• RNOR - Resident Not Ordinary Resident
• ROR - Resident Ordinary Resident
• NR - Non Resident

3. Why is it important to determine the residential status under the Income Tax Act?

Residential status under the Income Tax Act determines the taxability of various incomes. The income that is taxable for a resident may not be taxable for a non resident. Thus it is important to first determine the residential status. The residential status is determined by the number of days of stay in India.

4. What are my tax rates?

In India there are different tax rates for different slab rates depending upon the amount of taxable income.

Income Level	Income Tax Rate
If does not exceed Rs.1,50,000/-.	NIL
If exceeds Rs.1,50,000/- but does not exceed Rs.3,00,000/-.	10% of amount exceeding Rs. 1,50,000/-
If exceeds Rs.3,00,000/- but does not exceed Rs.5,00,000/-.	Rs. 15,000/- + 20% of the amount exceeding Rs.3,00,000/-.
If exceeds Rs.5,00,000/-.	Rs. 55,000/- + 30% of the amount exceeding Rs.5,00,000/-.

5. Who has to file an income tax return?

You need to file an income tax return if your annual income exceeds the exemption limit. The exemption limit is Rs 150000 generally, Rs 180000 for women assessees and Rs 225000 for senior citizens for the AY 2009-10.

6. What is PAN?

Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued by the Income Tax Department. This serves as a unique identifying number.

7. Who must have a PAN?

a. All existing assesses or taxpayers or persons who are required to furnish a return of income, even on behalf of others, must obtain PAN.
b. Any person, who intends to enter into financial transaction where quoting PAN is mandatory, must also obtain PAN.

8. Where can I obtain an application form for PAN (Form 49A)?

The application form for PAN (Form 49A) in the prescribed format can be obtained from TIN-Facilitation Centres (TIN-FCs), any other stationery vendors providing such forms, or from the NSDL-TIN website.

9. Where do I submit my completed application for PAN (Form 49A)?

You can submit your signed PAN application form duly filled up, along with all supporting documents, to any of the TIN-Facilitation Centres (TIN-FCs) or PAN Centres managed by NSDL

10. Is there any penalty for quoting the wrong PAN?

The penalty for quoting an incorrect PAN is Rs.10000.

11. I have been allotted more than one PAN. What do I do?

It is illegal to have more than one Permanent Account Number (PAN). In case you have been allotted multiple PANs by the Income Tax Department, surrender the additional PANs to the Department.

12. What is the mode of payment of taxes?

Income tax is normally paid in the following ways:

Tax Deducted at Source (TDS): For salaried employee, the employer would have deducted tax on a monthly basis from your salary. The employer finally issues a Form 16 at the year end with all the details of the tax deducted. Even for income other than salary where the tax has been deducted, the deductor would give Form 16A with all the details.

Advance Tax: Normally taxes are paid as Advance Tax. Advance Tax is paid in three installments by individuals: on 15th September, 15th December and 15th March.

Self assessment Tax: This is the tax paid at the time of filing the tax return after everything is finalized and the final tax liability determined.

13. What happens if I fail to pay the income tax?

In such a scenario, you have to pay interest at the rate of 1% per month from April following the financial year for which you failed to pay the taxes. This interest would be charged until you pay your taxes.

14. What do I do if the TDS deducted is more than my tax liability?

You can claim a refund of the excess taxes paid while filing the return. If the Income tax Department is convinced about the claim you will be granted a refund. This refund would be either credited directly to your bank account or sent by a cheque.

15. What are the common documents required while preparing my tax returns?

The following are some of the common documents required while preparing the return:

a. PAN Card / PAN Allotment letter
b. Last year’s filed copy of the Income Tax Return and Acknowledgement
c. Form No. 16 (Salary)
d. Form No. 16A (TDS Certificate)
e. Housing Loan Statement showing interest and principal components.
f. Rent Receipts
g. Shares and mutual Funds Activity Statements
h. Bank Statement / Pass Book
i. Copy of tax-saving investments, like Life insurance Premium Receipt,PPF Challan, NSC Certificate, ULIP Statement,Donation receipts,Tuition Fees Receipt,Medical Insurance Premium Receipt
j. Tax Payment Challans
k. Bank Account Information such as MICR code, account number etc

16. What are the different heads of income applicable in India?

The following are the heads of income applicable in India:

• Income from salary
• Income from house property
• Income from business or profession
• Income form capital gains
• Income from other sources

Income from Salary:

17. What is the purpose of the " FORM-16 "?
It is a certificate issued by your employer giving the details of salary, income from other sources declared by you, deductions claimed by you, tax deducted from your salary and paid to the income tax department by the employer. This serves as the evidence for the tax deducted from the salary paid to you.

