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What is form-16? How to file income tax return?

Date: 11 Apr 2012   Group: Finance and Investments    Category: Tax Planning   


How to get income tax which was deducted at source? What is the procedure for it? My income tax was deducted per month since December 2011. I have also saved and invested some money in LIC policy and PPF plus home loan. I want now my extra income tax which was deducted back to me. What is the legal procedure to do so? What is Form-16? How to file income tax return?


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How to file IT returns? What is form 16? Check out expert advise on how to file income tax returns, when to file IT returns and the complete procedure of filing income tax returns.

Author: Manoj Chaurasia    19 Apr 2012      Member Level: Gold     Points : 15  (Rs 15)    Voting Score: 2

Income tax is deducted out of your salary only if you earn more than the exemption limit prescribed.
This limit is applicable to financial year 2011-12 i.e. from April 2011 to March 2012. For current year 2012-13 limits have changed, since you have asked about tax deduction for 2011-12 hence the limits are also explained accordingly.

Exemption limits prescribed are as under:
For male below 60 years of age - Rs. 1,80,000/-
For male/female above 60 years of age - Rs. 2,50,000/-
For female below 60 years of age - Rs. 1,90,000/-

Now upto this level the tax rate is NIL and anything earned above it will be taxed as per the following rates.

Upto Rs. 5,00,000/- @ 10%
5,00,001/- to 8,00,000/- @ 20%
8,00,001/- and above @ 30%

Now there are deductions available under Section 80C, 80D, 80CCF and housing loan deduction.

Deduction under section 80C is available upto Rs. 1,00,000/-, under 80D upto Rs. 15,000/- and under 80CCF upto Rs. 20,000/-
Deduction for home loan will vary as per the interest amount paid in EMIs. Principal component amount in EMI under home loan is included under 80C limit of Rs. 1,00,000/- and no other separate deduction is available for the same.

Taking for example that your income is Rs. 6,50,000/- p.a.
Now after allowing deductions for HRA and transport allowance your takeaway salary is Rs. 5,00,000/-

Out of this 5 lakhs you have invested in LIC and PPF and also your PF deducted form company and the principal component of housing loan comes to around Rs. 1 lakh. Maximum deduction available under section 80C.
(I am assuming that you have not made any investment under section 80D and 80CCF for Rs. 15,000/- and Rs. 20,000/- respectively.)

You are now left with Rs. 4 lakh (5-1) lakh.
Now out of this 4 lakh, your interest component of housing loan comes to around Rs. 60,000/-

Now net taxable income comes to Rs. 3,40,000/-

Tax on above will be @10% (340000-180000) = Rs. 16000/-
Add on above @ 3% for education cess i.e. Rs. 480/-

Total tax comes to Rs. 16,480/- on taxable income of Rs. 3,40,000/-
This is the actual tax liability on your income for the year.

Now if TDS deducted on your income is above this amount then you can claim refund of the same from the Income tax department by filing your income tax return.
If it is below this sum then you will have to pay the difference.
If tax deducted is equal to this amount then you do not need to do anything and just file your return.

Form 16 is issued by your company mentioning therein the the total salary earned by you during the year and also the amount of deduction allowed (as per the proof submitted by you) alongwith the tax liability on the same and the tax deducted and deposited on the same.

For purpose of claiming tax refund you have to file the ITR 1 (this is as per the information provided by you and may vary from person to person as per their sources of income) and after filling all the details you have to give the bank details where you will mention your bank account number and MICR code.
Your refund will be transferred directly to your bank account or a cheque in your name will reach you if the return is filed in time, i.e. 31st July, 2012.

Now as per the above explanation you decide that whether you are eligible for the refund of tax or not.

Thanks and regards
Manoj

Author: Paresh Gujarati    19 Apr 2012      Member Level: Gold     Points : 0    Voting Score: 0

What an amazing explanation to my simple question. I am now your fan yaar in this matter. Thanks for such a nice clarification. This has cleared all my doubts.



