Tax is a compulsory charge that a government charges from its citizens. When an individual start paying taxes there is a proud feeling as one starts contributing financially in nation building. It’s the main source to build a nations economy and infrastructure. The authority collect a percentage of it’s working population’s salary to run their states and take care of its citizens. Every earning individual has to pay direct tax and the amount varies according to the money earned. These taxes are paid at the end of the year. In India, year-end is considered to be the month of March as the last quarter is between January–march. April is the beginning of financial year. The year-end for most of us is stressful with endless deadlines coming from all walks of life.
If you are a first timer to pay taxes, it might seem a mammoth task but when you will sit to file it, it might seem convenient. It’s the similar phobia that one has before taking that much hyped adventurous ride in the amusement park, but once you sit on it you realize that it was over-hyped.
To sail through your first income tax as an employee or an employer you must consider these following categories:
Different income slabs for different earning categories:
Your tax liabilities are based on how much you earn. Here’s the category that determines who pays how much taxes:
|INCOME SLAB||TAX RATE (%)||INCOME TAX (Rs)|
|Upto 5,00,000 Rs||No Tax Applicable (exemption)||Nil|
|10,00,000 & Above||30%||30%|
Besides this, the final tax amount is calculated by adding Rebate, Exemption, Relief, Deduction and Cess respectively. These categories are included or excluded according to your income slab.
What are the benefits of filing ITRs?
If you are law abiding regular tax payer then you will never face difficulty in buying home loans, applying for VISA, building capital and getting education loan for your kids as these bodies 1st criteria of pursuance is submitting ITR documents.
Proofs and Forms required at the time of filing ITR?
- Identification proofs required for filing tax:
- PAN Number
- Aadhar Card
- Bank account number with IFSC code
- Valid Email-ID
- Contact Number
You need to fill some forms that validate your ITR. You must fill and review Form 16 (in case of salary) or Form 16A (other income) to check TDS (Tax Deduction at Source) deducted on your income. Also check form 26AS, it’s a tax credit statement to ensure correct TDS has been deducted by the employer and deposited in government treasury.
I know this might look like a lot of work but it’s quite simple. You just need to process some forms correctly. Let’s know in detail about these forms:
- FORM 16
Form 16 is a crucial document that acts as a certificate from your employer. It verifies that the company has deducted TDS on your salary for the year. Form16 is released once in a year, on or before 31st May of the next year instantly after the financial year in which tax is deducted.
- FORM 16 A
The company your working in may be providing you with incentives. This incentive is considered as ‘other income’ and tax is deductible on such salaries as well. The government calls it as ‘other income’ and includes rent, commission, interest, etc. Details of such TDS can be filled in FORM 16, which would be issued to you by the employer.
- FORM 26 AS
Form 26AS gives complete sight of tax deducted for your PAN at different sources of income like tax deducted on commission, interest received from fixed deposits, tax payable from salary, etc. by your employer, bank and tenant respectively. This form double checks when where you have given tax and corrects if any wrong calculations are made in Form 16.
Which income tax return to file?
There are different returns to be filed for different groups that could be based on ones salary, profession, business or job etc. we have simplified the ITR forms in four categories for you.
The significant ITRs that one can apply for based on their eligibility are:
- ITR-1: Income attained in the form of salary, one house property, other sources (commission, interest, etc) and having a total income of up to Rs 50 lakh fall under ITR 1.
- ITR-2: People and Hindu undivided families (HUFs) not carrying out business or profession under any proprietorship.
- ITR-3: For individuals and HUFs having income from a proprietary business or profession.
- ITR-4: For people having reasonable income from business or profession.
Checklist at the time of filing ITR (Income Tax Return):
Double check the expense and investment sheet whether they can be claimed as deduction. Home loan payments, LIC premium, children tuition fees etc. are expenses that can be claimed as deduction.
If your net taxable income is below Rs. 5,00,000, there is an income tax rebate of maximum Rs. 12,500 provided by income tax department. This can be extended for those earning upto Rs 6,50,000 if they save more money in their PFs and other government regulated funds and policies.
You must enter your bank details in income tax return carefully as refund will be credited in that given bank account itself.
As an employer, when your accounts team has to be loaded with such detailed taxation of every employee, also with paying monthly salaries and taking care of other expenditures; then you must equip your workforce with state of the art, intuitive and seamless payroll software. The detailed personal information of employees will be available in one centralized data. The payroll software makes it easy for employees to file their taxes as all they have to do is fill their details in amazing UX driven software’s.