Are you ready to e-file your tax returns?

With July 31 being the last day for filing Income Tax returns, tax assesses need to start getting their returns ready electronically.

In the last few years, things have become quite easy due to the e-filing process.

E-filing is mandatory for taxpayers with an income of over Rs 500,000 a year.

But before that you need to know the changes in the return form this year. Changes in return forms are brought about almost every year.

What’s new?

There are some changes that one needs to keep in mind.

For instance, form Income Tax Returns -- 1 or ITR-1 has space for first-time home buyers to claim deduction under section 80EE.

Those who took a home loan between April 1, 2013 and March 31, 2014 can claim an additional deduction of Rs 100,000 on the housing loan interest paid, that is, they can claim tax benefit for interest repaid up to Rs 250,000 instead of Rs 150,000.

However, the loan amount for this should be Rs 25 lakh (Rs 2.5 million) or less.

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The new form ITR-2 requires you to divide capital gains into several categories, based on the nature of the capital gains and the asset sold.

You will also have to furnish details of exempt allowances under Section 10.

ITR-2 asks for information on house rent allowance, leave travel allowance, tax paid by employer on non-monetary perks and other allowances.

Till last year, you only had to mention the sum total of all such tax-exempt allowances.

Says Milind Kothari, managing partner of BDO India LLP, “Non-corporate taxpayers were given an option to claim refunds through cheque or credit into bank account.

“With an intention to expedite and align the refund process with processes applicable to corporate taxpayers, the new forms have done away with the option of claiming refunds through cheque.

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“Accordingly, going forward, all taxpayers will now receive the legitimate tax refunds directly into their bank account.”

Hence, ensure you submit the correct bank details.

Non-corporate taxpayers claiming deduction for bad debts are now required to disclose their Permanent Account Number in tax returns of every debtor whose quantum of bad debt exceeds Rs 100,000.

TDS details

Before you get down to filing your tax return, check if the tax paid by you has been correctly credited.

Check you tax credit statement or Form 26AS to know the same.

Salaried individuals should match the TDS details in their Form 16 with those in the Form 26AS.

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Form 26AS is available on the I-Tax department's portal. 

Says Sudhir Kaushik, co-founder and CFO of Taxspanner.com, an e-return intermediary, “Check if the tax deposited reflects in Form 26AS.

Also, pay the outstanding tax amount, if any, at the earliest.”

Is it the right form?

The form to be used for filing your tax return is equally important. Choosing the wrong form will lead to your returns getting rejected.

The simple ITR-1 is the most used tax form, but many assesses may not be using it correctly.

Last year, the Central Board of Direct Taxes had made it mandatory for taxpayers to use ITR-2 if their exempt income exceeded Rs 5,000 a year (see box).

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Where to file returns?

You can file returns either through the Income Tax department’s website or other sites such as I-T department authorised ERI Taxspanner.com, Taxyogi.com, Taxsmile.com, taxshax.com and myITreturn.com.

How to e-file returns?

Register with the tax filing site you choose and fill in your details.

There are various packages available with these sites.

For instance, Taxspanner.com’s e-file standard package is for employees who are interested in self-preparing and e-filing returns.

E-file Plus package is for those who want to e-file themselves, but would like to take assistance of a tax professional to enter data and review it.

The eFile Premium package is for those who want to keep their tax documents in a vault for up to eight years, in case of a scrutiny notice.

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WHICH IS THE CORRECT RETURN FORM?

ITR - 1 OR SAHAJ

USE IF YOU EARN FROM -

• Salary or pension
• Interest income
•   Rental income (one house)

DON’T USE IF -

• Exempt income is more than Rs 5,000 a year
• Earn other income from lottery or horse-racing
• Incurred loss under income from other sources
• Have any assets in a foreign country
• Claim tax benefit under foreign treaty

ITR - 2

USE IF YOU EARN FROM -

• Salary or pension
• Capital gains
• Rental income from more than one house
• Income from interest, other sources including lottery, horse-racing
• This is not for businessmen or professionals

ITR - 3

USE IF YOU EARN FROM -

• Salary, pension, bonus, interest income, commission, capital gains
• Rental income from one or more houses, carried forward losses
• Income from interest, other sources including lottery, horse-racing
• Not for sole proprietorship firms

ITR - 4

USE IF YOU EARN FROM -

• Proprietary business, profession, commission

ITR - 4S or Sugam

USE IF YOU EARN FROM --

• Business income (turnover less than Rs  1 crore)
• Business covered under presumptive tax laws

DON’T USE IF --

• Self-employed
• Made capital gains
• Made gains from lottery or horse-racing
• Earn commission from agency business
• Income less than 8% of the turnover of your business
• Income from speculative business

Issues in e-filing

• Gautam Nayak, partner, CNK & Associates, says you can log into the I-T department’s e-filing website by confirming your mobile number and email address. And if the same mobile number or email address is used for more than four taxpayers, it insists that you need to give a separate mobile number or email address. You cannot transact at all on the portal unless you carry out such change. ”This is a recent recommendation from CBDT,” he says
   
• He sites his own example. Nayak needs to file more than five returns -- his own, for his wife, mother, mother-in-law and the Hindu undivided family (HUF) of which he’s the karta, as the executor of a will, as partner of a partnership firm, and so on
   
• Nayak’s mother and mother-in-law do not have email addresses. They are not even SMS savvy, so there’s no point giving their mobile numbers. “Neither my HUF nor the estates of the will have any email addresses or mobile numbers,” he says. While Nayak's could be an exceptional case, many could be faced with similar situations if they need to file returns for their parents or in-laws or both
   
• Similarly, if a non-resident India has to file I-T returns, he will have to maintain an India number and a foreign number. Reason: The I-T department's e-filing website does not accept foreign mobile numbers. Such individuals will have to maintain India numbers for family members too in case they need to file returns in India
   
• Then, you should be careful about how you have named yourself across financial documents. For instance, the I-T department website is supposed to recognise you through the name given in your Permanent Account Number (PAN card). But sometimes if the name in your bank documents or any other official statements is even marginally different, you may be seen as a different individual, says Sudhir Kaushik of Taxspanner.com. Many people give their father's name as 'middle' name in the PAN card, but do not use the same when it comes to bank accounts or employment records

Mistakes to avoid

• File returns at the earliest: E-filing websites can get clogged closer to July 31 and refunds also come faster if filed on time
   
• Do not ignore interest income: Interest earned on your savings account is allowed deduction up to Rs 10,000 but interest earned on bank deposits is taxable
   
• Send ITR-V post filing: Just e-filing isn't enough; you have to post ITR-V within 120 days of uploading the return to the CPC, Bangalore
   
• Read ITR-V instructions: ITR-V should be sent by ordinary or speed post. Also, it should be printed in black and signed in original

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