July 22, 2009

Tax Filing: Avoid the glitches!

My nephew, Adi, aged 23 Yrs was all excited when he approached me, for he was filing taxes for the first time! I was only intrigued to figure out what the hoopla was all about, he quickly came up with some interesting inundates. “know what”, the young man said, “I feel responsible for the country, I am paying taxes and contributing to the country’s development!”. “I don’t want to get a thing wrong, don’t want to run hither and thither in the last moment.”

I was indeed proud that at such a young age, he was more organized than most of older brethren, infact Adi’s father always did the eleventh hour preparation, like most of the other individuals we come across. I was more than willing to fill him with the nuances of tax filing.

Know the last minute to avoid it!

For any project in life, it is best to be prepared early on – this holds good for tax filing as well, infact tax planning is another arena where individuals await the last call for proofs and then consider saving taxes. Now, to avoid the last minute rush, it becomes pertinent to know the last dates applicable.

The last date for filing return of income for the year ended March 31, 2009 is July 31, 2009 (Salaried and non-tax audit cases) and for individuals who are required to get their books of accounts audited under the Income Tax Act, 30 September 2009.

File your documents, before filing your returns

Apart from the form 16 issued by the company, there are couple of other documents which would be pertinent. Here’s a brief list of what would be required to conduct your tax filing –

· Form 16 (received from employer/s)

· PAN Copy

· Form 16A (Where TDS has happened incase of Term Deposits, Consultant Income)

· Summary of all bank statements

· Details of Capital Gains, Rental Income

If you have business / consultant income and claiming certain expenses, then the vouchers / bills should be in place.

Missed your proof submission deadline – Not late as yet

Being painfully lazy, some people tend to miss their deadline for submission of tax proofs and others could have genuine reason, don’t get panicky just yet – one can still claim the benefit and refund thereof. Re-compute your tax liability while filing return of income and attach the relevant proofs thereof. This is applicable for both Exemptions and Deductions.

Don’t lose your mind over lost Form 16

It is always a herculean task to get duplicates issued, it’s no different for Form 16. Form 16 is an important document, handle it carefully, but if someone were to lose the same, simply request the HR / Finance team to issue a duplicate – the written request should be on an indemnity bond.

Applicable ITR

With the advent of new income tax return forms based on nature of income earned during the year, one needs to know relevance of each return form and select the right ITR as applicable. For an individual, four forms are applicable based on the sources of income, the details of which are as under:


Form No.

Applicability

ITR 1

Meant for Individuals, who have

- Income from salary

- Interest income (taxable / exempt)

- Family pension

- Income from agricultural activities

ITR 2

Individuals / HUF not having any income on account of carrying out business / profession or on account of being a partner in a partnership firm.

ITR 3

Individuals / HUF who are partner in a partnership firm and does not carry out any other separate business / profession.

ITR 4

Individuals / HUF who is carrying out business / profession under a proprietary concern.

During the current budget, the Finance Minister hinted that Tax filing would be made simpler by re-introducing Saral, this would be a welcome move.

Preserve the filed documents

The acknowledgement that you receive from the IT department after stamping is an important document – these are the documents which are to be preserved –

· Detailed calculation of taxable income and amount of tax payable / refundable

· Advance Tax / Self Assessment Tax Challan

· Copy of documents concerning sale of investments & properties, bank statements etc.,

· Income Tax Returns Acknowledgment

My nephew was a happy lad, for he had devoured ample information, as he prepared to leave, he glanced back to ask, “Is it a legal obligation to file for taxes?”. I had indeed forgotten to mention that it was a legal obligation to file your taxes, however, only if your taxable income exceeds the basic exemption limit - For FY 2008 – 09 - Male Assessee – Rs. 1.5 Lakh; Female – Rs. 1.80 Lakh; Senior Citizen (above 65 Yrs) – Rs. 2.25 Lakh. If your income has been lower than the stipulated amount then you can lay back and relax!

As an afterthought, Adi added, “Oh! In that case, I don’t have to worry this year!”


