Top 10 Income Tax Rules You Should Know Before Declaring Investments
This is a common assumption of almost everyone that we are paying a large amount in income taxes. Along with the increased income, the tax liabilities are increased too. At the beginning of a financial year, an employee has to declare his investments and according to that, the employer deducts tax from the salary every month. As government collects tax from its citizen, it provides provision to claim deductions too. A tax return form is filled to declare income, claim deductions and the tax which has been paid. By filing your tax return, you declare how much income you earned during the year, the deductions you claimed and the tax you paid. There are some rules which every taxpayer must know before filing the return application. Before knowing the rules let us first know the tax slabs and who should apply for a tax return. Income Tax Slab
Income up to Rs 2,50,000-
Income from Rs 2,50,000 â€“
Income from Rs 5,00,000 â€“
Income more than Rs
Who Should Apply For A Tax Return? If the gross taxable income after exemptions, but before deductions, exceeds the basic limit one should file a tax return. Let us understand the same with the given table Taxpayer A
Gross Total Income
Net taxable income
Should you file returns?
Yes! As the gross income before deduction is more than the limit which is 2.5 lakhs
Yes! Even taxes are No! The gross income paid, still the gross after exemption is income is more than the below the basic limit basic limit.
# Rule No 1 The income tax return has to be filed if income exceeds the basic limit The first rule of income tax says that one has to file an income tax return if his/her gross taxable income is above the basic exemption limit. This limit is Rs 2.5 lakh for general taxpayers, Rs 3 lakh for senior citizens (above 60) and Rs 5 lakh for the very senior citizen. The gross income of a person is calculated after the exemptions. Many times it is seen that a person has to pay no tax as deductions have eliminated his tax liabilities but still, he has to file tax returns as his gross total income is more than 2.5 lakhs. # Rule No 2 Once the declaration is done, one must verify it Being a concerned taxpayer, one must verify whether the tax deduction is credited to your PAN. The tax deduction of an employee is reflected in Form 16, one must check Form 26AS online to make it sure that all deductions are credited to the PAN of the employee.
# Rule No 3 Choosing the right form is very important This is one of the biggest confusion among taxpayers to choose the right form for filing the returns. There are three forms of Income Tax Return. The ITR 1 or Sahaj is for the salaried or pensioned persons who may have income from their single house property. The ITR 2 is for salaried or pensioned persons who owns Foreign assets and income or agricultural income too. ITR 3 is for the individual or HUF with income from proprietary business or profession # Rule No 4 One has to include interest and other income in return This is a misconception among many taxpayers that the interest gained from fixed deposits is a tax free income. When one deposits money in a fixed deposit, it becomes tax-free but the interest gained over it is a taxable income. The TDS ( tax deduction at source) is even applicable to recurring deposits if the interest goes more than Rs. 10,000. If one doesnâ€™t report the interest income, the tax department will send a notice to the same person # Rule No 5 One must mention AADHAAR in the tax return Mentioning AADHAAR in income tax return has become mandatory for those who have this document. Without an AADHAR the return may be accepted now but in later period one may get a notice for willfully holding back required information. Tax authorities have the power to impose a fine or prosecute a person for submitting wrong information under section 277 of the Income Tax Act, 1961 # Rule No 6 The income of the previous employer must be mentioned When a job change occurs, a person may find that the tax outgo has been dropped as the new employer doesnâ€™t count the income from the previous employer. But when the return is filed, the deduction and the exemptions are also deducted hence he can not enjoy the actual tax benefit. If the person doesnâ€™t report that income, the discrepancy will come to the front by the computerized scrutiny system. He would notify the same by a tax notice. It is the best to inform the income from the previous employer so that the tax liability is correctly calculated. # Rule No 7 One has to disclose foreign assets and income Any taxpayer who has been in abroad must submit their foreign bank account details to the income tax department. The details should include the opening date, interest accrued during the year etc. Any wrong information may lead to legal action against the person.
# Rule No 8 Pan card of landlord is mandatory One can save money by the tax deduction of house rent. But the recent amendment says that if the annual house rent is more than 1 Lakhs, the applicant must apply for the tax deduction with the PAN card of the landlord. # Rule No 9 If the yearly income of exceeds Rs. 50 Lakh, one has to disclose all assets Taxpayers who fall in above 50 lakhs of income bracket are also required to mention details of the physical assets they owned. Now, the tax department wants them to also give details of their financial assets. One will have to declare any land or building under immovable assets. Along with that one has to declare his movable assets such as cash in hand or bank account, vehicles, jewellery, bullion and other valuable metals. Here one has to mention any outstanding loan amount too. # Rule No 10 One has to file the declaration before the deadline There is always a deadline for filing the income tax return which is 31.3.2018 this year. One must file the return before the deadline. There will be a fine of Rs. 5000 if you file your income tax return after the deadline. The penalty is applicable from the financial year 20182019.
Published on Mar 8, 2018
Published on Mar 8, 2018
Along with the increased income, the tax liabilities are increased too. At the beginning of a financial year, an employee has to declare his...