Why file tax returns? Is it Mandatory

Filing tax returns is an annual activity which must be fulfilled as a moral and social obligation by every citizen of this nation. The tax as applicable must be paid by the assessee failure of which will invite interest and penalties from the IT department. While most people are aware of the requirement of filing tax returns many are still unclear about the overall implications and repercussions of not filing returns on time.
 
Legal and social implications of filing tax returnsThere are several allied issues which are associated with the filing of tax returns. Filing the returns provides legal sanction to your income whether or not you are liable to pay taxes for that assessment year. The government has now in fact made it mandatory for all citizens to file returns whether or not they come under the taxable bracket. Filing returns makes it easier for individuals and firms to enter into subsequent transactions as the income they have shown is now in the knowledge of the tax department and the tax for the same has been paid as per records.  This also a means by which every right thinking citizen of the nation contributes to the progress and development of the nation. The money collected through taxes is the corpus from which the government undertakes welfare activities to improve the living conditions of the citizens.

Advantages of filing tax returns

Apart from helping the cause of the nation, filing income tax returns on time has many other individual advantages associated with it.

• Processing of home, educational and other types of loans require income tax returns to be shown to the lending institutions. Thus filing returns makes loans easier to process.
• It is mandatory to have income tax returns for the processing of any VISA.
• Registration of immovable properties in most states requires production of the tax returns of the last three years. Filing returns makes such registration procedures easier.
• Issuing of financial instruments of all kinds such as credit cards mandates the production of tax returns.
• Filing returns whether eligible for taxes or not helps pad up legally tenable income which will be useful subsequently to account for the wealth or property owned.

Consequences of not filing IT returns on timeThere are several disadvantages of not filing the tax returns on time under the various provisions of the income tax department.

• The various losses incurred by an individual or a firm in terms of business losses both speculative as well as non speculative, capital losses both short term as well as long term and various other types of losses which have not been reflected through proper tax returns in a financial year cannot be shown for exemption the subsequent years for the purpose of tax calculation as laid down under the Section 80 of the IT Act.
• In case the original IT return under Section 139(1) of the IT Act has not been filed then the revised return under Section 139(5) also cannot be filed subsequently when the assessee needs it.
• Under the Sections 235(A), 235(B) and 235(C) of the IT Act, non filing of returns by assesses can attract a penalty of Rs. 5000 from the IT department.

While filing of income tax returns may seem a voluntary activity on the face of it, there are legal provisions against those who do not do so. Even if a person is not eligible for taxes under the current provisions of the IT Act, it is wise to file the returns for the same so as to be on the right side of IT laws. Additionally filing of proper returns on time lends you a peace of mind and declares all your income shown as legal since they have been taxed for. Individuals, companies, partnership firms, LLP, AOI, BLP and HUF are all liable to file the tax returns before the deadline.

source-bankbaazar.com

How and when TDS Deductions can be saved and avoided

Even though many of us are familiar with tax filing, the process of TDS deduction is still confusing for many. When and where TDS is applicable, what are the procedures to reduce it and how to claim the deducted amount at the time of filing tax returns are few of the queries we have. So, here we discuss TDS deductions with a focus on how and when it can be reduced to help you in everyday life.

Understanding TDS:

The Indian tax structure is broadly a two dimensional approach towards payment of tax liabilities. In the first method- self assessment, taxes can be paid voluntarily after evaluation of income during a financial year. In the second method, Tax Deductions at

Source or TDS, as the name suggests, is the spot deduction of tax from the income source itself, at the time of earning. This is to simplify the taxation procedure for the government and to ensure that the payment making and receiving individual / company is accounting the same without fail.

TDS is applicable for earnings from several financial instruments and business transactions like sale of property, interest income from banks, commissions and incentives, payment received for contracts and services, vendors, dividends and awards or prices earned as money.

There is no uniform rate for TDS deduction. Depending on the source of earnings, it can range from 1% for sale proceeds to 30% .

From Salary and Commissions

It is mandatory as per Indian Income Tax rules that companies as well as working professionals who earn above the aforementioned figure should deduct tax at source from the payments they make.

