Top 12 Things to Know Before eFiling Your Salary Income Tax Return

1.      What is Form 16?

Form 16 is a certificate of Salary Income Earned and Tax Deducted on Salary Income. It is provided by employer to employee. It generally contains all the details that an employee needs to file his tax return.

 

2.      What is TDS and Form 26AS?

TDS stands for Tax Deducted at Source. When you earn Salary Income, your employer has a legal obligation to deduct tax from your income and submit the tax deducted to Government treasury. TDS is to be deducted for salary that is taxable i.e, it exceeds the minimum amount not chargeable to tax.

FORM 26AS is the annual statement in which the details of tax credit for each taxpayer by the Income Tax Department. Generally taxpayer can claim credit for taxes reflected in his Form26AS.

3.      I only have Salary Income. Do I have to file Tax Return?

If your Gross Total Income before allowing any deductions exceeds the minimum amount not chargeable to tax then you have to file your Tax Return.

The minimum amount not chargeable to tax is as follows (for both men and women)

Below 60 Years                                                 Rs. 2,50,000/-

Above 60 but below 80 Years                         Rs. 3,00,000/-

Above 80 Years                                                 Rs. 5,00,000/-

Also, if want to claim an Income Tax Refund then you are required to file income tax return.

4.      I only have Salary Income. Which ITR Form to use?

If you only have Salary Income and your Income does not exceed Rs. 50 Lakhs then you can use Form ITR1 also called SAHAJ

However if your salary income exceeds Rs. 50 Lakhs, you will need to file Form ITR-2. ITR-2 is a more detailed Tax Return form and you will also need to disclose your Assets and Liabilities in Schedule AL of this Income Tax Return Form (ITR-2).

5.      Tax Slab for Salaried Individuals

Tax Slab applicable to Individual below 60 years of age (Both men and women)

Income Range                                                Tax Slab

Upto Rs. 2,50,000/-                                           : Nil

Rs. 2,50,000/- to Rs. 5,00,000/-                        : 10%

Rs. 5,00,000/- to Rs. 10,00,000/-                      : 20%

Above Rs. 10,00,000/-                                      : 30%

  • Surcharge: 10% of income tax, where total income is between Rs. 50 Lakhs and Rs.1 crore,  15% of income tax, where total income exceeds Rs. 1 crore.
  • Cess : 3% on total of income tax + surcharge.

Tax Slab applicable to Individual above 60 years of age but below 80 years  (Both men and women)

Income Range                                              Tax Slab

Upto Rs. 3,00,000/-                                         : Nil

Rs. 3,00,000/- to Rs. 5,00,000/-                       : 10%

Rs. 5,00,000/- to Rs. 10,00,000/-                     : 20%

Above Rs. 10,00,000/-                                     : 30%

  • Surcharge: 10% of income tax, where total income is between Rs. 50 Lakhs and Rs.1 crore,  15% of income tax, where total income exceeds Rs. 1 crore.
  • Cess : 3% on total of income tax + surcharge.

Tax Slab applicable to Individual above 80 years of age  (Both men and women)

Income Range                                              Tax Slab

Upto Rs. 5,00,000/-                                          : Nil

Rs. 5,00,000/- to Rs. 10,00,000/-                   : 20%

Above Rs. 10,00,000/-                                    : 30%

  • Surcharge: 10% of income tax, where total income is between Rs. 50 Lakhs and Rs.1 crore,  15% of income tax, where total income exceeds Rs. 1 crore.
  • Cess : 3% on total of income tax + surcharge.

6.      Most Common Salary Allowances

6.1 Conveyance Allowance

Conveyance allowance, also called Transport Allowance is offered to employees to compensate for their travel from residence to workplace location.

Exemption Limit: The exemption limit for conveyance allowance is Rs. 1,600/- per month (Rs. 19,200 p.a.).

The exemption limit for blind and orthopedically handicapped is Rs. 3,200/- per month.

6.2 House Rent Allowance (HRA)

Salaried individuals who live in a rented house can claim House Rent Allowance. This can be partially or completely exempt from taxes. If you don’t live in a rented accommodation, this allowance is fully taxable.

Exemption Limit: The deduction available is the minimum of the following amounts:

  • Actual HRA received
  • 50% of [Basic salary + DA] for those living in metro cities (40% for non-metros)
  • Actual rent paid less 10% of salary

Example: X has received following amount during the previous year.

