2018 is here and before you know it, it will be time to file your taxes. So, get those tax investments ready and we will tell you all about filing taxes.
“Income Tax is the most difficult thing on earth to understand”. We didn’t say this. It was Albert Einstein. You must have felt the same way sometimes. But filing your taxes is no longer a complicated and long process.
Here is a tax filing guide for 2018 that does away with all those complications.
Know the tax slabs
The Income Tax department and Ministry of Finance prescribe different tax rates depending on your age and the income that you earn. The latest rates for the financial year 2017-18 are as below.
Tax slab for an individual or HUF or Association of Persons:
| Taxable Income | Tax rate |
| For income up to Rs. 2,50,000 | Nil |
| For income up to Rs. 2,50,000 to Rs. 5,00,000 | 5% |
| For income up to Rs. 5,00,000 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
Tax slab for a resident senior citizen (60 years or more):
| Taxable Income | Tax rate |
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,000 to Rs. 5,00,000 | 5% |
| Rs. 5,00,000 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
How to calculate taxable income from your salary
You can calculate your income tax online using the Indian Income Tax website, based on your gross annual earnings. Don’t forget to include investments made for tax deductions.
While computing your gross income you must account for all your income, including income from salary /profession/business, income from any short-term capital gains, income from long-term capital gains, income from house property as well as income from other sources.
Popular tax deductions
Below are some of the most popular tax exemptions that you can avail:
- Tax exemption of up to Rs. 1.5 lakhs on principal repaid for Home Loans under Section 80C and up to Rs. 2 lakhs on interest repaid, under Section 24.
- The Government encourages investments by offering tax deductions under section 80C, 80CCC and 80CCD. The total deductions under these sections are limited to Rs. 1.5 lakhs.
- Section 80D offers a tax deduction on Health Insurance premium for self, children, spouse, and dependent parents with a maximum exemption limit of Rs. 25,000 on the Health Insurance premium for self and family, and Rs. 30,000 for senior citizens.
- Section 80DD offers a tax deduction for normal disabilities with a maximum exemption limit of Rs. 50,000 if the disability is less than 80% and Rs. 1 lakh if the disability is more than 80%.
- Section 80G offers tax deduction against any donation given to approved charitable institutions or certified funds (up to 100%).
Besides, salaried individuals can avail tax deductions for the following allowances under Section 10 of Income Tax Act:
- House Rent Allowance
- Leave Travel Allowance
- Children’s Education Allowance
- Special Allowance
How to calculate tax liability
You can file your income tax returns online by visiting the Income Tax website at https://incometaxindiaefiling.gov.in. After registering, you can download the appropriate ITR form that applies to you. The website can auto-compute your income tax liability when you fill in all your details. And after filing, check if you have received an acknowledgement for it. Typically an acknowledgement is sent to your email.
Know the tax filing forms to be used:
You will have to choose the appropriate tax filing forms depending on the type of income you earn. The forms are listed below.
- ITR 1 (Sahaj): ITR 1 or Sahaj is to be used by individuals who have income from salary or house property.
- ITR 2: For those earning income from salary, house property, capital gains and other sources
- ITR 2A: If the income is from salary or pension or from more than 1 house property and/or income from other sources
- ITR 3: Income from being a partner in any firm that’s not carrying out business
- ITR 4: Income from business or profession
- ITR 4s: Income from business
- ITR 5: For firms, association of individuals
- ITR6: Companies other than those claiming exemption under Section 11
- ITR7: Specialized ITR form for individuals or companies
Process of filing returns- e-filing Vs traditional filing
IT returns can be filed either at the local office of the Income Tax Department or electronically at www.incometaxindiaefiling.gov.in.
If you are a salaried individual or a self-employed person earning an income of more than Rs. 5 lakhs, it is mandatory to file returns using the e-filing process. E-filing is also mandatory if you are availing any tax deduction under sections 90, 90A or 91 of the Income Tax Act.
Documents needed while filing tax
While you do not have to submit any documents while filing tax, you will need to keep all your financial documents with you so that you get the details right. Some of them include:
- PAN Card
- Aadhaar Card
- Bank Statement
- Interest Statement for FDs
- Form 16 or 16A
- Details of income that is exempt
- Rent receipt (if applicable)
- TDS certificate
- Form 26AS to cross-check TDS details
- Home Loan statement (if applicable)
- Premium receipt for Life Insurance (if applicable)
- Medical insurance premium receipt (if applicable)
- Proof of investment (if applicable)
- Proof of donations (if applicable)
As you might know, the Government has introduced linking your Aadhaar number to an electronic verification code system. Hence, you won’t have to send a physical copy of a signed ITR-V to the Central Processing Centre.
Deadline for taxpayers
The due date for filing the tax returns for salaried individuals is July 31st of each year. For 2018, it will be 31st July, 2018. The due date for filing Income Tax returns for companies, working partners of companies or any other person whose accounts needs to be audited is 30th September.
5 quick pointers while filing your IT returns:
Here are some 5 quick things that you must note while filling your Income Tax returns:
- Use the right ITR form
- Double check your tax liability
- Claim all applicable tax deductions
- Verify your Form 26AS that will be available on the Income Tax website
- File your tax return before the due date
Income tax filing is not as complicated as it appears, provided you have all documents in place. Yet to make tax-saving investments? Why not look at ELSS Mutual Funds? They offer tax deductions under Section 80C.