Filing the income tax return is a very easy process. You are required to file a return of income, if your taxable income during the year has exceeded Rs. 1,50,000 (Rs 1,80,000 in case of women and Rs 2,25,000 in case of senior citizens).
This is what you need to do:
Step 1 Please obtain the following documents :
Form No. 16: This form is issued by your employer and contains details of your salaried income, and the amount of tax deducted from that salary.
Form No. 16A: This is issued by Banks, Companies from whom you have received income (Either interest or rent.) the course of the year. This contains details of the income and the Tax deducted by these companies
Summary of all bank accounts/Credit card: This summary will provide information on your income and expenditure, as well as investments for the year.
Details of property owned: If you have bought some property during the year, you will need details of rent received and receipts of municipal tax paid during the year. If you have bought this property on a loan, carry the loan details and a copy of certificate of interest paid.
Sale and purchase bills/documents for investments/assets sold: In case of a large number of transactions, it is advisable that you prepare a statement of sale and corresponding purchase of these investments and arrive at the amount of profit or loss, before actually calculating your taxable income.
Details of tax payments made: This is required only if you have made paid taxes in advance.(Remember 15th Sept, 15th Dec & 15th Mar payments)
Step 2 Now you need to select the correct income tax form (ITR) which is based on the nature of income earned. For individuals: Form No. Applicability ITR 1 Meant for Individuals, who have a) Income from salary b) Interest income (taxable / exempt) c)Family pension d) Income from agricultural activities In other words, this form is not applicable in the following situations: a)Individual having any income (taxable / exempt) other than mentioned above b)Any brought forward loss of earlier years c) Any income of other person to be included
ITR 2 Individuals / HUF not having any income on account of carrying out business / profession or on account of being a partner in a partnership firm.
ITR 3 Individuals / HUF who are partner in a partnership firm and does not carry out any other separate business / profession.
ITR 4 Individuals / HUF who is carrying out business / profession under a proprietary concern.
Step 3 Where & How to file your tax returns: You can file your returns either physically at the department collection centres, or electronically.{Take a print out of the respective ITR form along with the Acknowledgment form and file it with the Income Tax Officer}
In case you have doubts or want to download forms you can visit the Income Tax Department for further details www.incometaxindia.gov.in/ And please do not wait for the last day to file your returns.
Sunday, March 29, 2009
What is the Public Provident Fund (PPF)? PPF is a long-term, government-backed small savings scheme of the Central government. What is duration of the investment (tenor)? The duration for the investment is 15 years. The effective period works out to 16 years as the year of opening the account is added 15 years. The contribution made in the 16th financial year will not earn any interest but one can take advantage of the tax rebate. The account holder has an option to extend the PPF account for any period in a block of five years after the minimum duration elapses. The account holder can retain the account after maturity for any period without making any further deposits. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed.
What is the minimum and maximum amount of deposit? The minimum deposit that you can make into a PPF account in a year is Rs 500. The maximum is Rs 70,000. What is the interest rate offered through PPF and how is it calculated? The interest rate offered through PPF is around 8 per cent, which is compounded annually. Interest is calculated on the lowest balance between the fifth day and last day of the calendar month and is credited to the account on March 31 every year. So to derive the maximum, the deposits should be made between 1st and 5th day of the month.
Want to open a PPF account and where? A PPF account can be opened by an individual (salaried or non-salaried) on his own behalf or on behalf of a minor of whom he is the guardian or on behalf of a Hindu Undivided Family (HUF) of which he is a member or on behalf of an association of persons or a body of individuals. An individual can open only one account for himself. A PPF account can be opened with a minimum deposit of Rs 100 at any branch of the State Bank of India and branches of its associated banks The account can also be opened at the branches of a few nationalized banks, like the Bank of India, Central Bank of India and Bank of Baroda [and at any head post office or general post office.
What are the Income tax benefits from PPF? The amount you invest is eligible for deduction under the Rs 100,000 limit of Section 80C. On maturity, the entire amount including the interest is non-taxable. Is it possible to withdraw the amount deposited at any time during the tenure or take a loan against the deposit? Yes. You can take a loan on the PPF from the third year of opening your account to the sixth year. So, if the account is opened during the financial year 2009-10, the first loan can be taken during financial year 2011-12 (the financial year is from April 1 to March 31). The loan amount will be up to a maximum of 25 per cent of the balance in your account at the end of the first financial year. You can make withdrawals during any one year from the sixth year. You are allowed to withdraw 50 per cent of the balance at the end of the fourth year, preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower. For e.g., if the account was opened in 2000-01, and the first withdrawal was made during 2006-07, the amount you can withdraw is limited to 50 per cent of the balance as on March 31, 2003, or March 31, 2006, whichever is lower.
Once you have retired or taken a VRS, you normally get a lumpsum money in the form of compensation, gratuity, provident fund (PF) etc.
As long as you were working the interest earned on PF & gratuity was exempt from tax hence there was no worrying on how to save tax or there was no TDS deduction.
On retirement every retiree faces a dilemma on where to invest money for maximum returns with minimum risks. Further for most private sector employees there is no or very low pension and one is forced to live out of the PF, Gratuity, personal savings.
In my earlier article I had introduced “Reverse Mortgage”, the same is a secure source of good income as most of us own a home during our lifetime.
At this phase of life investments in mutual funds, equity shares are very risky and not advisable.
