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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.

 

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