Author: Manoj Chaurasia    19 Apr 2012      Member Level: Gold     Points : 0    Voting Score: 2

You are most welcome. There was one clerical mistake which i have rectified.
Thanks for your appreciation.

Author: Manoj Chaurasia    03 May 2012      Member Level: Gold     Points : 2  (Rs 1)    Voting Score: 0

Return is filed in sahaj form only if you are a salaried employee and have salary and interest income and no other source of income. You need form 16 to fill in the details into sahaj form.
Have a look at sahaj form and the details it needs, like total income from salary that you will find in form 16 only and nowhere else.

Regards

Author: Manoj Chaurasia    23 May 2012      Member Level: Gold     Points : 8  (Rs 7)    Voting Score: 2

Dear Shahenshaw

You are facing this problem totally because of the fault of your employer. Now either the accounts department of your employer is too lazy or they are just dumb. You should not suffer for mistake of your employer.

You have three options:
1. You should ask your employer to correct the mistake and re-issue the correct form 16 for filing the return and claiming the excess tax deducted.

2. Consult any Chartered Accountant for the same.

3. You should recompute your income on your own and take the correct deduction and compute the tax payable and actual tax paid and arrive at the excess tax deducted which can be claimed as refund. If you have the necessary information and know the method of computation of income, then you should follow it. Assuming that you have only salary income and some interest income for financial year 2011-12, you can follow the given steps for computation of total income.

a) Gross Salary (including all allowances and perquisites) xx
b) Less: Deduction u/s 10 xx
(Transport allowance, HRA,etc)
c)=(a-b) Net Salary xx
d) Add: Income from House Property xx
e) Add: Other income like interest xx
f)= (c+d+e) Gross Total Income xx
g) Less: Deduction u/s 80C xx
h) Less: Deduction u/s 80D xx
i)=(f-g-h) Net Taxable income xx
j) Tax calculated on above income on basis of tax rate and slab applicable xx
k) Total tax deducted by employer xx
l)=(j-k) Tax payable/(refund) xx

You can compute your income on basis of above method. This is only a tentative format on assumption that you have only salary and interest income, as i do not have details about your salary slip.

For purpose of calculation of HRA exemption following is applicable.

Least of the following three will be exempted:
i) Actual HRA received
ii) Actual rent paid in excess of 10% of salary
iii) 50% of salary in case of metro cities and 40% in case of other cities.

Salary here means: Basic + Dearness allowance + Commission based on fixed percentage of turnover
All other allowances and perquisites to be excluded.

Go for the 1st option and try to convince your employer to amend the form 16 issued to you, if he doesn't budge then you can follow the other two methods which suits you.

Only reason that your employer is refusing to amend the form 16 issued to you, is because the companies also have to file quarterly TDS return which gives details of taxes deducted and deposited, and they will have to revise the return (which require effort on their part) if they have already filed their quarterly TDS return.

Hope this helps.

Regards

Author: Shahenshaw    24 May 2012      Member Level: Bronze     Points : 0    Voting Score: 2

Dear Manoj,

Thanks a lot for your detailed reply. I shall recompute the income and calculate the actual tax refund.
But should I ( or is it possible) to enclose the rent receipt, pay slip and mediclaim recpt with SAHAJ.

I have only salary income.
Have enclosed the form 16, employer has shown HRA as value of perquisites u/s 17(2)

In form SAHAJ in the column for Income from Salary/Pension shall I enter the value after reducing the amount of HRA exemption as there is no separate box to reduce allowances u/s 10 in SAHAJ form


Author: Manoj Chaurasia    24 May 2012      Member Level: Gold     Points : 8  (Rs 8)    Voting Score: 2

You are welcome Mr. Shahenshaw

Nowdays no attachments are allowed to be filed along with the ITR, either it is filed manually or online. So you cannot attach any rent receipt or premium receipt along with the return. But you should take the appropriate deduction for the same and keep the original receipt with you, if in case needed in future. Try to keep them in a separate file where you keep your returns. Attach them with the acknowledgement of the return you are going to file.

