By 31 July 2009, when you would be filing tax returns for the
assessment year 2009-10, advance preparation in this financial year
2008-09 itself can help you avoid the last-minute anxiety. Here are 12
must dos to reduce tax filing stress next year
Look out for refund
Income tax authorities are supposed to send you the refund either
electronically directly to your bank account, or by cheque to your
address within 30 days of filing the return. Ideally, give 45-90 days
for this to happen. Get in touch with the authorities in writing if the
delay is longer.
Estimate the tax bill
For the current year, first estimate your tax liability. You may
contact your account department to get a fix on the figure. Budget 2008
increased the income slabs, giving a relief of Rs 4,000 to every
taxpayer. For an individual not a woman or a senior citizen, whose
taxable income was Rs 8 lakh in the previous year, the tax liability
was Rs 1,94,670. Now, it is Rs 1,49,350. A net yearly savings of Rs
As a part of your salary, you may get a reimbursement of medical
expenses incurred by you on yourself and your family—Rs 15,000 would be
tax-free per annum. You need to give bills or other documents to claim
the amount. Preserve them carefully.
Leave travel allowance (LTA) is paid every year, but it is tax-free
only for two trips in a block of four years. The blocks are 2002-2005,
2006-2009 and so on. You may have to pay tax this year even after
submitting the bills.
Organise and keep documents handy
Some investment-related proofs, such as statement of account of ELSS
funds, can be stored electronically. Remember that interest income
earned on all your savings bank accounts also needs to be disclosed and
tax paid on them. Close dormant accounts and reduce tax liability.
Collect all your bank statements and TDS certificates, if any. This
will help you calculate your earning from bank interest. Deposit
advance tax if required.
If you are claiming deduction on interest paid on an educational loan,
collect a certificate of repayment for this financial year in which the
interest is stated separately. Do the same for your home loan.
If you are claiming deduction for house rent allowance on actual rent
paid, collect and keep the rent receipts. For any donations given to an
approved charity, get a receipt and also a certificate that the trust
gets deduction under Section 80G. If you are claiming a deduction for
any medical disability under Section 80U, get a certificate of
disability from the authorised doctor.
If you got any gifts during the year, collect the gift deeds in your
favour, which should clearly state that you received money without any
consideration. Keep all the receipts of contributions made towards
health insurance, or to schemes under Section 80C such as LIC payment
receipts, copy of the PPF pass book, and children’s tuition fee
receipts, among others.
Health for all
Even before thinking of any tax-saving investments, ensure adequate
health cover for your family. Further, to the ded-uction of up to Rs
15,000, from this year you will get additional deduction of Rs 15,000
if your parents are also covered, and Rs 20,000 if they're senior
Pay in advance
If your employer does not deduct tax at source and your total tax
liability this year is above Rs 5,000, you will have to pay tax in
advance. Keep a copy of the challan safely for future reference.
Use capital losses
If you have sold any stocks at a loss, you can book a short-term
capital loss, which can be set off against any capital gain—long-term
If you have made any short-term capital gain during the year, you can
set off the loss against the gain. If you book a long-term loss, it may
not be of much use as it can be adjusted only against long-term gains,
which are not taxable for shares.
Send all the details to your accounts department in the form of an
investment declaration. This document normally states all the
tax-saving investment and expenses you plan to undertake this year.
This will allow your account department to calculate your taxes. Based
on this, tax will be deducted at source.
Figure out the existing outgo
Work towards bringing down your tax outgo. Before blindly investing in
tax-saving avenues, figure out how much tax you are already saving.
For salaried employees, 12 per cent of the basic salary goes towards
Employees’ Provident Fund, which qualifies for tax benefit. Life
insurance premiums are also on the same list.
Further, principal repayments up to Rs 1 lakh on existing home loans
get tax relief under Section 80C and interest payments up to Rs 1.5
lakh qualify for tax deduction under Section 24. Another deduction
could be on the tuition fees, up to Rs 1 lakh, that you pay for a
maximum of two children.
Add these figures to see how much of your tax liability is already covered.
Get the old Form 16
If you have moved jobs anytime after 1 April 2008, take a copy of the
Form 16 from your previous employer. If you don’t, you will lose the
advantage of tax exemption. Taxable income is the aggregate of all
income received during the year. If your earlier employer has not
deducted any tax from your salary, you may get a salary certificate
from him indicating the amount received by you as salary during the
Choosing your tax-saver heads under Section 80C should depend on its
time horizon and your risk appetite. An increase in EMI or loan tenure
is likely for floating rate home loans. Try to prepay the loan, either
in parts or in a lump sum. These payments will also help you cut down
your tax liability. For an equity-linked saving scheme (ELSS), invest
systematically to avoid a last-minute dash.
The final moments
Most employers ask for actual proof of investment and expenses by the
first week of February. Once these documents are given, wait till May
2009 for the Form 16, based on which you can file your income tax
return for the next year by 31 July 2009