Here are answers to twenty questions that crop up frequently in the taxpayer’s mind:

1. Heard of New Year. What are financial year, previous year and assessment year?
A financial year (FY) is a period of 12 months commencing on 1 April of a year and ending on 31 March the next year. An assessment year is the year immediately following an FY.
For the purpose of calculating income tax, FY is the period during which the income has been earned. The income earned in a FY is assessed in the following year, that is, the assessment year.
For example, income earned in FY 2007-08 (1 April 2007 to 31 March 2008) will be assessed for tax in the year 2008-09. The year preceding the assessment year is the previous year.


2. What if I have not received my Form 16?Employers are supposed to hand over Form 16 within 30 days of the end of a financial year, that is, by 30 April. Ask your employer to issue Form 16 immediately so that you don’t miss the 31 July deadline for filing return for salaried employees.
If you think that your employer might not issue the form in time, you can write a registered letter to him on the issue and send a copy of this to your assessing officer. The employer can be penalised for not issuing the form in time.
If no tax was deducted at source, you can ask your employer for a salary certificate on his letterhead stating your salary during the financial year. This certificate can be used to file a return.

3. Can I use my investment in ELSS this year to reduce last year?s tax liability?No. But if you had not claimed any deductions in your previous year?s return, you may file a revised return to claim a refund, if eligible. However, fresh investments would not be eligible for deductions from last year’s income.

4. Taxes get deducted from my salary every month. Do I need to file income tax return?
Yes. Filing of tax is compulsory for every person whose gross total income, that is, the income under the five heads before allowing for any deduction such as insurance premium, exceeds the basic exemption limit. For financial year 2007-08 (assessment year 2008-09), this exemption limit was Rs 145,000 for women below the age of 65, Rs 195,000 for persons above 65, and Rs 110,000 for any other individual.
Every person falling in the tax bracket should file a return, even if his tax liabilities have been taken care of by the employer through tax deducted at source.
Persons whose salaries have been subjected to TDS are also required to file return because they may have earned from sources other than salary.

5. I have earned under two heads?salary and capital gains. Which form should I use to file my return? How will my tax be assessed?
As an individual assessee, if you have earned income from capital gains in addition to your salary, you will have to file your return in form ITR-2. For taxation, you will have to first segregate capital gains into short-term and long-term.
Any gain from selling shares held for more than a year is termed long-term. Gain from sale of shares held for a year or less is called short-term. If you have paid the securities transaction tax on all share trading, LTCG will be exempt from tax and STCG will be taxed at 10 per cent for FY 2007-08.
Your gross tax outlay will depend on your salary income, income from capital gains, income from other sources like interest on bank deposits, and the deductions you are entitled to.

6. I was in two jobs. How should I file return?
The aggregated income from both your employers will be considered while calculating your tax. Ideally, both companies should give you Form 16 for salary earned during the relevant period. Try to get a salary certificate from your previous employer if you cannot get Form 16 from him. Submit this estimate and a declaration in Form 12B to your current employer who will then incorporate these details in the Form 16 that he issues.

7. What if I miss the deadline of July 31?
If there are no balance taxes to be paid, no interest or penalty will be levied if you file your return before 31 March 2009. However, there is a penalty of Rs 5,000 if you fail to file by that date. In case there are tax arrears, a penalty of 1 per cent per month will be charged as interest on the taxes due.

8. I took up a job in Bengaluru recently. My IT return was filed in Delhi till now. Where should I file it now?
You can file your IT return either in the city you are residing in at present, or in the city where your office is located. Since you have joined a company based in Bengaluru and also shifted your residence there, you will be required to file your return at Bengaluru.
You should write a letter about the change of your address to your current assessing officer and mark a copy of the same to your assessing officer in Delhi. You should also write to the IT Department to get your address changed in its PAN records.
It would be best if you enclose a copy of your previous year’s return while filing your return at Bengaluru. This will serve as a ready reference for your current assessing officer.

9. I have misplaced my insurance receipt. Is it necessary to attach it and other relevant documents with the tax return?
No attachments are needed with the current ITR forms as the forms themselves capture most of the required information. You don’t even need to attach the computation sheet with the form. After you submit the form, the IT department cross-references the TDS details using Oltas (Online Tax Accounting System). However, make sure to carry the photocopies of all the relevant documents to the income tax office.

10. Last minute planning can hurt. How do I prepare myself for next year?
This financial year (2008-09) would be better than the previous one as Budget 2008 has already brought a minimum of Rs 4,000 as tax savings for all the taxpayers. There is a gamut of instruments that can be used to avail deductions under Section 80C.
The mix taken usually depends on the safety, liquidity and term of the various instruments. However, most taxpayers generally forget to factor in whether the income generated by the instrument is subject to tax. It is at the fag end of the financial year that most salaried employees wake up to the need to save taxes through investments.
And in this last minute commotion and confusion, a lot investment happens in assets that are low on return, high on risk, or unsuited to the long-term financial objectives of the investor. As in life, it is always better to be an early riser in tax planning too and begin right at the dawn of a financial year, in April.
A deduction of up to Rs 100,000 is allowed from income every year on specified investments, expenses or payments.
Among these are bank deposits with a minimum period of five years, life insurance premiums, Employees’ Provident Fund, Public Provident Fund, repayment of the principal amount on housing loans, tuition fees, National Savings Certificate and equity-linked saving schemes. Link tax saving investments to long-term goals. Gauge Section 80C instruments as tax savers and wealth creators by looking at their post-tax return.

There are some more things to know in this regard… i will tell u later….in the meantime…..do write comments on this article….Do u like it or not? How it was? What u want to read…. Do tell me Your opinions.