Investment Guru: Income Tax

Showing posts with label Income Tax. Show all posts

Enjoy PF Interest @9.5% tax free

Millions of PF account holders got a bounty of 9.5% interest for the year 2010-11. However there was a lack of clarity on the taxability of the Interest over 8.5% as the finance ministry had notified a interest exemption on PF deposits @8.5%.

In its notification No. 24/2011 dated 13th May,2011, the ministry of finance has revised the rate of interest notified under rule 6(b) of Part A of IVth Schedule to the Income tax act,1961 to 9.5%.

This clears the way of tax exemption on Interest Income from PF deposits @9.5% for the financial year 2010-11.

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Due date of filing Income tax return is 31st July'08

Last day Tips from IncomeTax website

Income tax department has posted few tips that would be beneficial for return filers and would avoid jamming of website due to heavy rush. The department's website https://incometaxindiaefiling.gov.in is working fine as of now.

For a smooth E-filing experience please observe the following. 1>Completely prepare your return and generate xml and keep ready.

At the time of login, do not, repeatedly click on the 'Login' button. Please wait till your first login request is accepted.

After login please click on submit your return and upload the xml file.

Please download your ITR-V from My Account-> My Return link or wait for ITR-V to be received via email.

Please immediately logout and close your browser. This will enable other users to login and submit their returns.

E-filing for AY 2008-09 is now available for all ITRs. Please download the free Return Preparation Software for these ITRs from the downloads page in the website.

Income Tax Department has launched Web service facility for E-Return Intermediaries. Please download the latest Web Services Manual and follow instructions to avail this facility.

Please efile early to avoid last minute rush! The due date for filing returns for individuals and non-corporates not required to get their accounts audited u/s 44AB is July 31st. E-filers will get a automatic 15 day grace period from date of E-return upload to submit their signed and verified ITR-V to the Income Tax Department.

To enable taxpayers to file returns in the electronic mode, Income Tax Returns (except ITR-7) have been made annexureless. The CBDT has issued clarifications on annexureless returns. Click here to download Circular 6 of 2008 and related Press Release.

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File your Income Tax Return before 31st July

Don't worry if you couldn't file return in time

I am sure most of you must be spending a lot of time arranging your documents related to computation of Income Tax and trying to meet the Deadline of 31st July,2008 for filing of return of Income. Here are some tips which would be beneficial for you in filing the return without having unreasonable worries of implications.

Deadline of 31st July for whom ?

All individuals and business entities , other than companies, who are not liable to get their accounts audited are required to submit their return of Income by 31st July. For companies, the due date is 31st October. So all individuals, who have income from salaries, interest, house properties, capital gain tax or business income where the books of accounts are not required to be audited , are covered under this.

Benefits of Submitting Return in time

Well, the biggest benefit is that you get peace of mind and get rid of botheration of the implications. So Ideally I would recommend that one should submit one's return in time. The other benefit of submitting the return in time are

You would be allowed to file a Revised return of Income in case such need arises. Returns filed after due date are not allowed to be Revised.
You would be entitled to carry forward the losses under Capital gains. Later return filers lose this benefit.
You will save on interest charges on late payment of taxes. This applies if you have some tax payable in addition to what has already been deducted at source. In that case you need to pay interest @1% per month.

Delay in submission of Return, Don't worry !

Yes, 31st July is the due date for filing the return of Income, but it is not the last date of filing the return. You can file your return by 31st of March 2009 for assessment year 2008-09 without paying any penalty. Another good thing is that if you do not have any liability of paying tax in addition to what had already been deducted, you will not incur even the interest charges. So if your return does not show self assessment tax to be paid, you can safely deposit your return by 31st March, provided you don't get the need to revise your return.

File your tax online and get 15 days more to submit ITRV

Yes, this is a bonus for those who are filing the return online. What you need to do is file your return online and then you will get 15 days to get the acknowledgement submitted to your nearest IT office irrespective of the deadline of 31st July. So if I submit my online return on 31st July, I can deposit the acknowledgement form till 15th August and will still qualify for in-time submission. But remember to upload your return online before 31st July. It's a very easy and user friendly procedure. You can log on to Income tax department website to get step by step procedure of filing online return.
Related post

Guidelines for filing Income Tax Returns

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Top 5 Tax saving Mutual Fund Schemes

Invest in these Schemes for best of Safety and Returns

Most of us have received emails from our HR/Admin asking us to submit the proof of Investments for the purpose of Tax Savings before a specified date and I am sure a lot of us are still in thinking mode as to where to invest for Tax savings. I had written a post last year (How to Invest for Tax Savings?) on the various avenues of tax savings and one more post on Top 5 tax saving funds. Well things have changed from last year in terms of stock market performance and it's right time to review which tax saving or ELSS (Equity linked saving schemes) should we invest in. Well, when I compared the tax saving schemes last year, I concentrated on the Top performing funds over a 5 year and 3 Year timeframe. We are currently going through such a phase in the stock markets which makes us think of saftey of our investments too. Hence I have introduced one more filter in terms of Risk profile of each fund (based on Standard deviation) and Yes, there are new entrants this time and postions have shuffled. Though we normally look at a Three year reutrn for determining which fund to invest in for tax saving purposes, I would suggest that we give some weightage to 1 year return also this time around. Why ? Because, this year had a good mix in terms of both sharp upside moves and sharp downside moves. So position as of 5th February would give an idea of how successful was the fund to manage this situation. we will have an idea of how the fund was able to withstand bouts of volatility. So let's have a look on the top 5 tax saving funds worth investing for purpose of claiming tax benefit under Sec. 80C of Income tax Act.

No. 5 Franklin India Taxshield

NAV : Rs. 174.1
Risk Rating : 3
Overall rating : 5

This is a new entrant in our Top 5 pipping Sundaram BNP on acount of excellent Risk Rating.
The fund has above 35,000 crore Avg. Mkt. capitalisation and equity exposure is more tha 97& of the assets. Top holdings include Reliance Industries, HDFC, L&T, ICICI Bank and Bharti Airtel. Financial Services, Technology and Energy are the top sectors where the fund is invested.

No. 4 Birla Equity

NAV : Rs. 76.47
Risk Rating : 5
Overall rating : 4

Another new entrant in our list of Top 5 tax saving schemes. Birla Equity offers excellent returns from all parameters,but standard deviation of 24.42 , this growth comes with comparatively high risk. The fund has 9394 crorr of AMC with high exposure in Engineering, Services and Financial service sectors. Top holdings include ABB, TRF, Gammon India, Welspun Gujarat and Goodyear India. Top 5 holdings constitutes 20% of its portfolio.

No. 3 HDFC Tax Saver

NAV : Rs. 179.05
Risk Rating : 4
Overall rating : 3

This fund was at No. 2 in the last year Top 5 funds ranking of Investment Guru. But has slipped to No. 3 this year. Well, the fund is second best in terms of 5 year return but scores poorly on 1 year return. Moreover, the Risk rating at 4 is the major reason for it slipping to No. 3 slot. So new filters had a impact on its ratings.

With Avg. market capitalisation of Rs. 23204 crore, the fund has top holdings in Basic Engineering, Financial Services and Energy sectors. Top 5 holdings include ICICI bank, L&T, ITC, Crompton greaves and Reliance Industries.

No. 2 HDFC Long term Advantage Fund

NAV : Rs. 114.99
Risk Rating : 1
Overall rating : 2

Well this chap has overshdowed its elder brother " HDFC Tax saver funds" and has emerged as the star performer from the HDFC stable. Top holdings include ICICI Bank, Reliance Industries, Blue Star, SBI and Crompton Greaves. But why, HDFC Tax saver fund has better 5 Year, 3 year and 1 Year retrun than this scheme, so why Long term Advantage fund at No. 2 ? Well in the year when investors are realising that saftey of investmnet is as important as the return, why would a fund that has got "THE BEST" risk rating should not stand at No. 2 in our rankings. With standard deviation of 19.84 this scheme has outperformed all the others in Top 5 by a big margin. So for those of us, who places safety as the utmost important factor, HDFC Long term Advantage fund offers the best place to invest. But wait, what if you are OK with second best in Safety and No. 1 in returns ......read on

No. 1 SBI Magnum Taxgain

NAV : Rs. 61.65
Risk Rating : 2
Overall rating : 1

The True leader in its class, SBI Magnum Taxgain has managed to remain at No. 1 even this year. With Standard deviation of 22.13 it has managed to be second best in terms of satefy of returns. In terms of performance it has beaten its nearest rival HDFC or any of the Other 4 Top picks by a big margin.

