Forex tips for IT guys

While moving on a business trip to abraod location, employee gets forex as daily allowance.

Legally its like daily allowance and is not taxable as per India or foreign tax laws UNLESS spent as a whole at business trip itself. But most of time we bring some forex back as our savings. :)

Here the story begins.. Now as you have not spent the amount at your foreign trip, you need to pay taxes on that (Legally). But most of the people don't follow it.

This can bring you under the scrutiny, so here are some tips to play safe -

1. Before travel, keep some money here in india itself after discussion with your other colleugues abroad. Most of the time, total amount is not required. Why to carry more, if less is more than enough.

2. Prefer to spend Travellers cheque (TC) on business trip first and then switch to cash. TCs are more subject to legal catch as you need to necessarily submit your passport & other details to encash them.

3. On return to india, exchange forex as and when required and avoid encashing big amount in one go.

4. Keep withdrawing some amount from your salary account too. Don't depend on forex totally for daily expenses.

5. Don't deposit big amounts in your account at once, divide it in chunks of < 50000 and deposit then.

6. Prefer to exchange money with local vendors and avoid banks for two fold advantage. First, you will get good exchange rate and second you need not to show documents if you have good understanding with vendor.

Filing tax for salaried Employee

Lets learn this in 4 steps for the sake of easiness -
1. Sumbmitting details to company's finance dept. - Here TDS (tax deduction on source) will be calculated based on your income & tax saving intuments used. They calculate your final tax libility (only for the salary earned) & provide FORM 16 which contains details about your earning, exemptions & taxes.
2. Computing final tax libility - You should add your other sources of income in whatever comes out in form 16 (like income from bank interest etc, banks will issue a FORM 16A for that) to compute your final tax to be paid.
3. Filing ITR - Now the final thing is to file ITR[income tax return] using data collected. find my earlier posts to know the process and its components.
4. Collecting ITR ack - most of the time posted to the address you mentioned in your ITR.

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."

Direct Tax code from 1April, 2012

The Bill seeks to increase tax exemption on income from Rs. 1.6 lakh to Rs. 2 lakh and fix the corporate tax at a flat 30 per cent. As per the Bill, income from Rs. 2-5 lakh will be taxed at 10 per cent; Rs. 5-10 lakh at 20 per cent and 30 per cent thereafter.

The changes, when they take effect, will help save up to Rs. 41,040 for people earning more than Rs. 10 lakh a year. The exemption on savings and payment of interest up to Rs. 1.5 lakh on housing loan have been retained in the proposed DTC Bill.

Currently, income from Rs. 1.6-5 lakh attracts 10 per cent tax; from Rs. 5-8 lakh, 20 per cent and beyond Rs. 8 lakh, 30 per cent. The proposed tax slabs are much lower than originally suggested in the draft DTC bill -- 10 per cent for Rs. 1.6 lakh to Rs. 10 lakh, 20 per cent from Rs. 10-25 lakh and 30 per cent for income above Rs. 30 lakh.

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.