Wednesday , 21 November 2018
TRENDING NOW

Calculating your income tax

By Tensing Rodrigues*

I know the ITR season is far off but it is not too early to get prepared for it. Last time I broached this topic just in time. I was flooded with all sorts of ‘how to’ queries. And by the time I really got to them the date for filing the return was too close and then it was over. So, let me not make that mistake once again.

This is probably a good time to make a rough guess of your probable tax liability. This will help you to pay advance tax, to make tax saving investments, furnish that information to your employer, etc. Whatever effort that you make now will not be in vain; it will save your time later, avoid regretting and, the best of all, give you some peace of mind – you will feel in control.

So how to calculate your tax liability?  One good way is to use the tax calculator on the IT department website. I will explain below in detail.  Much of it may be superfluous to many readers to those who are familiar with it. But I find that there are many readers who are looking for very basic information. It is important that such readers acquire the knowledge for managing their tax affairs. For ignorance leads to their often being taken for a ride or making stupid blunders. I know of so many persons who are so terrified of tax matters that they just avoid paying tax! Or end up paying more than they are liable to. Or suffer losses on account of bungling their investments; out of sheer fear of tax. So let us make a beginning. Explanation here is for resident individuals not HUFs, firms, trusts, societies or companies.

Now begin to enter your details in the calculator: Assessment Year, Tax Payer Status, Gender & Senior Citizen and Residential Status.  Assessment year is the year following the financial year.  For the financial year 2017-18 the assessment year is 2018-19. On the income earned in 2017-18, you pay tax in AY 2018-19. Usually the last date to file ITR will be by end July 2018.

Tax payer status can be individual, HUF, firm, trust/ society or company. Choose individual. If individual appears in that place automatically do not worry. Then choose the appropriate option in gender, senior citizen, etc. Next choose the appropriate option between resident, non-resident and not ordinarily resident. A person is considered resident if she/he is in India for 182 days or more during the financial year or if she/he is in India for at least 365 days during the four  preceding years and at least 60 days in the relevant financial year.

A person is considered non-resident if none of these conditions are satisfied. A person is considered not ordinarily resident if she/he satisfies any of the conditions for being resident and also satisfies any of the following conditions. One the person has been a non-resident in nine out of 10 financial years preceding the current financial year. Two, the person has been resident in India for a period of 729 days or less during the seven financial years preceding the current financial year.

Now is the time to enter your income details. Income is categorized under five heads (Section 14): salaries, income from house property, profits and gains of business or profession, capital gains and income from other sources.

Salaries includes the salary for the current year, arrears and salary received in advance.  It means the gross salary which is before any deduction for PF contribution or TDS. It also includes any encashed leave, fees, commissions, perks or profits in lieu of or in addition to any salary or wages, medical allowance, house rent allowance, leave travel allowance, etc which is in excess of what is permitted. Pension is also treated as salary. If your employer is deducting tax at source from your salary, then you can get the correct salary figure from your Form 26AS.

Let us continue with this next time.

*The author is an investment consultant. Readers can send their comments and queries to investment.ideas.shop@gmail.com

Please like & share: