We are at the middle of the financial year best time to review our tax planning and take corrective measures, else it will be too late and we’ll end up making rash investments and will generate lesser returns. People especially new joinees get worried about what all is to be done to file an income tax and how much taxes they have to pay etc. etc. To clarify some of their doubts lets go one by one.
Income Tax Process
The process of income tax has been simplified in last few years and it require really very less effort by any individual in general who are working in Private corporate sector or PSU’s. If you working in boutiqe firms and getting salary by cash, you dont have to bother at all because what all you are getting is black money untill you signing salary vouchers.
Step1 In the start of the financial year, private corporate sector or PSU’s  plan your tax liability as per your salary structure and start deducting TDS as per government rules.
Step2 In the end of the year accountant match your tax liability with the plan to deduct the required extra tax amount from your salary itself.
Step3 After completiing the year by the month of may or june they provide employees with Form-16 the declaration of income and TDS.
Step4 So in case any extra deductions happened you can file in ITR through IT-advocates or CA’s by end of July and get the money back with 8% interest over them. Even if you not getting any returns file your income taxes for its benifits during loans and advances approval.  
Knowing Tax Liability
Its very structured and simple to do for salaried people because of simplified salary structure. Males and females fall in different tax brackets and dedutions allowed for them. There are differeny reliefs given by government in terms of tax free investment options under different sections most prominent are Section 80C and chapter VI (a) of income tax. They are basically 4-5 categories in general for new joinees.
  • Life insurance premiums
  • Equity linked savings scheme (mutual funds)
  • Provident Fund/ Public Provident Fund
  • National stock certificate/ FD’s in scheduled banks
  • Repayment of education loan & interest
Read the next blog on Calculating tax liability on Friday 24th September, 2010.
Minimizing Tax Liability
That is what everyone looks for right? some basic things are always done by company’s accountants by while planning your salary structure to optimize the levels by giving allowances like HRA and most of the things as seperate reimbursments for expenses. The common thing for a salaried person is to go for maximum avoidance of tax through invetments upto 1 lakh each year, here most of the people does not plan things properly and in last few days make rash investments or end up paying un-necessary taxes. Therefore plan you taxes well in advance and take professional help in that matter.
Follow this blog series regularly to know more on Investment options and plan things accordingly.