I would suggest that once you compute the total income and taxes, take a printout of the same and keep it at a place where you can find it easily if required. In short you should do the following
i) Make the correct computation after providing all deductions.
ii) Compute the tax refund.
iii) Take printout of the same.
iv) Fill the sahaj form as per the new computation.
v) File your return.
vi) Take printout of return and acknowledgement (if filed online)
vii) Attach all the rent receipt copy of premium receipt with the return and keep the file in safe place.
viii) Do keep the originals also for future reference.

Regarding the query about filling amount in sahaj form you have to fill the amount arrived after providing all the deductions i.e. after giving benefit of HRA. In sahaj form there is only one cell which asks for salary/pension details hence in your case you should take:
Salary as per section 17(1) + Perquisites u/s 17(2) - Allowance for HRA(as computed by you).

From the balance amount you should take deduction u/s 80C, 80D and 80CCF. You have already been provided Rs. 120000 as deduction but you are also eligible for 80D deduction for Medical Insurance premium. So fill the amount of premium paid under section 80D in the sahaj form. Although the deduction cannot exceed Rs. 15000.

You can click on the compute tax button in the sahaj form and fill the TDS deducted details in the relevant cells.The amount of refund applicable will be computed automatically and should match with your computation.

Hope this helps you.

Regards

Author: Shahenshaw    25 May 2012      Member Level: Bronze     Points : 0    Voting Score: 2

Thanks a lot my friend for your guidance. I have one more query. My brother's employer doesnt provide him HRA as part of his salary. He lives in a rented accommodation, so can he claim deduction u/s 80 GG. I am told we should file form 10 BA for this.

Should we enclose this filled in form 10BA with the IT return SAHAJ ? Also please let me know if we can deduct 80 C and 80 D deduction from total income for calculating the total income for this purpose.

Author: Manoj Chaurasia    25 May 2012      Member Level: Gold     Points : 5  (Rs 4)    Voting Score: 2

As told earlier no attachments can be filed along with ITR, hence, form 10 BA shall not be attached with the ITR of your brother. He can definitely claim deduction u/s 80 GG but at the same time retain with him the original rent receipts which may be needed for future reference. Also form 10 BA is needed to be filed only when asked for by the assessing officer and not otherwise..

Regarding your query about deduction under 80C and 80D, i am unable to understand it.
Total income means the income earned by an individual during the year from all the heads of income viz, income from salary, from house property, from business and profession, from capital gains and from other sources, taken together before providing deduction under chapter VI. All deductions u/s 80 is covered under this chapter.

Deductions are given from "total income" and after that comes the "taxable income." Hence you need to clarify me whether you are asking me about the total income or the taxable income and for what purpose.

Regards

Author: Shahenshaw    25 May 2012      Member Level: Bronze     Points : 0    Voting Score: 2

Thanks once again. Sorry for not being clear in the 2nd part of my query. It was regarding calculation of Amount of deduction under section 80GG

The amount allowed as deduction is the least of the following:

Rent / lease amount paid less 10% of your total income
Rs. 2,000 per month
25% of your total income

Kindly correct me if I am wrong in the above. My doubt is what all to be included and excluded in the calculation of total income for the above.

is it Gross Total Income (Less) Long term and Short term capital gain (Less) All deductions u/s 80C 80D

Thanks and regards

Author: Manoj Chaurasia    25 May 2012      Member Level: Gold     Points : 9  (Rs 8)    Voting Score: 2

Total income here would mean income from all heads taken together after allowing for all the adjustments in individual heads of income.

