TAX TIME – A season when people look back at how much of money (profit/earnings) they have made during the previous financial year and pay their taxes to the government. Tax filing is no doubt a compliance, if not done on time would become a hinderance to make progress in many instances. In the recent past the government has been gradually making amends to the law to widen the tax base and bring in more people under the tax net.
Tick the right boxes !
For many, tax filing is a box ticking exercise. It has become a mere post-mortem of historical facts, which does not impact or effect their current year activities. But what is forgotten is that an income tax return could be a source of reference for future investment and financing decisions. It is a document which gives a peek into the financial capacity of an assessee. In this context, is it enough if tax filing is done as a mere compliance without giving much importance to the details in it?
Tax laws – a maze that demands skilled navigation.
Plain understanding of “income taxes” is “taxing of income earned by an assessee”. But different sources of incomes have different tax rates and basis of charges. One needs a fair understanding of the same to ensure an error free tax filing. Income tax law is updated every year with quite a number of changes to ensure that loop holes are plugged in. Keeping a tab on the series of changes and the specific applicability to an assessee is a herculean task.
Tax filing – self-service mode
There are quite a few online portals where assessee can file their returns by navigating through a series of objective questions. In fact the expectations of the new income tax portal is also the same. This route holds good when one has only income from salaries. Taxes are already computed and paid by the employer in the form of TDS. In this context, one could assume that tax filing is only a box-ticking exercise. But is this a reality?
Taxation of salaries have undergone a structural change with the introduction of the new tax regime. While computing TDS, the employer considers only one regime that was confirmed in the beginning of the year by the employee. At the time of filing the income tax returns, an assessee can choose the regime beneficial to him irrespective of the one opted for TDS purposes. This requires reworking of taxes and it might result in reducing the tax burden.
Additional source of income
Most of us have realised and understood that an additional source of income or a passive income is essential for one’s personal growth. The additional sources of income could be dividend from shares or mutual funds, interest on savings bank account or time deposits etc. Each of these sources of income are taxed differently for different assessee. And due care needs to be taken to declare them appropriately in the tax returns.
Dividend taxation – the game changer!
Dividend income and capital gains (shares / mutual funds) have undergone significant changes in the last two years thus making the area more complex. Abolition of DDT and making it taxable in the hands of the investee seems to be a simple change. But it is not so. So far since dividend income up to 10 lacs was tax free in the hands of assesses, many were not bothered to even declare it as an exempt income in the tax returns. But with this change, one should ensure that all dividends received during the are correctly disclosed. This is also an income stream that needs to be considered in your advance tax computation to avoid penal interest. NRIs need to take extra care in this area by keeping the TDS factor in mind.
Long term capital gains (shares) – no longer tax exempt
Long term capital gains on shares and mutual funds were exempt from tax a couple of years ago. Hence tax payers conveniently did not track and report this exempt income in the tax returns. One needs to be mindful that the landscape has changed with successive amendments. Trading platforms provide a “ready to use” gain or loss statement to make life easier for the assessee. But these “ready to use” statements cannot be plugged into the ITRs directly. There is a lot of information that needs to be sliced and diced into different tax schedules as they have different tax implications. This exercise becomes all the more complex if an assessee holds trading account with more than one service provider. NRIs have additional complexities as TDS is applicable on redemption of mutual funds.
Cost of compliance is a choice, penalty is not!
Tax filing on a self-service mode is definitely plausible. But it works on the GIGO principal where the quality of output is completely dependent on your input. One should understand that the income tax department gathers all details with respect to PAN through SFT. If the information is not declared appropriately, the ITR filed might become “defective” leading to rework, additional taxes and penal interest. This calls for a fair amount of effort in pre-checks, review and choosing the best possible option and file the returns correctly in one go. While filing income tax returns, one should not become “penny wise and pound foolish”.
How can we help you?
Various clauses from the Income Tax Act may be simplified in online contents. But most of the time, it requires professional help in identifying suitable route for specific instances. Similar to nurturing and taking care of personal health, it is important to also keep a tab on one’s financial health. We at Chockalingam Unnamalai & Associates, can help you understand the pros and cons of various choices you make in the context of personal taxation. You can bank on us for a stress free tax filing and related compliances.
Call us at +91 73050 56628 or drop a mail to frontoffice@onesourcevault.com
ITR Filing – Why choose us?
Effective compliance is a key pillar for growing your finances and career/business. Tax compliance in particular could be cumbersome and at times very stressful. We help you to navigate through the maze of changes to tax laws with ease.
We understand and operate on the principle – “Time is money”. We have a reasonable turnaround time (TAT) which ensures timely tax compliance.
We understand the importance of data security and hence operate in a data-secure environment. Onboard us and experience certainty and value for money!
