This article was originally published in Postnoon on June 20th, 2012
It is that time of the year again when we scramble to put together our salary slips, investments, collect form 16 and 16A’s, run after Chartered Accountants, all in order to meet the deadline for filing our Income Tax returns. Most of us handle pretty complicated decision making scenarios with ease, in our respective work domains. However, this entire process of filing the tax returns seems unfathomable to most of us. The tax rate slabs, the deductions, the exemptions and the sections! This article lays down the basics of Income Tax returns filing for the Assessment Year 2012-13 (that is, financial year 2011-12).
Tax Slabs and Standard Deduction
The tax calculations for an individual depend upon the gender and the age of the person, apart from the income levels. There is a minimum standard deduction of Rs1,80,000 for a male individual below the age of 60. If we are doing the calculation for a woman, the standard deduction will increase by Rs10,000 to Rs1,90,000. Similarly, if the individual is a senior citizen above the age of 60 but below 80 years of age, the standard deduction is Rs2,50,000. For people above 80 years of age, the standard deduction is Rs5,00,000/-.
The Tax rates are 0, 10, 20 and 30%, depending on the level of the income. An illustration of how the tax rates are applicable depending on the income, is presented in Table 1.
For the current Assessment year, the tax slabs and calculations for a male individual or an HUF will be as follows:
Various sub-sections of Section 80 specify deductions which can be deducted from the Income, to reduce your tax liability and to encourage people to save in the specified instruments. Once again, this is not an exhaustive list, but covers most of the popular deductions:
The section 80c, 80ccc and 80ccd cover premium paid for Life Insurance policies for self, spouse or child(ren); contributions to Employee or Recognized Provident Funds; Post Office Savings Schemes; Subscriptions to Unit Link Plans of LIC, Annuity Plans or Mutual Fund Plans; Admission Fees for upto two children (this is not an exhaustive list). The upper limit for deductions available under section 80c, 80ccc and 80ccd together is Rs1,00,000/-.
Section 80ccf allows for a deduction of up to Rs20,000 invested in long term infrastructure bonds issued by approved institutions. The investment has to be for a minimum period of 10 years, with a lock in of 5 years. Section 80d is the deduction for premium paid for mediclaim or medical insurance. It is Rs20,000 for senior citizens and Rs15,000 for everyone else. One may also claim for premiums paid for parents who are senior citizens, over and above their own premiums.
Section 80E allows for deduction of interest on loan taken for Higher education, while section 80G allows for deduction of donations paid to approved trusts and NGOs. Section 80 GG allows for deduction of house rent paid (HRA). The amount to be deducted for HRA is the lowest of the:
the HRA received, or
50% of salary for people residing in the four Metro cities and 40 % of salary for any other city, or
rent paid in excess of 10 % of salary
Online Tax Filing
Taxes can be filed through a Chartered Accountant or a Taxation lawyer or one can do it online. If your income is below Rs5,00,000 lakhs, you are not required to file your tax returns if you are a salaried person and receive a Form 16 from your company. On the other hand, according to a notification by the Central Board of Direct Taxes (CBDT), if an individual or a Hindu Undivided Family (HUF) earns more than Rs10 lakhs, it is now mandatory to file the returns online.
You may directly file your returns through the official website of the Income Tax Department: www.incometaxindiaefiling.gov.in or you may file your returns through other sites which may charge you a nominal fees of around Rs200.
It is a good practice to recheck your tax return with the Form 26AS. Form 26AS is a statement of all taxes deducted or collected at source and paid to the Income Tax Department on your behalf, against your PAN number.