Each head of income shall be computed individually after providing for relevant deduction applicable to that head of income.
In case of salary all deductions of allowances should be provided for and then the remaining taxable income shall be taken.
In case of house property if there is housing loan and EMI is paid then the deduction of interest shall be taken and loss be computed accordingly.
In case of capital gains or loss all the adjustments applicable shall be done viz long term loss be set off against long term gain and short term gain and short term loss set off against short term gain. If still any gain remains then it shall be taken as income under head capital gain.
Similarly for other two heads.
Now income from each head is totaled to arrive at total income from all heads of income. From this total income deductions under section 80 (80C, 80D, 80CCF, 80U, etc) shall be provided except for deduction under 80GG.
The income which now arrives after providing for all the deductions except 80GG is the total income which is needed as per the three conditions as enumerated under section 80GG.

Hope you got my point clearly now.

80GG says that all deductions to be provided except for this section for computing total income. How come you be able to compute deduction under section 80GG when at first place you do not know the total income and to get the total income you will have to ignore deduction u/s 80GG after providing deduction under all the other sections. This is what came to my mind when i read this provision. Pretty confusing and in the end holding the ear the other way, but still provisions are provisions and we have to follow them. We all think that why don't they be drafted in a simple manner.
By the way you can ignore the above para as it does not relate to your query anyway, it was just my thought.

Regards

Author: Paresh Gujarati    06 Jun 2012      Member Level: Gold     Points : 0    Voting Score: 0

I still have some doubts. I need to file income tax return for this year as I got form-16 from my employer. I want to file income tax return soon. I wonder what are the attachment required for it.

Is there any need of last year income tax return copy as attachment while filing income tax return for assessment year 12-13? I have not filed income tax return last year because I changed the job in financial year of 2010 to 2011. I changed the job on 1st September 2010 and joined SVNIT on the same date. My old salary was Rs. 20,000 fixed per month and new job gives me Rs. 30,000 fixed per month. My tax was not deducted on that financial year. Also, I was not given form-16 from any of my employer in that year. Should I file income tax return of that year now? What is the tax should I have to pay? I invested Rs. 14078 that year.

What is the fine I have to pay for it in terms of interest or as such there is no requirement?

Author: Manoj Chaurasia    07 Jun 2012      Member Level: Gold     Points : 8  (Rs 6)    Voting Score: 2

Hello Paresh

As already told you earlier there is no need to attach any document along with your return. No attachment shall go with the return whether the attachment pertains to previous year or current year.

It is not at all compulsory or needed to provide any proof of last year return along with current year return, hence again no attachment shall be sent with the return.

As per the information provided by you the return for financial year 2010-11 has not been filed. The last date for filing the return for that period without any penalty or interest was 31/03/2012, which is now over. Still if you want to file the return for that year you can do so but only after paying a penalty of Rs. 5000 under section 271F of the Income Tax Act, 1961. After computing your taxable income, if tax liability is arrived then too you will have to pay the tax as well as interest on the outstanding amount of tax from 31st March 2011 till date @1% per month.

I wonder why From 16 was not issued to you by your employer as it is their obligation to provide the same to each of their employees even if they work with them for only a month. Here your employer is at fault.
As per the information given about your salary for that period your salary comes to Rs. 300000 per annum which may or may not be taxable. This can be found only if i have the breakup of your salary.

I need to know that have you ever filed your income tax return before in previous years and if yes then you should definitely file the return pertaining to 2010-11 and if not then you can skip the same as this year will be considered as your first year of return. This is my personal advice to save you from so much hassle or else you always have the other option of filing the return along with penalty and interest.

If you need me to compute your tax for the previous year 2010-11, then i would need your salary breakup as basic salary, hra received any allowances, rent paid (if any), etc.

Hope your doubts are now resolved.

Regards

Author: Paresh Gujarati    07 Jun 2012      Member Level: Gold     Points : 0    Voting Score: 0

Yes, Manoj You cleared my almost all doubts. I filed NILL income tax return in year 2009-2010 and in 2010-2011 I ha d no form-16, so I have not filed the return as well tax was not deducted that year. Should I file only this year's return i.e. for financial year 2011-2012? Will it make any problem as I have not filed previous year return?
Author: Manoj Chaurasia    08 Jun 2012      Member Level: Gold     Points : 7  (Rs 5)    Voting Score: 2

If tax on current year income is deducted and deposited then you should file the return. If in previous years you have filed your return online mode then stick to that process only and do not go for manual filing.

