ExpertDabbler

Is it not kinda weird if I tell you that the name on your PAN card need not be the name as per the Income tax department’s database? Nevertheless it is a fact.

I decided to file my IT returns online this time. When I mean online, it is not as easy as booking a railway ticket. The whole process can be divided into six steps.

Step 1:
The first step is to get yourself registered with the Income-tax efiling website

The fields are : PAN number, DOB, First Name, Middle Name and Surname. The department properly butchered my name. At last I did some trial and error and managed to register in the site. There is a hack to confirm your PAN, and figure out how the department likes your name.

Step 2:
Keep a copy of your Form-16 handy. The next step is to download an excel sheet based on your income. It was ITR-2 for me. If you are filing based on your salary alone and Form-16 and not claiming any deduction on home loans, then a much simpler ITR-1 would suffice.

Filling in ITR-2 was bizzare to say the least. You do not have a clue as to which field is editable and which is not. And our IT department have been very liberal in sprinkling references to Schedules, IT Act section numbers etc. I had to take some help from my colleague Santhosh, a few calls to bangalore to my CA friend to sort out a few doubts. I thought things are simpler with ITR-1. In the end it was a great relief to fill in all the details.

Step 3:
Create an XML by clicking a ‘Create XML’ button in the excel sheet.

Step 4:
The XML had to be uploaded into the IT efiling website.

Step 5:
The site then converts the file into a PDF which we can download and print it out.

Step 6:
The printed out PDF has to be signed and taken to the nearest IT office within the next 15 days for an acknowledgement. I am assuming one does not have digital signature

My adventure was just half the fun. I volunteered to register for my friend with his PAN card. The Tax department database has conveniently left out the guy’s middle name

I tried ‘maane’ first, then ‘thaene’ first, then ‘maane thaene’ followed by ‘thaene maane’ etc etc. All the lessons learnt on permutations and combinations came in very handy. After an hour of hard work and with the help of the hack above, I managed to register for the guy.

The user experience of the whole process notwithstanding, I think doing this online filing still saves lot of time.

The departments can enlist the voluntary services of usability guys to make the whole process less intimidating.

PS:
I know the whole post is a bit too late as the deadline for filing IT returns ends on 31st July. But I still think it will be useful for lot of guys who search helplessly for information regarding e-filing of IT returns in the coming years.

I think it’s only appropriate that i publish something on taxes just two nights before the Union Budget

The Income tax in India wiki has the following.

Interest on Housing Loans

For self occupied properties, interest paid on a housing loan up to Rs 150,000 per year is exempt from tax. However, this is only applicable for a residence constructed within three financial years after the loan is taken and also the loan if taken after April 1, 1999.

For let out properties, the entire interest paid is deductible under section 24 of the Income Tax act.

If the house is not occupied due to employment, the house will be considered self occupied.

worst practice happening:
Our ‘kepmaari’ makkals build a house for 35 lakhs, for which they would be paying an EMI of about 33000 per month. Out of this, about Rs.30,000 would be for the interest component.
But if only the assessee declares the house as self-occupied, his maximum deductible amount will be Rs.1,50,000.

So our killadi kepmaaris declare the newly bought house as ‘let out’ for a princely sum of Rs. 3000 per month.
The result?His entire 3,60,000(30,000 x12) is fully deductible.

On the other hand, he is going to add Rs. 36000 as annual value of such let out house property.

Income From House property

Income from House property is computed by taking what is called Annual Value. The annual value (in the case of a let out property or a deemed let out property) may be maximum of the following:

* Rent received
* Municipal Valuation
* Market Value

Annual value in case of a self occupied house is to be taken as NIL. From this, deduct Municipal Tax paid and you get the Net Annual Value. From this Net Annual Value, deduct :

* 30% of Net value as repair cost (This is mandatory deduction)
* Interest paid or payable on a housing loan against this house

In the case of a self occupied house interest paid or payable is subject to a maximum limit of Rs,1,50,000 (if loan is taken on or after 1st April 1999) and Rs.30,000 (if the loan is taken before 1st April 1999)

The balance is added to taxable income.

I dont think one needs to show any proof for declaring such low amounts as rental value.

What’s more, he will show another fake receipt which stipulates he is giving out monthly rent for his accommodation of , say, Rs 6000 and claim HRA as well.

Idhu epdi iukku?

If this can happen with salaried professionals, imagine tax collection among business men.

What happens when a 24 year old, 3 years experienced software pro gets a CTC of 8 lakhs plus?
She has no precedent in her family who can guide her on how to handle all the new money. Nor is she taught about the importance of financial prudence in school or college. While a fat pay cheque is a good thing, it does come with its own perils.

As the economy sees GDP growth rates of 8% for the nth consecutive year,and with the industry facing acute shortage of manpower, more and more young people are earning a lot more per annum than their fathers and forefathers ever did in a decade. Where does this lead to? As is always the case with most youngsters, they end up learning things the hard way.

