Step 1: Identify your sources of income under different Income Heads.
Categorize your income against the relevant item. The income heads can be of following.
- Income from Salary
- Income from Business/Profession
- Income from House Property
- Income from Capital Gains
- Income from Other Sources
Step 2: Keep Documents Ready
Before filing Tax you should know which documents you need to keep in hand in order to find out your tax-amount. You should identify the sources of income and place them under the right income heads. Here is a list of documents to be maintained.
Income from Salary |
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Income from Business/Profession |
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Income from House Property |
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Income from Capital Gains |
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Income from Other Sources |
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Income from Salary |
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Income from Business/Profession |
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Income from House Property |
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Income from Capital Gains |
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Income from Other Sources |
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Income from Salary
Income from Business/Profession
Income from House Property
Income from Capital Gains
Income from Other Sources
Step 3: Compute the gross Total Income (GTI)
Add up your earnings from the five income heads to arrive at total taxable income. To get your total taxable income, you will have to subtract the standard tax deductions (Section 80) from the gross income.
Step 4: Calculate deductions
Add up all your Section 80C and non-80C deductions and minus it from your gross total income.
- House rent allowance (HRA)
- Leave travel allowance (LTA)
- Medical allowance
- Perquisites
If you are paying house rent it is exempted from tax up to a certain limit. Similarly, leave travel allowance is also not taxable but only for a certain number of journeys in certain number of years. Reimbursement of medical expenditure incurred by you and your family is tax-free up to Rs 15,000 per annum. All reimbursements need to be supported by bills. Then there are perquisites that should be reduced up to a certain limit. These are usually in the form of accommodation, car and concessional loans. Apart from this premium for group medical and term insurance paid by your employer escapes the tax net. However, you need not worry about calculating all this. Your employer will give you Form 12BA, which will show the value of your perks as part of your salary.
Step 5: Calculating Total Taxable Income
To get the Total Income on which the tax is to be paid reduce the total deductions from the gross total income. The income from house property and capital gains are taxable. Your total tax liability may stand reduced if some tax has been deducted at source (TDS). Subtract TDS from your total tax liability to get the final amount to be paid as tax.
Income from business/profession
In case you have income from a business or you are in a profession, the excess of gross receipts over expenses incurred to earn it will be taxed under this head. A person earning his living in a profession such as law, medicine, engineering, architecture or technical consultancy, whose total gross receipts from that profession exceed Rs 1.5 lakh per annum, is required to maintain books of accounts.
Income from others sources
Usually, any income that does not fall under the four heads of income mentioned above is taxed under this head. Examples of such income are, interest earned on bank fixed deposits, savings account and National Savings Certificates. Now that you have the numbers right, you can proceed to the final act of actually filing your taxes.
Step 6: Finding your tax rates
Individual taxpayers are categorized as General, Women and Senior Citizens. Identify your category and check out your tax liability according to the tax slab applicable for assessment year 2010-11 or financial year 2009-10
Income Tax Rates/Slab for Assessment Year 2010-11 (F Y 2009-10)
General (except senior citizens and women)
Income | Tax |
Up to Rs. 1.60 lakh | Nil |
Rs. 1.60 - 3.00 lakh | 10% of total income exceeding Rs. 1.60 lakh |
Rs. 3.00 - 5.00 lakh | Rs. 14,000 +20 of total income exceeding Rs 3 lakh |
Rs. Above 5.00 Lakh | Rs 54,000 +30% of total income exceeding Rs 5 lakh |
Tax Rates for Women
Income | Tax |
Upto Rs. 1.90 lakh | Nil |
Rs. 1.80 - 3.00 lakh | 10% of total income exceeding Rs 1.90 lakh |
Rs. 3.00 - 5.00 lakh | Rs 11,000 +20% of total income exceeding Rs 3 lakh |
Rs. Above 5.00 Lakh | Rs 51,000 +30% of total income exceeding Rs 5 lakh |
Tax rates for Senior Citizens
Income | Tax |
Up to Rs. 2.4 lakh | Nil |
Rs. 2.25 - 3.00 lakh | 10% of total income exceeding Rs 2.4 lakh |
Rs. 3.00 - 5.00 lakh | Rs 6,000 +20% of total income exceeding Rs 3 lakh |
Rs. Above 5.00 Lakh | Rs 47,500 +30% of total income exceeding Rs 5 lakh |
* 3% cess on tax payable
Step 7: Choosing the correct income tax return (ITR) form.
Based on your income sources, you need to choose your ITR form. Once the documents and the calculations are done, the process of filing tax enters the final phase. The return form that you would need to fill will depend on your income sources:
- ITR-1
- ITR-2
- ITR-4
ITR-1: For individuals having income from salary, pension and interest earned in the financial year
ITR-2: In addition to the above income sources, income from capital gains, income/loss from house property and income from any other source
ITR-4: For all individuals having income from a business or profession
Step 8: Filing returns
Subtract your TDS from the tax liability that you computed earlier to ascertain if you are still to pay any taxes. If you still have a tax liability, get hold of Form 280, fill it up and deposit it in any bank along with the tax payable in cash or cheque before filing your returns. You can also pay this through Internet banking. In both cases, you will get a receipt number, which has to be quoted in the ITR form.
You can file your returns offline or online. However, before doing so, check whether you still have a tax liability
Offline
Under the offline method, you will have two options -- you may either submit the ITR form at the nearest income tax office (ITO) after filling it up yourself, or you may get a CA or a tax return preparer (TRP) to do it for you. You may also take help from the public relations officer of the ITO to fill the form. No documents or investment proofs need to be attached with the form, but remember to bring photocopies or originals with you to the ITO.
Online
Known as e-filing, this method is fast catching up. Filing returns online is compulsory for companies, but optional for salaried individuals. In the future it will become compulsory for individuals with a certain level of income, so it may not be a bad idea to familiarize yourself with the process
Income from Salary |
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