Yes, we all know it’s that time of the year. You’ve taken advice on tax-saving investments, so you don’t need to worry. Then why raise the tax issue, you might ask. We agree. However, this is not about tax planning or tax saving or anything of the sort.
This is about the actual process of filing your tax returns. Till recently, the thought of filing tax returns was enough to make a strong man weep—especially if he had income from more than one source or from abroad. But, over the past few years, the tax department has become more people-friendly and systematic. So we have simpler forms, less cumbersome processes, and best of all, online filing. The tax department’s adoption of technology has come as a mixed blessing. On the one hand, it has become much easier to understand and fill the tax return forms. On the other, there’s the problem and expense of buying a digital signature. But get over that and online filing could change the way you look at your tax returns.
Instead of eyeing it with fear and loathing, you might actually just breeze through it. Of course, it won’t be so easy if your annual financial and tax planning is a mess. And that’s why our past issues have been devoted to how you can plan your tax-saving investments. This time around, with some help from tax consultants at Ernst & Young, we decided to show you how you can take advantage of the changing process of filing returns.
Online filing of tax returns is easy, cheap and convenient—but this is not all. Here’s how you stand to gain from filing e-returns.
E-filing: What numbers say
• 3.19 crore taxpayers filed returns in 2007-8
• 21.93 lakh, or 6.8%of the returns, were filed online, up from 3.7 lakh the previous year
• Only 11% of the e-returns filed last year were paperless and used digital signatures
• The biggest chunk of e-filers were those with business or professional income, with 62.5%using ITR 4
• 30%of the e-returns used ITR 1 and ITR 2
• 27%of the e-returns were filed beyond office hours—before 9 a.m. or after 6 p.m.
• Maharashtra tops in e-filing, with 2.46 lakh returns, followed by Delhi (1.74 lakh) and Gujarat (1.6 lakh)
• Income-tax collections touched Rs 3,14,468 cr in 2007-8, up 37% from the previous year
The silent revolution that began two years ago in the way tax returns are filed is turning out to be a roaring success. Last year, nearly 22 lakh taxpayers filed their tax returns online, obviously drawn to the convenience of e-filing. Why struggle to fill a lengthy form and stand for hours in a queue when you can do it from the comfort of your home or office?
The online filing of tax returns is more than just a convenient tool. It has the potential to become an intrinsic part of your financial planning. That’s because the filing process takes you through all your financial decisions during the year. Whether it is buying or selling a mutual fund or stocks, renting out a property or simply earning interest on your bank balance, you get a perspective of every investment (or expenditure) done during the year.
Sure, you don’t have to submit documentary evidence of your savings and spending, but just filling these details in the appropriate schedules means reviewing your entire financial year. In the process, you get to know how profitable your investment decisions have been. And as the tax liability gets calculated alongside, you also get to know which decision was the most tax efficient. So, the online filing process makes you a more informed investor and a careful spender.
Another advantage of the online process is that you get an electronic copy of your return which can be easily stored and accessed whenever necessary. You still need to store a physical copy of the verification but your filing work is reduced. Despite these advantages, e-filing hasn’t been adopted as widely as it should be, given the spread of computers and Internet connections.
While the numbers are growing at a frenetic pace—the Central Board of Direct Taxes (CBDT) expects some 50 lakh e-returns this year—in absolute terms, it is minuscule. Only 6.8% of the 3.19 crore returns filed last year were submitted online. Also, most of the e-filing was not a completely paperless process.
Of course, in an ideal world, you would be able to log in, fill the forms, submit it and be done with. But only 11% of the assessees who filed online actually did so last year. They are the few who own digital signatures, which are needed for complete online filing. The rest filled and filed the return online, but submitted a physical copy to the Income Tax Department for verification.
The reason why more people don’t have digital signatures is that they are expensive, costing Rs 700-1,200, and are valid for a limited period. “Digital signatures should be made cheaper to make e-filing seamless,” says Ramesh Krishnamurthi, director, online filing, CBDT.
Adding to the hassle is the fact that the verification has to be submitted to the income-tax office where the taxpayer filed his returns. This negates the idea of anywhere filing. “Jurisdiction-less filing will make things a lot easier,” says Ketan Raiyani, MD of Taxsmile, an online tax filing company.
This is why tax-filing sites are coming into their own. There are several portals for e-filing, including taxspanner.com, taxshax.com and taxsmile.com. They offer you a package deal, where you can file returns online, get expert help to do so, and buy a digital signature, all for a flat rate. Taxspanner, for instance, has tied up with MTNL to bundle tax-return preparation, filing and digital signature for Rs 750 for a three-year package. Taxsmile offers a similar package for Rs 699.
|Click here to see online options: Who is offering what|
|“E-filing opens a 24x7 window for the taxpayer to prepare and file his income-tax return”|
—Ajai Singh, member, CBDT
Right now, these sites cater to only taxpayers with income from salary, pension and interest. The charges range from Rs 139 to Rs 1,000 depending on the type of income and the facilities being availed of. For instance, if income does not include capital gains, rent, or other sources, a basic plan using ITR 1 will do. But if these heads of income are also included, then the taxpayer has to use ITR 2 and shell out Rs 250-500. For this fee, the site offers help in preparing and filing returns. What’s more, you can do this from anywhere and at any time of the day. “Electronic filing opens a 24x7 window for the taxpayer,” says Ajai Singh, member, CBDT.
There’s also the government portal (www.incometaxindiaefiling. gov.in), which is free. The site accepts returns from all types of taxpayers. But unlike the private tax-filing portals, it does not calculate your tax liability. It just provides an Excel sheet with embedded notes to guide you. If you don’t have much tax sense, it might be a good idea to begin your online filing venture with a paid site. After a few years of e-filing with some help, you should be confident enough to do it yourself on the government site.
Interestingly, over 70% of e-returns filed by individuals last year were of taxpayers with business or professional income, categories that private portals do not cater to. A correctly filled form lessens the chances of your case being picked up for scrutiny. Till a few years ago, about 0.8% of the people who filed returns got a notice. This percentage has now more than doubled to 2%. Filing through a portal (or a tax return preparer) helps reduce mistakes, which, in turn, means less chances of your return being flagged for a notice.
The other big reason to e-file is that your return will get processed faster. Till now, physical returns and e-returns took the same time to process. But now e-returns will get priority. “Our target is to process ereturns within two or three days of filing,” says Singh. He adds that once the central e-filing processing centre being set up at Bengaluru starts operations, we can expect quicker and better tax services.
This means your refund may get credited to your bank within weeks. Sounds promising, doesn’t it? If you want more details on tax, go to our archives .
More on income tax and return filing from Money Today archives
Before you fill up your return form, get some basic concepts about income tax clear. Read all about the income that is taxable, the one that is not and how to calculate your tax
Make the most of the tax breaks available by using tax planning tools more effectively and efficiently
The new income-tax forms are more user-friendly than Saral. Learn how to fill them up
Deductions under various sections can reduce your tax substantially. Find out how you can avail of them