Almost always, the jobs that most of these MNCs dish out just plain sucks or is too demanding. This is not to say that work with lesser pay packets are revolutionary. What I am stressing here is, a crappy work can make you more cynical, and more frustrated in the long run, and a fat salary can just make more people enter into quirksmode. Typically, people would respond by trying to compensate their dull day life with exciting things in life that money can buy - fun nights or weekends, lavish lifestyle etc. just to went out their frustration.

Soon this 8 lakhs per annum CTC leads to parties, buying expensive clothes, a car on EMI scheme, new mobile phone every few months, LCD television, monthly mobile bills big enough to can get a mobile phone, move to ridiculously expensive apartments - purchase or for rent. The term ‘compensation’ is more in line with the compensation for loss of happiness than for the time spent and knowledge gained.

Let’s see the less glamorous facts.

First, 25% of that CTC is what i call ‘God money’. You know it’s there but you can never see it - e.g., Variable Pay, PF etc.

Second, 33% of the balance will go to the tax man (or to the Home loan lender - essentially the money will go out of your hand and will be taxed again if and when it returns to you).

Third, your job was secure only till your last payslip, in other words, not any more. You never know when USD will go below 35 rupees, how much loss can your investment banking employer/client can absorb on sub-prime crises before axing you, and when your boss can get so cranky that you cannot stand.

Fourth and very importantly, the opportunity cost incurred is enormous. For one, not many can move to less paying but more potentially rewarding vocations in future (higher studies) because of societal and financial/lifestyle pressures.

If X wants to pursue a full time MBA in a good B school, he knows that he cannot because he absolutely needs the paycheck NOW to pay his home loans, car dues, credit card bills, mobile bills etc. This leads to even more frustration and consequently he requires more exciting things to keep him happy. All these are classic illustrations of ’salary trap’. Unfortunately, i find more and more fellow MNC folks falling into this trap. And it looks like there is no way out.

Frankly, i bet almost all of the salaried class would’ve, at some point or the other, felt trapped by their monthly pay checks. At least I’ve felt the same now and then. And this is true indeed, only the degree of entrapment varies.

So what’s the way out? Well, the way out will depend to a large extent on the degree of entrapment. And that can be deduced by a simple method. If you think you’ve been trapped as well, imagine a doomsday scenario. Just think you will be out of your job by EOD today. How long do you think you can survive with your own resources? An honest answer to this question will show you the dire straits or financial paradise you are in. If you are financial paradise material, then you do not belong to salaried class.

Once you know where you stand, just accept that as a fact. Realize that it’s gonna take sometime for you to come out of the mess - a year or two. Remember you did not get into the mess overnight.

Here are some common TO DO items which i sincerely think that you can do to help yourself:

Make sure you close at least 10% of your outstanding credit card dues every month. I know many jithan’s who dodge with balance transfers, but hey, a debt is a debt. Just because it’s interest free does not mean you will ever be worry free. The sooner you make it to zero, the better off you are. Credit card interest rates in India can be as high as 36% per annum - legal kandhu vatti.

Make sure you save at least 10% of your salary per month.

No matter what the tax benefits on your home loans are, target to close at least 10% of your outstanding principal every year.

Develop interests or hobbies which are engrossing but which does not cost a bomb. There are tons of hobbies and pursuits satisfying this criteria.

Never, never trade in stocks using margin funding. Avoid day trading in stocks per se. Day trading in stocks is not investing.

Get a decent health insurance cover for your family members.

All the above gyaan is not to prevent you from enjoying your hard earned income. My only concern is, know what you are getting into. Balance and moderation works well in most of the situations in life, but it works best in these aspects.

It’s great to live king size today, but make sure you and your family do not end up living pauper size tomorrow.

Info-1:via my friend jeysh

Income Tax Department has put on its website the list of income tax refunds of all salary tax payers which could not be sent to the concerned persons for want of correct address.
Salary taxpayers who have not received refunds for assessment years 2003\04 to 2006\07 can click on the link below and query using the PAN number and assessment year whether any refund due to them has been returned undelivered from the menu `undelivered salary refund management system’.
If any refund has been returned undelivered due to change in address, then the taxpayer can enter the present address and the refund will be sent to the taxpayer at the new address.

The link to the website is as under:
http://www.incometaxindia.gov.in/CCIT/refundsearch.asp

Info-2
Folks who commute in their own two-wheelers in OMR are strongly advised not to take the Pallavaram Bye-pass during evening, night times. At the bare minimum, you may have to endure a million insects ramming into your face in the stretch between Thoraipakkam and Kamakshi Memorial Hospital. Not worth it.

Info-3
I still see a few folks having their helmets in their fuel tanks. Not sure if their fuel tanks are so precious, fuel prices notwithstanding. The common complaint against wearing helmet is losing one’s hair.
‘Mairey pochu!’. If its a choice, would you rather lose your hair or your head? Its a no-brainer, honestly. Think about it this way, even your hair tries to protect your head. So it will only be too happy to sacrifice its life for the sake of protecting your head.
My friends’ friends’ father passed away in a tragic accident y’day. This is not the first, this is not the last. If you still wager your head to protect your hair, you’ve lost you brains anyway, what’s the difference?