Employers normally will ask employees to fill an investment declaration form. If you have done an early homework to save your TDS deduction by investing in several tax saving instruments under Sections 80C, 80D, or planning to do within that financial year, do declare the details in the form with required proofs to save TDS. If despite all your investments, your salary is still above the exemption limit, TDS will be deducted monthly.

The employer will issue a TDS certificate (also referred as Form No.16 (a)) at the end of the financial year which can be produced while filing income tax return to get the credit of the TDS ( if applicable) during the personal income tax assessment.

TDS is applicable for payments including commissions, service fees, professional fees and payment via contracts. Here the TDS certificate issued will be Form 16 B which like Form 16 A, can be produced while filing income tax return to get reversed if applicable.

TDS from Property, Awards and Incentives:

TDS is applicable in case of earnings sale of property, rental / lease income, cash prizes, lottery winnings etc. The amount of deduction may vary from 1% in case of sale proceeds to nearly 30% in case of cash awards.

Individuals seeking TDS refund in the above mentioned situations can submit form 15G/H which is a self deceleration that your income is below taxable limit. This is applicable only for Indian residents including senior citizens and Hindu Undivided Families (HUF’s). Form 15G can be filed by all Indian residents whose total financial income for the designated financial year is below the threshold limit while senior citizens need to avail Form 15H for the same purpose. It is imperative to note that Non resident Indians are not allowed the use of forms 15G and 15H and need to apply separately.

In case of rental income, TDS will be deducted only if the rent you receive is not less than Rs1.8 lakh a year. In case of joint ownership of rented / leased property, where the specific share of the property is decided, the limit of Rs 1.8 lakh can be claimed separately by each owner.

Income generated through bank deposits-

TDS is deductable on interest income paid by banks and financial institutions in respect of FDs (exceeding Rs.10000 in a FY) and term deposits (exceeding Rs.5000 in a FY).

If your income is below the taxable limit, but the interest earned from your deposits is above Rs 10,000, you can request your bank not to deduct tax by submitting form 15 G and 15 H to the bank at the beginning of the financial year.

Another effective way is to opt for multiple smaller fixed deposits across various banks.

Splitting the interest earned across two financial years in such a way that the overall annual interest earned from any of the FD not exceeding Rs 10,000 is another workable option.

In certain cases, dividing fixed deposits under two different heads can also be useful in avoiding. Individuals can divide deposits in their names and have some under a HUF account to avoid interest generation cross the taxable limit.

And never forget to carry your PAN card for all fixed deposits over Rs.50000, because on not receipt of PAN number banks may deduct 20% TDS which is non reversible.

Reversing TS collected

As you file your tax returns, you will know the tax bracket you are which determines the balance tax to be paid or that can be reversed. So do keep a track of the TDS that you have paid with Form 26AS or annual tax statement. All the taxes deducted on your behalf will be listed in it and it can be availed from the concerned sources along with Form 16. Otherwise missing taxes will be considered unpaid by the income tax authorities.

Source	Deduction pattern	How to reduce TDS	How to reverse TDS	Conditions (if any)
Salary	Monthly by employer	Submitting investment declaration with proofs	At the time of filing ITR (with proofs of investments under 80C and 80D. Form 16 A	Ensure to have a tax savings plan under 80c and 80D
Incentives , Commissions, Services, Contracts, Rental Income	At the time of payment	Possible only to reverse	At the time of filing ITR (with proofs of investments under 80C and 80D. Form 16B	Only if eligible under 80C and 80D clauses
Sale of Property	At the time of transaction	If the transaction as per papers is below 20 lakhs in panchayaths and below 50 lakhs in municipality / corporation limits	NA	As per costs shown in documents
Bank Deposits	During interest remittance by bank	Form 15 G / 15 H, Splitting of accounts across banks / HUFs ( if applicable), splitting of interest in two FY	Form 15 G / 15 H,	Will not be reversed if a single deposit is above 50,000 and PAN no. not submitted

source- BankBazaar.com

Benefits of Filing your Income Tax Return on time

Under Income Tax Law if your total income exceeds the basic exemption limit: You have to file the Income Tax Return within the prescribed time, i.e. by the due date.

