Savings Certificate
- Contribution to Unit Linked Insurance Plan (ULIP) of UTI
- Contribution to Dhanraksha, 1989 plan of LIC
- Subscription to Home Loan Account Scheme of National Housing Bank
- Payment of instalments towards cost or repayment of loans taken for purchase or construction of a residential house upto a maximum of Rs. 10,000
- Contribution to any approved pension fund 80CC
- Subscription to equity or bonds of Infrastructure nature
- Education expenses upto Rs 12,000 per child for two children in a family would be eligible for rebate
- Tax rebate to senior citizens increased to Rs. 20,000/-
The rate of rebate is 20%* of the qualifying amount of all the above investments upto a maximum of the tax of the person and an overall limit of Rs. 70,000 of investment. If you are under a higher tax bracket and need to invest over Rs 70,000 then you can make an additional Rs. 30,000 investment in an infrastructure issue. (*Note: In case of individuals with a gross taxable income of above 1,50,000/- per annum then rebate rate would be 15%.)
File your Income Tax returns in time, to avoid payment of interest and penalty for the delay in the filing of IT Returns. There cannot be any extension of time for the delay in the filing of IT Returns. The interest is now @ 1.25% p.m., on the tax due. If any loss is claimed for carrying it forward to the future, such loss cannot be allowed, if the Income Tax Return is not filed by the due date. Hence, keep date with your Income Tax well in advance and avoid unpleasant consequences.