Tax return filing information: Finance Trading Times

Tax return filing information

There is still a lot of confusion about filing of tax returns, so just wanted to share some information regarding tax returns filing. The last date for filing the tax returns have already passed (31st July 2007). However, you may still NOT have to pay any penalty for filing returns late.

Here’s the actual procedure for tax return filing and penalty:
• As per the rules of income tax department, the tax returns should be filed by 31st July 2007. Otherwise, an individual MAY have to pay penalty for filing late returns
• When will the penalty be imposed? Penalty on late filing of income tax returns will be imposed as follows:
o ONLY if there is an outstanding amount of tax that is due. Meaning: If you have NOT paid taxes by 31st July on your income in the financial year ending March 2007, then there will be a penalty imposed for filing late returns
• For salaried employees, where TDS (tax deducted at source) is already taken by the employer, should NOT worry at all. Such individuals can file their returns even till 31st March 2008, i.e. till the end of this current financial year without any penalty.
• However, in case you have an extra income which is other than your salary, like income from bank interest, mutual funds, stock trading, or other businesses, then you MUST pay interest on that on your own. This tax is to be paid in addition to the TDS by your employer, and should be paid before 31st July.
• Say, if my TDS (as mentioned in my form-16) issued by my employer is 20,000 Rs. Whatever is mentioned in form-16 is based upon my salary. However, I may have additional income from interest earned on the money in bank account and fixed deposit, short term capital gains for trading in stocks or income from other businesses. I HAVE THE RESPONSIBILITY TO DECLARE THIS ADDITIONAL INCOME AND PAY TAX ON THAT.
• There are 2 ways of paying taxes on this additional income
1. I declare to my employer that I have this additional income and ask him to deduct TDS on my total income (salary + this additional income). This additional income is quoted as “Income from other sources” in my form-16, and becomes taxable. So if it is included in my form-16, I DON’T have to do anything.
2. If I don’t declare this additional income to my employer and hence it is NOT mentioned in my form16, then I should deposit tax by filling a challan form and deposit it in any of the banks. I should then file my returns with a copy of this challan attached to my return form (ITR-1)
• In case I have deposited all my taxes before 31st July, then I need not worry about filing of taxes before 31st July, as there is NO outstanding taxes to be paid by me. I can as well file my returns till 31st March 2008 without any penalty.
• In case I’ve missed out paying taxes on some (or all) of my income: I was suppose to pay my taxes before 31st July. Since I’ve missed it, then I am required to pay a penalty of 1% PER MONTH on the OUTSTANDING AMOUNT ONLY (not on the entire amount). For e.g., my employer deducts 20,000 as TDS and mentions it in my form 16. I have additional income of 1000 Rs. on my trading and bank interest. I missed paying tax on this 1000 Rs. before 31st July. I realize my mistake later and I pay my taxes on this additional income of 1000 (say 20% i.e. 200 Rs.) in the month of August. So I should pay a 1% additional penalty since I am late by a month – i.e. I should pay 1% of 200 = 2 Rs, a total of 202 Rs. as my taxes and then file my returns.
• One very good way of filing the returns is online – BUT NOT on PAY websites (like moneycontrol or taxsmile). The official website of Income tax department is offering this service for free. I had filed my returns on 31st July, within a matter of just 5 minutes, that too FREE OF COST and avoiding lengthy queues. The website is quite clear and explains everything in easy steps.
• Let me know if you have any questions – please post them as comments.

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8 Comments: Post your Comments

Anonymous said...(on 6 August 2007 at 00:13 )  


Your articles are pretty informative and set good examples of thought processes that be at work when "investing". Thanks you.

Could you write about Wealth Tax some time? All along I thought wealth tax was on any asset you had. But a fried defined it as only such wealth that is not being directly used by the economy. He said, for example, if you have a fixed deposit, the money is availabe to the economy and hence its not counted for wealth tax.


Anonymous said...(on 6 August 2007 at 06:45 )  

this article helped me clear my questions. keep going!


Anonymous said...(on 7 August 2007 at 01:05 )  

How you filed the return online?
I mean do you had digital signature?

Investment n Trading Advisor said...(on 7 August 2007 at 02:13 )  

You dont need a digital signature to file the returns online.
You sign up with an email-id, PAN no. and other account is created for you.