July 02, 2009

All’s well, if ‘The Budget's’ well!

Everytime Sachin Tendulkar comes to bat, he is supposed to exhibit a match winning performance – ones you deliver high results, the expectations are that you would do so everytime you are meted out any task. With the budget round the corner, the situation is no different for UPA – led Government. When they won the elections, the market participants were ecstatic, the sensex spiraled about 2110 points. The market continued to trade positively for a significantly long time, the exhaustion started showing only recently.

Every market participant, every sector awaits the Budget speech – the wait is not without relevant baggages, the Finance Minister is expected to spread happiness to one and all – the finance minister should probably get a magic wand to grant everybody’s wish!

Sensex post-budget – Evidencing History

With the emotions running so high, it is interesting to note that the Sensex has not reacted euphorically in the past. History, infact, clearly indicates that the market in the month post-budget has blushed more times, setting the market participants to rant about the losses incurred. Although, this need not necessarily mean that it would turn coy this time round too!

Table1: Sensex post-budget scenario

Year

Close on Budget Day

One Month after Budget

One Month post-budget

1991

1,220

1,168

-4.26%

1992

2,831

3,802

34.30%

1993

2,652

2,225

-16.10%

1994

4,286

3,776

-11.90%

1995

3,487

3,460

-0.77%

1996

3,808

3,406

-10.56%

1997

3,475

3,361

-3.28%

1998

3,643

3,231

-11.31%

1999

3,400

3,683

8.32%

2000

5,447

5,041

-7.45%

2001

4,274

3,788

-11.37%

2002

3,562

3469

-2.61%

2003

3,284

3,115

-5.15%

2004

4,844

5,197

7.29%

2005

6,714

6,511

-3.02%

2006

10,370

11,086

6.90%

2007

12,938

12,884

-0.42%

2008

17,579

16,371

-6.87%

Sectors in focus

Broadly, most social welfare sectors have always stood to benefit from the budget, Mr. Montek suggested that this time round the budget would be popular. There have been clear indications that certain sectors will be stark favorites with the Congress – Education, Infrastructure, Agriculture and Health. These are sectors which are perceived to create better prospects in India, more jobs – the need of the hour and also, accelerate the ancillary businesses which will necessarily thrust the economy out of the recessionary trends.

Defying the Deficit

‘Fiscal Deficit’ has been the hot topic under discussion, with the FY 09 figures hovering around 12.6%, all experts are looking forward for the measures the Government would announce to handle the fiscal deficit effectively. For FY 2010, the fiscal deficit will probably still be high at 9.7% of GDP (vs. 12.6% in F2009). Keeping check on the fiscal deficit is important to ensure low real interest rates for the private sector. The current high level of the fiscal deficit is likely make it difficult for the government to increase its spending to support economic growth. In such an environment, the government will need to augment its financial resources through divestment of its stake in government companies. The Congress, has in the past tried to push the envelope on the divestment proposal, however, the results have been pretty disappointing. This time round, things are going to be slightly different, since the alliance is sans the left parties who were the key members opposing this move.

FDI Dilemma

In 2009 alone India has received about $5.5 Bn of FII money out of a total $23 Bn that has flowed into emerging markets. India received close to 25% of the net outlay to emerging markets. India is cited as the most promising investment destination amongst the emerging markets. There is likelyhood that the investment ceiling for the insurance sector which is currently pegged at 26%. Broadly, there could not be too many changes in the FDI regimen, there has been considerable rationalization in the past, hence, there would not be too much focus herein.

The ‘Aam Aadmi’ hopes that there could be something on the tax front, however, here too the previous budget presentations have brought in behemoth changes and any dramatic regimens are unlikely at this point. Rural support has always been on the agenda, and will continue to be the key point under consideration.

This budget is going to be different in more than one ways, with the 100-day economic turnaround promise by Congress Government, and with sky-high expectations, it is awaited as to how Mr. FM is going to unveil a well balanced and a popular budget!

Until then...Cheers!

Right Horizons - Research Desk