It is required that once you file your return then you should do the same in coming years continuously without any break until and unless there is a case that you have left your job and have not really earned any income due to some unforeseen contingencies.

For year 2010-11, there is a possibility that your income was liable to tax, but again that can be found only if i have the details of your salary. Since tds was not deducted by employer it does not amount to non taxability of income. Your employers did not deduct tax because the income earned under each of them was not taxable individually, but when taken together it does cross the exemption limit. You should check that at your end by referring to the tax slabs and taking appropriate deductions available.

You can very well file return for 2011-2012 and there won't be any problem as such. If it had to, then the income tax department must have already sent you a notice intimating that they did not receive your return of income for year 2010-11. So go ahead and file your return and do it as soon as possible so as to avoid the last date rush. Your last date of filing is 31st july, 2012.

Author: Santosh    13 Jun 2012      Member Level: Bronze     Points : 0    Voting Score: 2

Hi Manoj,
Thanks for good post.
I have a question too. I have two form 16 for last FY as i worked 8 months in one and another 4 months in second company. From my first company I got 2.81 Lacs gross salary after reducing TA, company deducted 9K flat tax amount without considering HRA. company not given me HRA exemption which i decelerated because i left company in Dec and we have to submit Rent receipt at end of Jan.Now in form 16 they not mention any HRA amount.

In my second company I got 1.4Lacs salary after reducing HRA & TA.I did not paid any Tax here.

In summary after a deducting all exemption( including 80C and all) I have total 1.3lacs taxable income.

But I have 60K of Rent receipt which is not consider by my first company. So can i submit rent receipt while filing ITR.

If my rent receipt consider then i will get return of( 130000-60000=70000) 2K (as i already paid 9K tax) if not consider then I hv to pay 4K more.

So please tell me what i do.

Author: Manoj Chaurasia    13 Jun 2012      Member Level: Gold     Points : 5  (Rs 4)    Voting Score: 2

Hi Santosh

Before i advice you regarding your problem, i need the breakup of your salary i.e. your payslip to compute exactly how much the HRA exemption will be available to you. As you have said that you have rent receipt of Rs. 60,000 and considering the whole amount as deduction is not correct.
HRA is computed on following basis:
1) Actual HRA received
2) Rent paid over 10% of salary.
3) 40% or 50% of salary (50% in case of Delhi, Bombay, Kolkata, Chennai and 40% in other cities)
Least of the above three will be exempt.

"Salary" here means: Basic + DA + Commission based on fixed percentage on turnover.

Now since i do not know about the actual HRA received, i cannot compute the exact exemption.

In addition i need to know about the savings and f amount deducted to know how much deduction under section 80 is available to you.
Income from both the employer will have to be taken into consideration to compute your total income for the year and accordingly compute the exact tax liability.
Maybe you will have to pay additional tax but not the one which you have computed.

If you can provide the details then i might be able to help or alternatively you can attach both your form 16 over here for better understanding, if it's fine with you.

Regards

Author: Santosh    14 Jun 2012      Member Level: Bronze     Points : 0    Voting Score: 0

Hi Manoj,

HRA is 40000 in my salary breakup.

Here is all details

Total gross Income from both company=4.2 lacs
PF deducted by company= 20000
80 investment(PPF+Life insurence)= 75000
Medical expense on self= 20000

Tax Paid by me= 9000

I want to HRA exemption which is there in my salary slip but not mention in my form 16. and also i can't say to change form 16 to my company as i left the company.

Author: Manoj Chaurasia    14 Jun 2012      Member Level: Gold     Points : 2    Voting Score: 0

Hi Santosh

I need to know how much was your basic salary in previous company so as to compute exact HRA exemption.
Basic salary for the previous company as the new company has already given you HRA deduction.

Let me know i will tell you the HRA deduction you can avail.

