Though the income-tax return forms are annexure-less, the tax department may seek supporting documents at a later stage.
Even as financial year 2012-13 ended, salaried taxpayers would have breathed a sigh of relief after claiming all investments and expenditures for tax purposes.
However, before we start planning for the current year, let us look at the documentation requirements, clubbing of spouse/ children’s income, and tax filing mechanisms for hassle-free tax filing for last year.
With the tax department focusing more on all investments made and the expenditure incurred by taxpayers, it is essential to maintain proper documentation for all financial transactions. Though the tax return forms are annexure-less, the tax department may seek supporting documents at a later stage.
Currently, specified financial institutions have to file the Annual Information Return (AIR), disclosing transactions exceeding a threshold.
For example, cash deposits of Rs 10 lakh or more in a savings bank account, purchase or sale of immovable property worth Rs 30 lakh or more, credit card payments of Rs 2 lakh or more in a year, and so on. Though individual taxpayers don’t have to disclose these transactions in their returns, the tax department has the information on hand when processing the returns. It is also important to have the following documents in your file, wherever applicable:
Bank certificate for repayment of housing loan, a copy of the sale deed, and receipts for expenses such as brokerage or commission;
Copies of premium paid receipts, donation receipts, health insurance premium paid receipts, and so on;
Bank statements with explanations for deposits and withdrawals, copy of Form 16A if the bank deducts tax on interest amount;
Copies of National Savings Certificates;
Copy of broker’s note, statement of demat accounts and details of dividend received;
Receipts for contribution to Public Provident Fund;
Copy of Form 26AS to show taxes deducted have been deposited with the Government.
Before filing the return, one should be aware of the clubbing provisions. Any income received from the investments or assets purchased in the name of a spouse/ minor child should be clubbed with the income of the investing individual, and taxed accordingly.
If the spouse has a source of income, and the assets are purchased from his/ her funds, then the income will be taxed accordingly. Similarly, if income is earned by a child from his/ her skills/ manual work, it will be taxed in the hands of the child.
An exemption of Rs 1,500 per minor child is available to a person in whose hands the minor’s income is clubbed.
With respect to tax filing, one can file electronically (e-filing) or manually. From FY 2011-12, e-filing is mandatory for those with annual income exceeding Rs 10 lakh, and residents with assets outside India.
E-filing is a fast and secure method, and the returns are processed faster and refunds granted quickly. Also, one should assess the requirement to file a wealth tax return based on the assets held such as car, house, jewellery, urban land, and cash exceeding a certain threshold.
Tax Partner, Ernst & Young