Budget 2011 & Income tax

In Union Budget, finance Minister Mr. Mukherjee proposed to raise the income tax exemption limit for general tax payers to Rs 1.80 lakh per annum from Rs 1.60 lakh at present and introduced a high new tax slab for senior citizens of 80 years and above. Also, he proposed to reduce the age limit for consideration as senior citizens from 65 years to 60.

The new exemption for Senior citizens will be for income up to Rs 2.5 lakh, higher from Rs 2.4 lakh now.

Now keep DIN with you for income tax purpose

The government has made it mandatory for taxpayers as well as collectors to quote a unique document identification number (DIN) on every communication with the income tax (I-T) department.


The unique Document identification number (DIN), on the lines of numbers like PAN and TAN, will be quoted on "every" income tax-related communication, including returns to be filed next year for the financial year 2010-11.

I-T department generates DIN (Document Identification Number) which is essentially useful for error filling of income tax returns, for claiming refunds and other communication with the department by the assesses. Assesses will not be put to any trouble, as the numbers will be generated and allotted by the department itself.

According to section 282B of the Income Tax Act that deals with DIN, if the document sent to the tax authority does not bear this unique computer-generated number then "such document, letter or any correspondence shall be treated as invalid and shall be deemed never to have been received."

Income tax return - all inclusive

Income tax return

The first thing you should know is, its always good to file Income tax return when you have any source of income no matter if you have any taxable income or not.

Some comman concerns about income Tax -

1) Why Pan Card??

A PAN number has been made compulsory for every transaction with the Income Tax department. Now a days Pan Card is mandatory for many financial transactions including opening of bank accounts, taking institutional financial credits , purchase of high-end consumer item, foreign travel, transaction of immovable properties, dealing in securities etc. A PAN card is a valuable means of photo identification accepted by all government and non-government institutions in the country.

2) Is Income tax return filing is mandatory, if I have a PAN card?

No. Return is to be filed only if you have taxable income.

3)Income tax return can be filled online & offline. For online filing (e-filing), various ITR filing services are available. Some good ones are -

itrust.in

taxsmile.com

incometaxindiaefiling.gov.in

All you need is details regarding your income and deductions applicable (like tax saving intuments etc).

For Offline filing, you can fill up ITR-1 form yourself and visit any nearest Income tax office to submit it and get acknowledgement. Still probnlems then visit any agent or CA. They may charge anything from Rs. 100 to Rs. 1000 and provide you full assistence in filing ITR.

4) What is form 16 ?

Form 16 is a summary certificate for all your tax related details from your employer mentioning all your income and tax saving expenses. You should have this document with you and everything from this you can mention in ITR-1 form.

5) What If I don't reveive Form-16 from my employer?

Its always better to have all your documents with you as a proof so best thing is to get Form-16 from the employer. Still, if there is any issue, then you can still file income tax return and you need to keep all proofs (salary slips, saving documents, House rent receipts, medical, ULIP documents etc) with you in case of any enquiry by IT dept.

6) What if all tax saving details or any source of income not mentioned in my Form-16?

You can add them in your ITR-1 form or mention that to agent at the time of ITR filing.

7) I am confused in terms financial year and assessment year?

See. Financial year is for what you are going to file the income tax and assessment year is the next year of financial year.

eg, If you are planning to file income tax in june-2010, then your financial year will be from 1st April 2009 to 31 March 2010, and assessment year will be 2010-2011.

8)What is corporate tax then??

When companies pay income tax, its corporate tax. :)

9)What are different sources of income with respect to income tax ?

Categorized in mainly 5 types as below -

Income from Salary

Income from House property

Income from Business or Profession

Income from capital gains

Income from other sources

10) How can I apply for PAN?

Its very simple to apply for PAN now. Either fill the form online (https://tin.tin.nsdl.com/pan/index.html) and send Pan Ack & supporting docs via Normal post to NSDL, or you can also fill the form (hardcopy) and send/deposit the same at UTI center.

Alternatively you can go to any agent for filling up PAN form.

While switching job..

So, you are looking for a job change or recently switched?? Then read on..

Negotiating your Cost to Company (CTC): Even if the actual CTC is the same as your previous job, structure your CTC so that your cash in hand can be higher than what it might have been at the previous job. This might be particularly important given the new rules announced in the Budget in July 2009 under which fringe benefits offered to you are now going to be taxable in your hands as perquisites. Understand how you can maximize your take home pay, because that is what matters at the end of the day. :)


Form 16 and tax issues: At the end of the financial year take your Form 16 from your previous employer and share that with your new employer, so that the right amount of tax is being deducted and that you are not getting more deductions than you are entitled to. Remember to also take a no dues certificate, relieving letter, salary slips for the duration you have stayed.

Shifting your PF balance and Superannuation: This can be a big administrative issue for you if you have not moved over your retiral accounts to your new firm. Take care of the necessary paperwork to facilitate a smooth transition of your account to your new employer. Form 16 is being used for transfer of PF account. Withdrwal may be another option but remember, its taxable if it has not being maintaioned at least for 5 years.

ESOPs: Don't leave a lot of value on the table if you have worked hard to earn incentives. If your current employer gave you ESOPs, understand if you are eligible to encash these at all. If you are giving up a lot of value because not all your shares have vested, you might want to ask your new employer to offer you similar upside as an incentive to move to the new job.

Insurance: If your current employer was offering you and your family life and health insurance coveragerecognize that you might need this from your new employer as well. Do not remain uninsured during the transition period from one job to another. Accidents and emergencies come unannounced and don't put yourself or your family at risk by not having appropriate insurance coverage. Additionally, understand what are the insurance benefits you will be eligible for at your new job and whether you will have to serve for a minimum few months before your coverage kicks in.

Income tax Exemptions

Tax saving is directly proportional to knowledge of tax saving intruments. So here is the list for all available tax saving clauses you can use to get max tax benefits -

Income Tax deduction - Section 80C
Tools - Provident Funds, Life Insurance premia, ELSS, Bank deposits (>5 yr.), tution fees, principal part of EMI on housing loan, etc.
Max Exemption limit - Rs. 1,00,000.

In budget 2010, the FM has also increased the limit of deduction available under section 80C. He has allowed an additional investment of Rs 20,000 for infrastructure bonds taking the total of the limit under section 80C from the current Rs 1 lakh to Rs 1.2 lakh

Income Tax deduction - Section 80D
Tools - Premium in health insurance of you, your spouse, children or dependent parents
Maximum Exemption limit - Rs. 15000(for senior citizen Rs. 20000)

Income Tax deduction - Section 80DD
Tools - Medical treatment (including insurance) of disabled dependent
Maximum tax exemption limit - Rs. 50000 (Rs. 75000 if disability is severe,e.g. >80%)

Income Tax deduction - Section 80E
Tools - Interest paid on educational loan taken for higher education of you, your spouse or children.
Maximum tax exemption limit - no limit :)

Income Tax deduction - Section 80GG
Tools - House rent in excess of 10% of income, if no HRA is received.
Maximum tax exemption limit - Rs. 2000 per month or 25% of your gross salary, whichever is less.

Income Tax deduction - Section 24
Tools - Interest paid on housing loan.
Maximum tax exemption limit - Rs. 1,50,000

Income Tax deduction - Section 80G
Tools - Donations
Maximum tax exemption limit - 100% of donation amount for special funds , 50% of donation amount for all other donations.

This is just a brief idea of what exactly you can think of regarding tax savings. you'll see detailed analysis of all the above in coming posts.