Skip to main content

Tax Planning: Take Control of Your Taxes

 

 

File-Proof

Return filing is the final step in getting the tax equation right. Salaried persons (Forms 16 and 12BA are relevant only for them), businessmen and professionals can check out the papers they will need from this list

  • PAN card
  • Form 16 and Form 12BA (showing perquisites) from employers in financial year
  • Form 16A, showing tax deducted from income sources other than salary, such as bank term deposits
  • Bank statements showing interest earned and exact amount of any advance tax paid
  • House rent receipts for HRA deduction
  • Home loan principal and interest repayment certificate for financial year
  • Educational loan interest repayment certificate for financial year
  • Documents for assets sold and purchased
  • Gift deeds of monetary gifts, clearly showing that money was received without any consideration
  • Health insurance premium receipt
  • Receipts for contributions to Sec. 80C schemes

To get taxes right, you need to show in the tax return your income sources and the tax benefits you availed to minimise tax outgo in the financial year. To have control over the return filing exercise, keep all the relevant documents and submit the necessary information to the IT Department on time. You are not required to enclose the supporting papers with your return of income. Both salaried and non-salaried persons should securely keep the papers related to tax filing of the past seven years, including the current year, as the IT Department can seek them for scrutiny.

The tax benefits allowed and the papers required for filing return listed in File-proof are common for businessmen, professionals and salaried individuals except for Form 16 and Form 12BA which are relevant only for salaried people. These forms need to be taken from all the employers a person has worked for in the financial year. For a salaried person, the crucial task of enumerating the incomes and the deductions for tax benefits is done by his employer through these two forms. If you are a businessman or a professional, you need to figure it out yourself.

Tax control for businessmen and professionals. The amount of tax a business entity or a professional need to pay depends on the gross receipts minus the expenses incurred for running the business or profession. Expenses that satisfy two conditions qualify for deduction from income. One, they should be directly related to the running of the business or profession and two, they should have been incurred during the financial year. Documentary evidence in the form of bills and receipts needs to be furnished for such expenses.

If a car was used for your business, you can claim deductions, among other things, for petrol bills, insurance premium and maintenance charges. If you employed people to keep the work going, their salaries are eligible for deductions if you have documentary proof for it. Payments made through debit cards, credit cards and cheques can also be claimed for tax benefit as evidence can easily be traced and furnished to show that they were actually made. Personal expenses do not qualify for deduction.

If you are running the business or profession from your home, then electricity and home bills can be shown to claim tax benefit. However, claiming the full expense may be contentious for you. For example, a doctor who practises his profession from his home uses utility services like electricity and phone for both personal as well as professional purposes. Such expenses need to be shown as shared. Tax benefit can be claimed only on the proportion of such expenses that went into running the profession or business and not on the entire amount.

Similarly, if a multi-storey apartment taken on rent is used for both residential and professional purposes, expenses incurred on the apartment like rent and electricity cannot be claimed for tax benefit in entirety.

 

Popular posts from this blog

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...

PF e-Passbook

  Provident Fund e-Passbook   The Employees Provident Fund Organisation now runs an e-passbook service that enables members to log in and access their provident fund accounts . This facility enables tracking of the money and ensuring that the employer's contribution has been deposited into the account. This facility is available to those whose accounts are with the central provident fund commissioner for maintenance and can be availed at members.epfoservices.in . Registration A member can register at the portal easily by using PAN , Aadhar or passport number as the log in and the mobile numbers as the PIN . This combination enables easy retrieval of information. Accounts After logging in, the member has to choose the state where the employer is located, and enter the code number of the employer, account number and name. These details can be obtained from any existing PF document . PIN To download the passbook, the member will request...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now