  1. Basic Salary – Rs. 20,000/- per month
  2. ­­Dearness Allowance (D.A) – Rs. 2,000/- per month
  3. House Rent Allowance (H.R.A.) – Rs. 11,000/- per month
  4. Actual Rent Paid – Rs. 10,000/- per month
  5. Lives in Non Metro City

Calculation of Exempt HRA Allowance: The minimum of the following amount shall be exempt

  • Actual HRA received
    • =  11,000*12 =  132,000/-
  • Rent Paid in excess of 10% of salary
    •  (10,000*12)-[(20,000+2,000)*12*10%] = 120,000-(22,000*12*10%)= 120,000-26,400= 93,600/-
  • 40% of Salary
    • (20000+2000)*12*40% = 105,600/- 
  • Exempt HRA = least of the three above = Rs. 93,600/-
  • Taxable HRA = 132,000-93,600= Rs. 38,400/-

If you are making payments towards rent for any furnished or unfurnished  accommodation occupied by you for your own residence, but do not receive HRA from your employer, you can claim deduction under Section 80GG. This is discussed separately later in the article.

6.3 Children Education Allowance & Hostel Expenditure Allowance

These are further two allowances commonly claimed by salaried employees.

Exemption Limit: For Salaried Individuals

  • Children Education Allowance: Rs 100 per month per child up to a maximum of 2 children.
  • Hostel Expenditure Allowance: Rs.300 per month per child up to a maximum of 2 children.

 

6.4 Leave Travel Allowance

LTA is the remuneration paid by an employer for Employee’s travel in the country, when he is on leave with the family or alone. Exemption is allowed only in respect of two journeys performed in a block of four calendar years. The current block runs from 2014-2017

Exemption is allowed only for actual expenses For example, where an employer provides LTA of Rs. 25,000, but an employee spends only Rs. 20,000 on the travel cost, then the exemption is limited to only Rs. 20,000.

It is for cost of travel and does not include any other expenses such as food, hotel stay etc.

Exemption Limit:

  • Journey performed by Air – Economy Air fair of National carrier by the shortest route or the amount spent whichever is less will be exempt
  • Journey performed by Rail – A.C. first class rail fare by shortest route.or amount spent whichever is less will be exempt.
  • Place of origin and destination place of journey connected by rail but journey performed by other mode of transport – A.C. first class rail fare by shortest route or amount spent whichever is less.
  • Place of origin & destination not connected by rail(partly/fully) but connected by other recognized Public transport system – First class or deluxe class fare by shortest route or amount spent whichever is less.
  • Place of origin & destination not connected by rail(partly/fully) and not connected by other recognized Public transport system also – AC first class rail fare by shortest route (as the journey had been performed by rail) or the amount actually spent ,whichever is less.

  
7.      Housing Loan

You can claim deduction for interest component of Housing Loan and Prinicipal Repayment component both.

  • Interest on Housing Loan is claimed under Section 24 and Section 80 EE
  • Principal on Housing Loan is claimed under Section 80 C

 

7.1 Interest Payment under Section 24:

  • For Self Occupied House

The maximum tax deduction allowed under Section 24 for a self-occupied property is Rs. 2 Lakhs

  • For Under Construction House

Sometimes, taxpayers take home loans for under construction property. Maximum deduction that can be claimed is Rs. 2 Lakhs. Some conditions need to be satisfied for this:

  • The construction of the property must be completed within 5 years
  • If the construction of property is not completed within 5 years from the end of financial year in which the loan was taken, the interest benefit in this case would be reduced from 2 Lakhs to Rs 30 Thousand only.
  • You can start claiming interest deduction in the financial year in which construction of the property is complete.
  • Pre- construction Interest
    • If Loan is taken for purpose of Repair/ Renewal/ Reconstruction: No Tax Deduction allowed for Interest paid for repairs/ renewal/ reconstruction during pre-construction stage
    • If Loan is taken for the purpose of Purchase/ Construction: The Interest that was paid before the completion of construction should be aggregated. The aggregate amount will be allowed as tax deduction in 5 equal installments for 5 successive Financial Years starting from the year in which the construction was completed.
  • For House given On Rent
    • In case the property for which the Home Loan has been taken is not self-occupied the taxpayer can take tax deduction of the interest amount upto Rs. 2,00,000/- under Section 24.
    • It is also important to note that this tax deduction of Interest on Home Loan under Section 24 is deductible on accrual basis even if amounts were actually not paid.