One of the first options opted by the senior citizen is to keep Bank Deposits, Company Deposits, debentures since senior citizens get an extra return. However the income earned on these instruments are subject Tax Deducted at Source (TDS). This deductions range between 10 to 30% on the income earned.
TDS is deducted even if one is not liable to pay income tax or has already paid the necessary tax dues. One has to file an income tax return to get a refund of tax. It takes atleast six to eight months for getting the refund from Income Tax Department. This is an administrative hassle for a lot of senior citizens as they have low tax liabilities and generally have to claim TDS refund from Income Tax department.
Here are some instruments which have no TDS deductions, but please not that these are not tax free instruments. Income is subject to Income Tax but no TDS is deducted.
National Saving Certificate (NSC): There is a very popular investment. Also, investments in NSC get tax benefits under Section 80C. NSC is a six-year instrument where the investor is able to earn a cumulative return. The interest is compounded half-yearly and the rate works out to 8.16 per cent. The investor gets the entire sum in his hands. The income earned is taxable. And the investor has to show each years accumulated income as income from other sources.
Post Office Deposits: This includes post office time deposits as well as post office recurring deposits. In a normal bank, where TDS is imposed on the time deposits, there is no such provision present for the time deposits at a Post office.Even the monthly income scheme from the post office will not have a TDS. However please note that the income is subject to income tax in the hands of the recipient.
Recurring Deposit with banks: In this type of deposit scheme an investor puts a specified sum of money for a number of months and years. The rate of return is fixed on such deposits. At the end of the term, the bank pays back the entire accumulated sum. Unlike a normal fixed deposit made with the same bank where there would be the TDS when income exceeds a specific limit (Rs 10,000), no amount is deducted from the interest earned here. The interest earned on recurring deposits however remains taxable.
Certain Specific bonds: Income earned on bonds issued after June 1, 2005 by any infrastructure company or capital fund or a public sector company is exempt from TDS deduction. In case you have any further questions, please write to me at mrinalmghosh@gmail.com.
In the West the concept of reverse mortgage is as old as 1929. The process has evolved over the years and is very useful to the senior citizens. Almost every financial institution in the West has a reverse mortgage product. The same is yet to get popularity in India. The same was introduced by the Finance Ministry in 2007.
You need to understand the following terms:
1)What is “Reverse Mortgage”?
It is basically a financial product in which the owner of an house property converts their equity in the property into an income channel.
Confused?When you take a loan from a bank, you take the loan amount upfront and then pay by back in instalments. In a “reverse mortgage” you simply pledge the house property to a financial institution and they give you a series of cash flow back for a fixed tenure or a lump sum amount.
2)Who are the involved parties?
The senior citizen who owns the house property & the financial institution (In India it would be a bank or a housing finance company(HFC))
3)Howdoes one repay the lumpsum amount or series of cash flows?
The house property owner not required to repay the loan during his lifetime. On death or leaving the house permanently, the loan along with the accumulated interest is repaid through the sale of the property pledged.
§If there is a shortfall then the lending institutions bears the loss.
§In case there is profit, the same is returned to the legal heirs.
4)Closing a reverse mortgage.
If the senior citizen gets a lumpsum amount or other income then he can repay the necessary amount and free the property.
5)In case of death of a spouse:
If one of the spouses dies, the other can still continue living in the house. If both die, the bank will give their heirs two options either settle the overall outstanding loan and retain the house, or the bank will sell the house, use the proceeds to settle the outstanding loan and give the rest to the heirs.
6)What is the rate at which the annuity be calculated?
Currently the reverse mortgage market is not developed but it would range between 11 to 14%.
7)What is the impact of such annuity on the Income tax Act in India?
The amount received through reverse mortgage is considered as loan and not income; hence the same will not attract any income tax liability.
8)Does age have any impact?
Higher the age of the house property owner, more the annuity. Everything else remains the same.
In India:
The National Housing Board (the facilitator for housing finance in India) is promoting a specific product variant in whichthe tenure is 15 years and the owner of the house and his/her spouse continue to live in the house till their deathwhich can occur later than the tenure of the reverse mortgage.
What are the features of this specific product?
The draft guidelines of reverse mortgage in India prepared by the Reserve Bank of India have the following features:
-Any house owner over 60 years of age is eligible for a reverse mortgage.
-The maximum loan is up to 60 per cent of the value of the residential property.
-The maximum period of property mortgage is 15 years with a bank or HFC.
-The borrower can opt for a monthly, quarterly, annual or lump sum payments at any point, as per his discretion.
-Revaluation of the property has to be undertaken by the bank or HFC once every 5 years.
-Reverse mortgage rates can be fixed or floating and hence will vary according to market conditions depending on the interest rate regime chosen by the borrower.
Why Reverse mortgage?
The reverse mortgage pros and cons should be measured carefully before subscribing to it. Since, the bulk of the savings for the average Indian are typically locked away in a house or other property at the time of retirement, and in case of requirement it cannot be encashed except by selling the home or moving out. This is where reverse mortgage comes as an answer.
The major reverse mortgage lenders in India or the banks and financial institutions providing reverse mortgage in India include:
-National Housing Bank
-Dewan Housing Finance Limited
-State bank of India
-Dewan Housing Finance Limited
-Punjab National Bank
-Indian Bank
-Central Bank of India
Reverse mortgage is a way of getting the benefits on your home equity by retaining the ownership and without having to make any repayments. This is a goodsolution for senior citizens for their post retirement needs and maintain financial independence.
In case you have anymore questions please write to me at mrinalmghosh@gmail.com
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