 The due dates of filing returns for Assessment Year 2012-13 are the following:

Category	Due Date
Most people fall in this category – Salaried employees, pensioners and other persons whose accounts are not required to be audited	31st July 2012
Companies and other persons whose accounts are to be audited	30th September 2012

What happens if a person does not file the Income Tax Return by the due date 

You have to Pay Interest on Income Tax Due if you don’t file on time  If you do not file the Income Tax Return by the due date:

You are liable to pay interest at the rate of one percent for every month after the due date till the date of filing the return.

If No Tax is due: Interest is calculated on the amount of tax payable after adjustment of pre-paid taxes like advance tax, TDS etc. So, if there is no tax payable on the basis of the Income declared in the Tax Return, there is no liability for the payment of interest.

You don’t get the benefit of Carry Forward of Losses if you don’t file on time Under income tax law, if you have sustained a Business loss or loss under the head “Capital Gains”, you can carry forward the loss ONLY if you file the Income Tax Return by the due date.

Therefore, if you have sustained a loss, you must file your Income Tax Return in time if you want to carry forward the loss for future adjustment with your Income.

Possibility of Penalty or Prosecution by the Income Tax Department

Say you could not file the Income Tax Return by the due date: To avoid any penalty by the Income Tax Department, you must file your Income Tax Return before the end of the relevant assessment year that is 31st March 2013.

Possibility of Penalty and Prosecution: If you do not file your Income Tax Return by 31st March 2013, the Income Tax Department may impose a penalty of Rs. 5000, even though the tax payable by you may be Zero.

Further, if a person has failed to file the Income Tax Return by 31st March 2013 and the tax payable after adjustment of advance tax and TDS exceeds Rs. 3000, he may be prosecuted for imprisonment also. However, this law is used in practice very rarely.

Other reasons for filing the returns of income within time If a refund is due after adjustment ofprepaid taxes, it is necessary to file the Income Tax Return to get the refund from the Income Tax Department.

Bank Loans: Further, the return is a declaration of your income and it will be extremely helpful when you are applying for a loan from bank. Before granting the loan, banks want to know your financial capacity and your income details as shown by you in income tax returns.

Visas of foreign countries: Many countries want to know if you are financially sound before they issue you a visa and for this purpose they will rely on your income tax returns.

 

Is filing the Income Tax Return compulsory?

As an Individual you are required by law to file your Income Tax Returns, if your total income without allowing deductions (such as Section 80C etc) exceeds the basic exemption limit.

For Assessment Year 2012-13, the basic exemption limits are the following:

•   For Men below the age of 60, the exemption limit is Rs. 1,80,000.

•   For Women, below the age of 60, the exemption limit is Rs. 1,90,000.

•   For Senior Citizens, whose age is between 60 years to 80 years, the exemption limit is Rs. 2,50,000. This is identical for men and women.

•   For Super Senior Citizens, of the age of 80 years or more, the exemption limit is Rs. 5,00,000.

What does Total Income without allowing deductions (such as Section 80C etc) actually mean?

Let’s say, your gross total Income is Rs. 2,00,000. You have paid Rs. 50,000 in LIC premium for claiming deduction under Section 80C. Your Taxable Income is Rs. 1,50,000 (Rs. 2,00,000 - Rs. 50,000). The tax payable on Rs. 1,50,000 is Zero.

However, even in this situation, you are required to file your Income Tax Return as your gross total Income exceeds the basic exemption limit of Rs. 1,80,000. (assuming you are not a senior citizen).

Exemption for filing Income Tax Return for Salaried Employees

For the Assessment Year 2012-13, there is an exemption from filing the Income Tax Return for Salaried employees, subject to the following conditions. 

•   Your Total Income after deductions (such as Section 80C etc) is upto Rs. 5,00,000.

•   Income other than Salary should be only from Saving Bank Interest, upto Rs. 10,000. If you have any other source of Income like House Property, Capital Gain, or even interest from fixed deposits, you will have to file your Income Tax Return.

•   You must declare this Interest Income from the Saving Bank to the Employer. The employer then has to deduct the TDS taking into account your Interest Income.

•   If you have a refund due, you need to your file your Income Tax Return to claim this refund.