You can then login and download the form, fill it in, click on Generate XML file, save this generated xml file on your computer, then on the website upload this xml file.

You will get an acknowledgement no. and u print the acknowledgement.

That's it!

Anonymous said...(on 8 August 2007 at 08:04 )  

Dear Shobhit,
After reading your blog "Tax saving investments and financial products: PPF, ELSS and more "
I felt intrigued by my friend's rather typical case, and whether he should invest in a balanced fund, or in an ETF
or prepay the housing loan, as suggested in one of your articles (not in his name but in the name of HUF of which he is the karta). Here goes!
The HUF derives a rental income and the housing loan is also in HUF's name incurring interest of 11.5%, monthly compounding. The balance outstanding as on date is Rs. 602032.The EMI is Rs.15218/-.The total interest payable during CFY is Rs.67485/-
There are no prepayment penalties if up to 20% of outstanding amount is prepaid in any given year.
The HUF already makes a "saving" of Rs.100000 /- pa by repayment of principal.
My friend, the Karta has an independent income falling in the tax bracket of 30% and his savings on own account (all things that you warn against but commited )about 70 k for taxation purposes. He has no loan in his name.
The liability of repayment of housing loan is on the Karta, as the HUF earns a rental income which he uses.
The interest on housing loan gets deducted from the rental income of the HUF (about 4.65 lakhs per annum). Now, the question is whether this Karta of the HUF should invest the amount in a balanced tax saving equity fund or in an ETF or prepay the loan to the extent. At the current rate of repayment, the loan gets paid up by Sept 2011 without prepayment and by July 2011 if Rs 30000/- is prepaid (onetime).
Calculations reveal that the saving by prepaying the 30000 in this August itself yield "become"
Rs.47818 over ~four years period
This translates to a return of 17818 or a simple return of 14.85%
The HUF falls into a tax bracket of 30% I think but am not sure of this; it could also be 20%.
Intt payable during CFY without prepayment =67485 fully deductible from rental income & Rs.65106 by prepaying 30K
Therefore, additional taxable amount when prepaid = 2379
Tax @ 30% on this is 713.7
Thus net returns (neglecting cess etc.)17104.3
or , on a simple interest (average asyou often put it)14.25% pa Now, let us calculate his returns if he invests in an ELSS, this very same amount
again assuming the investment in this August it self
For want of any other known yardstick, I used the NAV of the Balanced Fund of ICICI Pru Pension Plan with which you are familiar &
which I had taken for my self about four years ago.
I have used the NAV of 3rd August, 2006 and 2007 respectively;
NAV as of 3rd Aug 2007 (after markets corrected)23.96
NAV as of 3rd Aug 2006 19.99
Appreciation over one year 3.97
Or, in % terms, 19.86%
Considering that this was a bull phase, let us just use 40% of this rate for the coming four years
which is very conservative to my mind, considering all aspects. Say 7.94%

Amount assigned to MF tax saving type 30000
One time tax saved 9000
Amount actually invested after commissions etc 29250
returns with annual compounding at the above rate 10461.7887
returns with simple interest at the above rate 9294.447224
Net return non taxable, minimum including tax saved 18294.45
In percentage terms, this would be =15.25% pa
The returns would be higher if he also invested the 9k tax saved say in an ETF.
The lock-in period is also only 3 years.
Would appreciate your as well as readers comments on methodology adopted for comparison and any flaws/bloomers therein!

Anonymous said...(on 8 August 2007 at 08:04 )  

And then you need to submit the acknowledgement at the local income tax office - within 15 days of e-filing. All this if you don't have digital signature - please see

One needs to take two printed copies of the acknowledgement to the income tax office, one of which will be returned with seal.


Anonymous said...(on 8 August 2007 at 09:56 )  

YOur articles are excellent
I have a small query regarding ETFs.
Where can i purchase an ETF.
Can i buy in online using my icicidirect account like a mutual fund.
What is the easiest way to invest in ETFs.

Investment n Trading Advisor said...(on 15 August 2007 at 06:57 )  

YOu can buy ETF at icicidirect.
Code is NIFBEE

Wish you all happy and fruitful trading and investing activities with safety! = = = Post a Comment

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