 

7.2 Principal Repayment under Section 80 C

  • Principal Repayments can be claimed under Section 80C. Maximum amount that can be claimed is Rs. 1,50,000/-
  • Tax Deduction will be reversed if property sold within 5 years
  • Tax Deduction can be claimed only for Principal amount actually paid in Financial Year

 

7.3 Interest Payment under Section 80 EE:

Deduction under Section 80EE available if following conditions are satisfied:

  • Value of the property purchased is less than Rs. 50 Lakhs
  • Value of loan taken is less than Rs. 35 Lakhs.
  • Loan was sanctioned between 1st April 2016 and 31st March 2017.
  • This Deduction would be available from Financial Year 2016-17 onwards.
  • No other residential property is owned by the Individual on the date of sanction of loan

Exemption Limit

  • Additional Deduction of Rs. 50,000/- allowed under section 80EE
  • This will be in addition to deduction of Rs. 2,00,000/- available under section 24
  • The benefit of this deduction would be available till the time the repayment of the loan continues.

8.      How do I Declare Interest Earned on Savings Account/Fixed Deposits Account in my salary Tax Return?

Interest earned on Savings Account/ Fixed Deposits should be declared under Income from Other Sources.

Deduction is available under section 80TTA for Interest earned on Savings Account. Maximum deduction that can be claimed under section 80TTA is Rs. 10,000/-.

9.      Deductions allowed from Taxable Income (Reduces your tax liability)

9.01 Section 80 C: Deduction for LIC, PPF, FD etc.

Some of the Investments Qualifying for deduction under section 80C are:

  • Provident Fund (PF) & Voluntary Provident Fund (VPF)
  • Public Privident Fund (PPF)
  • Life Insurance Premiums
  • Equity Linked Savings Schemes
  • Home Loan Principal Repayment
  • Stamp Duty and Registration Charges for a Home
  • Sukanya Samriddhi Account
  • National Saving certificates (NSC) (VIII Issue)
  • Infrastructure Bonds
  • 5 Yr Bank and Post Office Fixed Deposit
  • Senior Citizen Saving Scheme
  • Others

Exemption Limit: Maximum exemption that can be claimed under section 80C is Rs. 1,50,000/- . This deduction is allowed to an Individual or a HUF.

 

9.02 Section 80 CCC: Deduction for Annuity Plan

Available for investment in pension funds

Exemption Limit: The total deduction under 80 C, 80CCC & 80CCD(1) cannot exceed Rs. 1,50,000/-

9.03 Section 80 CCD (1), 80 CCD(1B), 80 CCD (2) Contribution to National Pension Scheme (NPS)

Available for investment in National Pension Scheme (NPS)

NPS Tax Benefits under Sec.80CCD (1)

  • The maximum benefit available is Rs.1.5 lakh
  • For an employee à 10% of Basic + Dearness Allowance contribution will be eligible for deduction.
  • The max benefit under 80 C, 80CCC & 80CCD(1) cannot exceed Rs. 1,50,000/-

NPS Tax Benefits under Sec.80CCD (1B)

  • Addition allowance of Rs. 50,000/- available for NPS under this section
  • This is over and above 80CCD(1) limit
  • So the total amount that can be claimed by employee for own contribution to NPS is Rs. 2,00,000/- (Rs. 1,50,000/- under 80CCD(1) and Rs. 50,000/- under section 80CCD(1B)
  • Both self-employed and employees are eligible for availing this deduction.
    • Deduction allowed is least of the following three amounts:
      • Amount contributed by an employer,
      • 10% of Basic + Dearness Allowance
      • Gross Total Income
    • This is additional deduction which will not form the part of Sec.80C limit.

NPS Tax Benefits under Sec.80CCD (2)

  • Deduction allowed is least of the following three amounts:
    • Amount contributed by an employer,
    • 10% of Basic + Dearness Allowance
    • Gross Total Income
  • This is additional deduction which will not form the part of Sec.80C limit.

9.04 Section 80 CCG: Rajiv Gandhi Equity Saving Scheme(RGESS)

The deduction available is 50 % of amount invested in such equity shares or Rs. 25,000, whichever is lower. The maximum Investment permissible for claiming deduction under RGESS is Rs. 50,000.

Conditions to be satisfied for claiming the above deduction under section 80CCG

  • The gross total income of the assessee for the relevant assessment year should be less than or equal to Rs. 12 Lakhs.
  • The assessee should be a new retail investor as per the requirement specified under the notified scheme.
  •  The investment should be in such listed equity shares or listed units of equity-oriented fund specified under the notified scheme.
  •  The minimum lock in period in respect of such investment should be three years from the date of acquisition .

9.05 Section 80 D: Medical Insurance Deduction

  • Expenses for Medical Insurance, Preventive Health Checkup and Medical Expenditure are allowed as deduction subject to limits. These are summarized in table below:
Deduction in respect of Individual and his family Parents of Individual Individual and his family Parents of Individual
(none of them is a senior citizen) (none of them is a senior citizen) (if senior citizen or very senior citizen) (if senior citizen or very senior citizen)
(a) (b) (c) (d)
  ■  Health Insurance

25,000

25,000

30,000

30,000

  ■  Contribution to CGHS

25,000

-

25,000

-
  ■  Preventive health check-up (refer Note)

5,000

5,000

5,000

5,000

  ■  Medical expenditure if no amount is paid in respect of health insurance - -

30,000

30,000

(only in case of very senior citizen) (only in case of very senior citizen)
Maximum Deduction

25,000

25,000

30,000

30,000

Note: Deduction for preventive health check-up of assessee, spouse, dependent children and parents shall not exceed in aggregate Rs 5,000.

(a) Maximum deduction, if individual or any member of his family or any of his parent is not senior or very senior citizen: Rs. 50,000 [(a) + (b)]

(b) Maximum deduction if individual or any member of his family is not senior citizen but any of his parent is a senior citizen or very senior citizen: Rs. 55,000 [(a) + (d)]

(c) Maximum deduction if individual or any member of his family and any of his parent is senior citizen or very senior citizen: Rs. 60,000 [ (c) + (d)]

9.06 Section 80 DD: Deduction for Maintenance of Disable Dependent

  • You can claim the benefit up to Rs. 75,000/- based on the expense incurred for nursing, training, medical treatment, preservation, and rehabilitation of a dependent with disability
  • In case of extreme or severe disability Rs. 1,25,000/- can be claimed as deduction
  • Dependent could be your parents, children, spouse, or siblings
  • Certificate issued by prescribed Medical Authority required to claim deduction

9.07 Section 80 DDB: Serious Illness Deduction

  • Deduction up to Rs. 40,000/- (Rs. 60,000/- for senior citizens and Rs. 80,000/- for super senior citizens) for medicinal expense can be claimed for expenses incurred for prescribed ailments (e.g. Cancer, Chronic renal failure, Parkinson infection, etc.)
  • Prescription is required from specialist for claiming the deduction
  • Amount (if any) received from medical insurance company will be reduced from total expenses to arrive at deduction amount
  • You can claim for self, spouse, guardians, children, and siblings.

9.08 Section 80E: Deduction on Loan for Higher Education

  • Deduction can be claimed for interest on loan taken for pursuing higher education
  • The loan can be for self, spouse or children or for a student for whom the taxpayer is a legal guardian.
  • The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier.
  • There is no restriction on the amount that can be claimed.

9.09 Section 80 EE: Income Tax Benefit on Interest on Home Loan (First Time Buyers)

Deduction under Section 80EE is available if following conditions are satisfied:

  • Value of the property purchased is less than Rs. 50 Lakhs
  • Value of loan taken is less than Rs. 35 Lakhs.
  • Loan was sanctioned between 1st April 2016 and 31st March 2017.
  • This Deduction would be available from Financial Year 2016-17 onwards.
  • No other residential property is owned by the Individual on the date of sanction of loan

Exemption Limit

  • Additional Deduction of Rs. 50,000/- allowed under section 80EE
  • This will be in addition to deduction of Rs. 2,00,000/- available under section 24
  • The benefit of this deduction would be available till the time the repayment of the loan continues.

9.10 Section 80 G: Deduction for Donations to Charitable Institutions

  • The various charitable donations as specified in Sec. 80G (e.g. Prime Ministers National Relief Fund, National Defense Fund etc.) are eligible for deduction up to either 100% or 50%, with or without restrictions, as provided under the section.
  • Donations above Rs. 10,000/- should be paid in Cash, else it cannot be claimed as deduction
  • Donation needs to be monetary donation and not donation in kind
  • To be able to claim this deduction the following details have to be submitted in your Income Tax Return
    • Name of the Donee
    • PAN of the Donee
    • Address of the Donee
    • Amount contributed

9.11 Section 80 GG: Deduction for Rent Paid where no HRA received

  • This deduction is available for rent paid when HRA is not received. Taxpayer or his spouse or minor child should not own residential accommodation at the place of employment.
  • Taxpayer should not have self-occupied residential property in any other place.
  • Taxpayer must be living on rent and paying rent.
  • This deduction is usually claimed by a self-employed person but salaried employees can also claim deduction if no HRA received.