This exemption is difficult to get in actual practice. You will most likely have to file your Income Tax Return.

This is because, you must declare your Interest Income to your employer before 31st March of the Financial Year. But in most cases, the Bank issues the Interest statement after 31st March. So it is virtually impossible to report the Bank Interest to the employer in time.

Compulsory filing of Income Tax Returns if you have foreign assets.

For the Assessment 2012-13, it is mandatory to file your Income Tax Return if you have any foreign assets. Even though you may not have any taxable Income.

When is e-filing your Income Tax Return compulsory?

For the Assessment year 2012-13, e-filing of the Income Tax Return has become compulsory for the following cases:

•   If your Total Income exceeds Rs. 10 Lakhs, then you must e-file your Income Tax Return.

•   If you own foreign assets, you must e-file.

I have paid all my taxes, do I still need to file my Income Tax Return?

As explained above, the law has placed an obligation on you to file the Income Tax Return even if you have no tax due

refrence:yahoofinance

STEPS INVOLVED IN STARTING A BUSINESS

The current economic climate of India is ripe with opportunity for individuals ready to strike out on their own with a business idea. Of course, a lot of groundwork has to come before the actual act of starting a venture.

This includes creating a business plan, market research, funding sources and the business model. Once you have validated your idea with these steps, it is time to delve into the legalities and paperwork involved in launching a business in India. We have listed the main parts of the process below based on a few reliable published sources.

Company Incorporation

1. File the desired company name with the Registrar of Companies and make sure it is available for use.
2. Submit the main objectives of the company to the Registrar of Companies (ROC) for scrutiny. You will be informed of approval or any objections within 10 days.
3. Obtain a Director Identification Number (DIN) online from the Ministry of Corporate Affairs portal. This process calls for submitting attested support documents as proof of identity and address.
4. Obtain a Digital Signature Certificate – a requirement for all those who have to sign ROC forms and related documents. The certificate can be obtained from one of the private agencies authorized by MCA 21.

Stamping of Documents:

Pay stamp duties and submit various incorporation forms and documents, including unsigned copies of the Memorandum and Articles of Association for stamping.


1. Memorandum of association – This lists the main, ancillary, subsidiary and other parts of the company. It also lists the authorized share capital of the company and the names of its first directors.

2. Article of Association – describes the rules and procedures for the routine conduct of the company.


These documents have to be executed by the promoters in their own hand and in the presence of witnesses.

Certificate of Incorporation:

• Submit digital and physical copies of the following documents to the ROC in order to obtain your Certificate of Incorporation:

o Forms e-form 1 (stating that all requirements of the incorporation process have been completed), e-form 18 (informing the ROC of the location of the registered office of the company) and e-form 32 (stating the appointment of proposed directors) have to be filed electronically;
o Signed and stamped forms of the Memorandum and Articles of Association
o Initial consent of directors
o Original approval of name letter
o Stamped Power of Attorney documents

Tax-related Procedures

• Permanent Account Number (PAN) – A PAN card can be obtained by filing an application with the Income Tax department using Form 49A along with supporting documents. In recent years, the government has tried to simplify this process through service centres such as UTI Investor Services Ltd or TIN Facilitation Centers.

• Tax Account Number (TAN) – This is required for anyone responsible for deducting or collecting tax. Use Form 49B for this and submit it at any TIN Facilitation Centre authorized to receive e-TDS returns

• There is a mandatory registration process for Value-Added Tax (VAT) and other tax requirements such as professional tax and service tax

Labour Law Procedures

• Registration with the Office of Inspector, Shops, and Establishment Act: the steps involved in this may vary by state.

• Registration with the Employees’ Provident Fund Organization: This is required only if the number of employees is 20 or more.

• Registration with the Employees’ State Insurance Corporation – a social security scheme to provide protection to workers in the organized sector and their dependents in contingencies such as sickness, maternity, death, disablement or occupational disease

The steps and procedures described above may vary depending on the state and type of business. Tackle these in a proactive and systematic manner to ensure you don’t get caught in a legal tangle that will delay the launch of your business or hamper its operation.

For more information, refer to:

http://www.mca.gov.in/

http://www.incometaxindia.gov.in/