Salary is easy but tax isn't complicated: Here are some easy tips to guide you

First jobs are always memorable and if you lay hands on your first salary in 2014-15, here are some simple tips which will help you understand taxes from a beginner’s point of view.

Assessment Year – A lot of people don’t know what an ‘assessment year’ is and end up choosing the wrong one. Income earned by you in a financial year is ‘assessed’ in the next financial year, and the year in which it is assessed is called the assessment year. And that’s pretty much all there is to the assessment year. So if you are filing a tax return for financial year 2014-15, your assessment year is 2015-16. Do remember to choose your assessment year correctly, in your tax return as well as while paying yourself.

Form 16 – You taxes are half done if you have a Form 16 from your employer. It has the all the information you need to fill regarding your salary income. E-filing portals allow you to upload your Form 16 and then they automatically extract the requisite information from it. It has your total taxable salary and deductions claimed by you.

Total taxable income – While you may believe salary to be your only source of income, a small income may have been earned through interest. Think of your bank account which pays you interest on the balance or fixed deposits that earn interest. If you have purchased bonds, you may be earning interest on that too; these are all incomes that must be reported in your return. They may seem to be small and not significant, but do report them. On the savings bank account interest a deduction of Rs 10,000 can be claimed under section 80TTA. While interest income from fixed deposits is fully taxable. If bank has already deducted Tax Deductible at Source (TDS) on it, you must still report it. TDS deducted is adjusted against your final tax liability, since it is tax already paid from your income. As a thumb rule include all interest income in your return.

Deductions –It’s your first year managing a pay cheque and you had no clue about what deductions were and what you could do with them. But you have heard them of as stuff that lowers your taxes. And such things are always good for you! A lot of these deductions don’t need money to be invested. Your employer deducted Employee Provident Fund (EPF)? Remember, EPF can be claimed as part of Section 80C. If you made payments to buy life insurance, well, count that in too. Parents forced you to deposit money in good old PPF, add that up. You can claim a maximum of Rs 1,50,000 under this section, try to maximise it. Investments to section 80C can only be made during the financial year, so if you invest now remember those can be claimed in the next year’s return. Go over all eligible deductions under section 80C and claim them if you have spent money on them. A bunch of other deductions are also available under section 80 and even if you did not submit any proofs to your employer, you can claim these deductions in your return. Just file your proofs safely in your records, in case your assessing officer comes knocking for them.

TDS – Tax Deducted at Source. Your employer is law bound to deduct tax on salary paid to you. This helps the government fills its own coffers along with you getting paid. You get salary, the government collects tax on it via TDS. Since all TDS deductions are linked to PAN, as you can imagine, it must not be hard to pull them together. Form 26AS is the document which does exactly that. Every TDS deducted from your PAN is present here. Make sure all of this TDS is claimed as a credit against your tax payable. This is the portion of your taxes already paid on your behalf, via deduction from payment made to you. Don’t worry if excess TDS has been deducted, it shall result in a refund of taxes to you. Be sure to include all incomes and all TDS thereon to get a complete picture. If you have a tax due, pay that before you submit your return.

E-filing your tax return – Filing a return is obligatory if your total income before deductions exceeds Rs 2,50,000. Those seeking a refund must e-file their tax return, no other way to get your refund. Besides, proof of your tax returns can help you get loans and may also be required for visas. So be the law abiding citizen that you are and file your return. E-filers have made the process extremely simple and easy and you can be done with your return in a matter of minutes. Take charge of doing it yourself, it helps to be in control of your finances.

Documents and proofs – Are you worried about how to send a copy of proof of investment or deduction to the tax department? You don’t need to send them to anybody. Your return is called an ‘annexure less’ return which means no one wants you to submit proofs, but you must stock them carefully in your own records.

Verification of your tax return – Successfully e-filed? Wait, you are not done yet. Your return filing process is not complete until you have verified your tax return. Verification can be done via sending a paper document to the IT Department or verifying electronically. Your return can be verified through the income tax department’s website, provided your total income is lower than Rs 5,00,000 (after deductions) and you are not seeking a refund. Those not seeking a refund can also e-verify by linking their Aadhaar card on the department’s website and verifying by generating an One Time Password or OTP, which is sent to your mobile. However if there is a refund in your return, you can e-verify only through net banking. Find out if your bank has been specified by the department for this purpose. If none of these means work out for you, use the old way to verify your return. Print your ITR-V and send it to CPC, Bangalore. Do remember it has to be sent via speed post and within 80 days of e-filing. The rule book states that 31 August is the due date to file your income tax return, don’t miss it!

Guest column by www.cleartax.in. ClearTax is India’s largest Income Tax e-Filing website for Individuals and Businesses.