Last year, I have written about ltcg computation from indian stocks in ITR-2. IT returns filing time for FY2013-14 (aka AY2014-15) is here and I had to again pull up my sleeves and get to work to deal with this thing. I am sure – not many geeks – will like this task. Nevertheless, it needs to be done.

First reaction of the geek is that can someone take care of this for me? Can I “offload” or “outsource” this? Very soon you will realize that you-can-not-get-away-from-this. Best is to understand little bit of this since this task like writing performance reviews or investing your saving – will come each year. Nobody will take care of this in-total keeping your best interests in mind. You will be really lucky if you found someone to take care of this.

Much has been said about simplicity of filing income tax returns. Yes – it is simple if your “income sources” are simple. If you have only “salary” income source – process is simple and it even got simpler this year. Income tax web site this year has got a wizard like UI for ITR-1. All you need to know is chapter vi few sections like 80c to save tax. There is plenty of material on web. Little bit reading can suffice and then, you can decide where to put money to save tax before march 31st. Before july 31st – file the return directly on income tax web site using the new UI.

Next – you buy house and take a home loan – you add little more complexity. In ideal world – bank (home loan) data should have been “connected” with IT department’s IT backend. to make the life of borrower simple. but we are not yet there. With this, you need to understand taxation rules around home loan – principal, interest, pre-emi and sometimes changes in max. exempted interest amount. Download/get the home loan certificate from bank and archive it for future reference (taxman can open your file anytime for review. Archiving relevant documents digitally or in original print copy is good idea.). Again there is enough material on web about this. but you need to spend sometime to digest it and remain abreast. You are still ok to use ITR-1.

Next – you put some money in FD (fixed deposits) and/or trade some stocks. Welcome to the world of STCG (short term capital gain), LTCG(long term capital gain) and taxation gamut around this. In ideal world, we can wish if our demat account and bank FDs data was linked to income tax system and IT dept. website presents computed tax liability to the user. but we are not there yet. My last post was only about how to put LTCG from Indian stocks in ITR 2. Further, You need to compute your interest income from FDs including interest credited in your Saving bank (SB) account. Collect form16A (TDS) and interest certificates from banks where you have FDs. Match data in form 16A and interest certificate to ensure that data uploaded to traces site by bank is correct. I have to deal with one case in past years where data did not match and hence, I have to wait for the correction by the bank before filing IT returns. I also maintain my own excel to compute the “expected interest income” from FD in FY. That serves two purpose – a) know your income from “interest source” and pay advance tax payment before march 31st. otherwise – you will need to pay interest when you file return by july 31st. b) check any gross mistake by bank in interest computation or TDS for FDs. I have one case in past where bank deducted 20% TDS for FD and because of this check in place, I could find that out. I doubt even if I take a service of a CA – if he/she will pay attention to the detail like this. Some of his staff will very likely put the data available in ITR-2 and submit my IT returns. If you have staff to support you – you may take their services to handle few tasks like interaction with banks – with proper checks at your level. Nevertheless – knowing the taxation rules and system – is required. Once you have money – managing the money do take some of your time. more money – more time required to manage it!

If you have ESOP (employee stock option plan) as a benefit – it also adds its own complexity to taxation. There is not great clarity on this topic when the company is MNC and you own stocks from foreign stock market. In some cases – TDS is cut and in addition, you have additional tax liability in India. USD to INR conversion is also applicable. I had built a excel for myself to compute tax liability. I am no guru on this topic. you will need to manage your case. I tend to suspect that your income tax file becomes “more of interest” to taxman with such transactions. Taxation demands and their review by taxman is another chapter by itself! Needless to say – archiving all data digitally or in original paper form is good idea (while I personally believe it is MUST). My father has data still from 2000 in archives. I think maintaining last 10-15 years data is good.

On a side note – keeping your data one copy on an external hard disk and one on online drive like dropbox, google drive or onedrive might be good idea. Hardcopies (like TDS certificates from bank) can be archived in a box file sorted and grouped by FY.

Saving taxes within the bounds of taxation rules is another topic as you build corpus of assets and savings in bank. This is still an area of research for me. It requires your time. Being a geek – it may not interest you. but it needs to be done if you care for saving that extra money.

Instead of staying in denial, it is good to build your knowledge about taxation and tax filing slowly as you progress in your career (with progressing income sources). As your income sources increase – taxation get complex. Like there is no simple route to gain years of experience in your domain – it requires hard work – there is no simple route to managing your money. The knowledge and experience needs to be  gained over a long period of time. You cannot “offload” it without knowing ABC of it.

Coming to this year – few things changed.

1. java utility to prepare ITR-2 is welcome change. It automates pre-filling your form with your “personal details” from IT dept. backend that already has the data indexed to your PAN id. It also automates fetching TDS details from backend. Saves you “error-prone” manual copying of these data.
2. It still does not fetch few details like your INCOME tax ward/circle. You need to check your old ITR-2 and fill it.
3. Excel with macros was error prone. I had done mistakes in past even when being extra careful. Like not hitting “re-compute” which left tax calculation stale and I got a demand notice later! I have to go through process of “rectification” of submitted return.
4. java utility output is a xml file. you can submit on site and also archive it.
5. ITR-V submission through post is still a loose end in the process. I post it through speed post to the CTC center blore. I once forgot to sign it before posting and my returns were not processed. This task can probably be eliminated by income tax dept. without requiring people to acquire costly digital signature – with some thinking. This can also eliminate printing these many papers and extra load on our India postal dept. When I was in post office today, there were 3 other people in queue posting ITRV through speed or ordinary post.
6. I learnt about 80TTA exemption up to 10k on interest on SB account this year. I also learnt about 80DD for saving on medical insurance / health checkup for self and parents – helps self employed who are not covered as an additional perk from their employer.

I am not a CA or authority on this subject. but I am certainly one of you – who has to deal with taxation every year and wish if more was automated, if I can just click few buttons to know my tax liability, if taxation rules were simple and did not require exercising problem solving skills to save tax money, if after paying tax mostly through TDS I don’t have to make visits to taxman myself (or through a CA in between), if I don’t ever get a demand notice from IT dept. after filing returns through its tool. On that note  – I am putting effort to understand taxation, handle me and my family finances and ensure that I meet our country’s legal obligations.

What are your learnings – to deal with filing income tax returns?