With Avg. mkt. cap of above 27000 crore and with equity to debt mix of 88:12, the fund has Reliance Industries, JP Associates, Welspun Gujarat, Reliance Communications and L&T as its major holdings. The Top Three sector in which the fund has exposure are Energy, Financial Services and Diversified.

My advice would be to go for SBI Magnum tax gain for claiming tax benefits under sec. 80 C of the Income Tax Act. The fund not only provides excellent safety in terms of "Low" risk but also offers highest return on all parameters among the Top 5 schemes.

For those who want capital appreciation can go for Growth option. Those like me who are willing to get regular liquidity in form of tax free dividends, opt for Dividend Payment option. Read More!

Basic guidelines for filing New Income Tax Return

ITR-1 to make life easy, ITR-2 may provide few challenges for Tax Payers

Gone are the days of saral form (People still doubt if they were really saral, but I bet you may have to think again after going through the new forms except ITR-1 !). The Income tax department has come with a new set of forms for assesse's to file their income Tax returns. The new forms are applicable w.e.f. 14th May,2007. The new ITR's are aimed at helping the income tax department monitor the quality of tax payers more closely and accordingly decide on measures to curb instances of Tax avoidances and bring tax rationality.

There are 8 different types of forms for different types of Tax payers. However, for readers I would focus on ITR-1 and ITR-2 unless I receive any specific request or query on the other forms. I believe ITR1 and ITR-2 would cover majority of the readers on the blog.

Here are the guidelines that tax payers have to keep in mind while deciding which ITR form to use and requirements for filing the returns

Every individual whose total taxable income exceeds Rs. 1 lac is required to file the retun of income. For females the limit is Rs. 1.35 Lac and for Senior Citizens it is 1.85 Lac.

Individuals who have only Salary Income and Interest Income have to fill their return in form ITR-1.

Individuals who do not have income from Business or profession, and have income from other sources are required to file return in ITR-2.

This means that all individuals who have income from house property or those those have income from capital gains will have to file ITR-2

Unlike previous years, there is no need to attach Form 16 (this is the form that your employers provides you detailing you Income declared to the employer and Tax deducted at source) with your return.

You are not required to attach any documents with your return.

You will need to provide certain details in the AIR (Annual information report) which is a section to be filled in the ITR's. I have given below the list of activities to be captured in AIR

The last date of filing your return is 31st July,2007. If you delay, you will be charged interest @ 1% for every month of delay.

You would be charged a penalty of R. 5000 in addition to the above interest if you file return for FY06-07 after 31st March,2008.

You have the option of filing the return online (will discuss this in detail later)

Annual Information Report (AIR)

AIR is the new requirement and is aimed at getting details of some significant transaction done by the individual tax payer in order to assess his tax profile. Eaelier the department used to get these informations from Banks, Credit card companies and Regisrtar's office.

Following are the key transactions to be reported in the AIR

Cash deposits totalling Rs 10 lakhs or more in a year in any savings account. If you have more than one savings account and none of the accounts individually has a balance of Rs. 10 Lacs, you don't need to provide this detail.

Payments totalling Rs 2 lakhs or more in the year made against bills raised in respect of a credit card. Again If you hold more than 1 credit card and you have not made any payment of above Rs. 2 Lacs on a single credit card, you don't need to provide any details in AIR.

Payment of Rs 2 lakhs or more for acquiring units of a mutual fund. Same logic applies here. You could have invested more than 2 Lacs in various mutual fund schemes, but report in AIR only if you have made a single transacion of 2 lac or more.

Payment of Rs 5 lakhs or more for acquiring bonds or debentures issued by a company or an institution. The logic explained above applies here also.

Payment of Rs 1 lakh or more for acquiring shares issued by a company. Please note that this covers IPO application made for a amount of Rs. 1 Lac or more even if the allotment was lesser or nothing was alloted to you.

Purchase property valued at Rs 30 lakhs or more. The reference point here would be the Registration amount.

Sale of property valued at Rs 30 lakh or more. The reference point would be the value considered by the Registration authorities.

Payment of an amount or amounts aggregating to Rs 5 lakhs or more in a year for bonds issued by the Reserve Bank of India. For example if you invested 5 lac in RBI bonds duting the year at various intervals, you still need to declare this. Single payment is not a criteria in this case.