Exemption Limit:

Deduction available is the minimum of

    • Rent paid minus 10% of Total Income
    • Rs. 5,000/- per month
    • 25% of Total Income
  • Thus, a maximum of Rs 60,000/- per annum can be claimed as deduction under this section.

9.12 Section 80 GGC: Contribution to Political Parties

  • Deduction is allowed to a taxpayer for any amount contributed to any political party or an electoral trust.
  • Deduction is not allowed for cash contributions.

9.13 Section – 80 TTA: Deduction for interest on deposits in Savings Account

  • Deduction is available under section 80TTA for Interest earned on Savings Account.
  • Maximum deduction that can be claimed under section 80TTA is Rs. 10,000/- or amount of interest earned whichever is less
  • Deduction can be claimed for interest on deposits in savings account with a bank, co-operative society or post office.
  • Deduction cannot be claimed for interest on time deposits i.e, deposits repayable after expiry of fixed periods.

9.14 Section – 80 U: Deduction for person with disability

  • Deduction of Rs. 75,000/- to an individual who suffers from a physical disability (including blindness) or mental retardation.
  • In case of severe disability, deduction of Rs. 1,25,000/- can be claimed.
  • Certificate should be obtained from a prescribed medical authority (for e.g. a Government Doctor) .
  • This is a fixed deduction and not based on bills or expenses.

10.  Rebate 87 A

If your Total Income (after deductions) is less than Rs. 5,00,000/- you are entitled to a  Rebate upto Rs. 5,000/- on your Income Tax Payable. This section was introduced to provide relief to small tax payers.

Example:

If Total income is Rs. 3,60,000/- . Rebate calculation will be as under (assuming less than 60 years of age)

Tax Calculation:

0 to Rs. 2,50,000/-                              : Nil

Rs. 2,50,000 to Rs. 3,50,000            : (3,60,000 – 2,50,000)* 10% = Rs. 11,000/-

                                                           ————————————————————-

Total Tax                                                : Rs. 11,000/-

Rebate u/s 87A                                    : Rs.  5,000/-

                                                           ———————-

Net Tax                                                  : Rs.  6,000/-

Add Cess @ 3%                                  : Rs.    180/-

                                                           ———————-

Total Tax Liability                                  : Rs. 6,180/-

                                                           =============

11.  What is the deadline for Filing Income Tax return? And what happens if you do not file your return before deadline?

Due Date: The due date for filing Income Tax Return for a Salaried Employee is 31st July, 2017 for current Assessment Year (AY 2017-18). Tax Returns filed after Due Date are called Belated Returns.

Disadvantages of Filing a Belated Return

  • Losses except Loss on House Property cannot be carried forward for set off
  • Most Importantly, if you make any mistake in your Belated Tax Return, you cannot revise it if you have not filed within deadline
  • You lose out on Interest on Refund
  • 1% penalty under section 234A will be levied for missing deadline of tax filing
  • Certain Deduction under Section 80 are disallowed for Belated Returns

Penalty for Late Filing

  • From next Assessment Year (AY 2018-19) a fee of Rs. 5,000/- shall be payable, if the return is furnished after the due date but on or before December 31 of the assessment year and a fee of Rs. 10,000/- shall be payable in any other case.
  • In Current Assessment Year (AY 2017-18) a fee of Rs. 5,000/- shall be payable if tax return is filed after end of assessment year

12.  For how many years can I file my tax return? 

  • In Current Assessment Year (AY 2017-18) you can file Tax Return for two Financial Years
    • FY 2016-17
    • FY 2015-16 (Belated Return)
  • From next Assessment Year (AY 2018-19) you can only file Tax Return for One Financial Year. This is as per the latest amendment brought in by Union Budget 2017.

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For any tax query related to your tax returns you can contact us at info@onlineITreutrn.com. We offer DIY and CA Assisted packages for filing your salaried and other tax returns.

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