Regards

Author: Manoj Gathe -> MPG    14 Jun 2012      Member Level: Gold     Points : 3  (Rs 2)    Voting Score: 0

Form 16 is basically a tool for assigning the income tax claim. It is basically used by every person who comes under income tax portfolio, i.e. all people who are working or not working.
One can directly fill the income tax by visiting the website for income tax as mentioned herewith https://incometaxindiaefiling.gov.in/. The income tax slabs can be mentioned on the website. You can get all the information regarding the income tax, income tax filling, income tax forms-downloadable etc. from this website.

Author: Varsha    14 Jun 2012      Member Level: Gold     Points : 1    Voting Score: 0

Request your employer to Grant you Form 16. i.e Salary certificate. You can also view your TDS credit online and clam it in your return of Income.
Author: Santosh    14 Jun 2012      Member Level: Bronze     Points : 0    Voting Score: 0

Hi Manoj,
I my Salary breakup with first company is-
Basic salary- 96000
HRA- 40000
TA- 6500
Other allowance- 145500
Total gross salary- 288000

2nd company-
Gross salary- 140000(after deducting HRA+TA, In this company i got HRA & TA exemption because i submitted rent receipt last three months there, I have no problem here)




Author: Manoj Chaurasia    14 Jun 2012      Member Level: Gold     Points : 10  (Rs 9)    Voting Score: 0

Hi Santosh

Your HRA computation will be as under:

1. Actual HRA received: 40,000
2. Rent paid over 10% of salary: 50,400 (60000 - 9600)
3. 40% of Salary: 38,400 (40% of 96000) Assuming to be a non-metro city.

Least of above shall be the HRA exemption i.e. Rs. 38,400.

Now accordingly your taxable salary income form 1st company will be as given below:
2,88,000 - 38,400(HRA) - 6500(TA if reimbursed on actual spent amount basis or else only Rs. 6,400) = Rs. 2,43,100

Taxable salary income from 2nd company Rs. 1,40,000

Total Taxable salary for the year: 2,43,100 + 1,40,000 = 3,83,100
Less: Deduction u/s 80C: Rs. 1,00,000
Net taxable income: Rs. 2,83,100

Tax on above Rs. 10,310 [10% of (283100-180000*)]
Add: Education cess of 3% on Rs. 10,310 = Rs. 309

(* 180000 is the basic exemption limit for male.)

Total tax payable = 10310+309=10,619
Less: Tax already deducted Rs. 9,000
Balance tax payable Rs. 1,619 (10,619-9,000)

You will have to pay Rs.1,619 as balance tax before you file your return.

When you say gross salary it means salary including all the allowances and perquisites and when these are deducted from your gross salary it becomes net salary.

You will not get any deduction for the medical expense. Deduction is available only for the medical insurance premium if taken under section 80D upto Rs. 15,000. I think you have not taken any medical insurance policy as such. This deduction is in addition to the limit of Rs.1,00,000 under section 80C, which means if you had paid premium for any medical insurance upto Rs.15,000 you will get a deduction of Rs. 1,15,000 and not just Rs. 1,00,000.

The computation and tax might change if the assumptions that i have taken does not match exactly with you. Like for HRA i have taken a non-metro city, which will change to Rs. 48000 if it is a metro city. In case of TA if it is not on actual reimbursement basis then the limit for TA is only Rs.800 per month so the TA will become Rs. 6400. You should check these before depositing the tax.

Hope the computation is clear to you.

Regards

Author: Santosh    15 Jun 2012      Member Level: Bronze     Points : 0    Voting Score: 0

Hi Manoj,
Thanks again for clearing my doubt.

So can i do online fill return with 2 form 16? If yes then suggest me some good site.

And more for getting HRA exemptions what document i have to provide as it is not mentions in my form 16.

and for 80C exemptions also not mentions in my form 16.so where and when i have to submit proof( as i already purchased PPF & Insurance policy).

Where i have to deposit renaming tax amount?

And as my total salary less then 5lacs is it necessary to file returns?

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