18. My employer has already deducted taxes and paid the same to the Government. Do I still need to file my tax return?

Yes, you still need to file your tax return as the Form 16 is not an income tax return by itself. Further, the final tax liability might turn out to be different from the amount withheld by the employer. You might well have to pay the balance tax or claim a refund in case of excess withholding.

19. I was not able to declare certain income/claim certain deductions to my employer. Can I do so now?

Yes, you can include the additional information while preparing your final tax return. Of course, the resultant tax liability would also be different.

Income From House Property:

20. Which properties come under this particular head of income?

A property would come under the head of Income from House Property if the following conditions are satisfied:

• The property consists of buildings or land adjacent thereto.
• The assessee must own property.

21. Can a house property be further categorized to determine taxability?

A house property could fall under one of the following two broad categories:

• Self Occupied Properties (SOP).
• Let Out Properties

22. What is a deemed to be let out property?

If the you own more than one property all of which are not rented out but are self occupied, then you may choose any one property as self occupied and the remaining properties though not actually let out, will be deemed to be let out ie they will be assumed to have been let out and a notional rental value will be treated as

23. I have taken a loan for the purchase/construction of my house property. Do I get any tax benefits on the same?

Your housing loan repayment would generally have 2 components - Interest and Principal. Both are deductible, but separately.

Interest can be claimed as deduction, irrespective of the source of the loan. The maximum interest you can claim as a deduction is Rs.1,50,000/, if the property is not rented out. In case of rented property, there is no such limit.

The principal repayment can be claimed as deduction only when the loan has been taken from Banks or Financial Institutions. This deduction is available in section 80C within the overall limit of Rs.1,00,000/-.

24. Do I have to declare even my self occupied property on the tax return?

Yes, even if the property is being used by you for self occupation, you still have to declare the same.

25. Can interest payable but not paid be claimed as a deduction?

Yes, you will be eligible for deduction even with respect to the interest payable, but to claim principal you have to make payment.

Income from Capital Gains:

26. When does a transaction fall under this head of income?

The requisites of a charge to income tax of are :-

• There must be a capital asset.
• The capital asset must have been transferred.
• There must be a gain arising on such transfer of a capital asset.

27. What are the common assets on which the capital gains arise?

Following are some of the assets the transfer of which attracts capital gains:

• Immovable property
• Shares
• Units of a mutual fund
• Bonds
• Debentures
• Jewellery, paintings etc

28. What are long term and short term capital gains?

Gains on sale of capital assets held for more than three years (one year for listed securities or mutual fund units) are treated as long-term and are taxed at concessional rates compared to short-term .

While calculating taxable long-term , the cost of acquisition and the cost of improvement are linked to a cost inflation index. As a result, the indexed cost of acquisition is deducted from the sale consideration received, to arrive at gain.

29. What is STT?

STT refers to Securities Transaction Tax and is paid when the securities are sold through a recognized stock exchange.

30. What is the income tax implication for STT?

When you hold shares for more than 1 year, they become Long Term Capital Assets. Any profit earned is exempt from income tax (10% tax for short term capital gain), if the following conditions are fulfilled:

1. Such shares are sold through a recognized stock exchange.
2. Securities Transaction Tax (STT) has been paid on the sale of such shares.

31. Can I claim a deduction for the STT paid?

No, STT paid is not an allowable expense for the purpose of income tax.

32. What is the indexed cost of acquisition?

"Indexed cost of acquisition" is the amount, which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year, in which the asset is transferred, bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later.

33. Are there any exemptions from capital gains on sale of residential house property?

Yes, provided you had held Residential Property for more than 3 years and you comply with the following additional conditions:

a) You have either purchased another residential house, one year before the Date of Sale or

b) You plan to purchase another residential house within two years from the date of sale or to construct another residential house within three years from the date of sale.
In case of (b) you need to deposit the amount of Capital Gain in a Capital Gain Account Scheme before the due date of filing your income tax return.

34. Can I claim any improvement costs also while computing the cost of the property?

Any expenses incurred for major improvements/repairs which have the effect of enhancing the value of the property may be claimed as improvement cost. However it may be noted that routine repairs and maintenance expenses would not be covered here.

Income from Other Sources:

35. What incomes come under the head ‘Other Sources’?
This is a residual head; income which does not meet criteria to go to other heads is taxed here. Also there are also some specific incomes which are to be taxed under this head.

• Income by way of Dividends
• Income from horse races
• Income from winning of lotteries
• Any amount received from key man insurance policy.

36. Are there any income which are exempt from tax?
The Indian Income tax act specifically exempts certain income from tax. Examples of such income are:

• Money received from an Insurance company as proceeds of an insurance policy (by way of an insurance claim, or by maturity) is generally exempt. However there are three types of payments under life insurance policy that are not tax free .
• Maturity proceeds of a Public Provident Fund (PPF) account.
• Dividends

37. Do I have to declare the exempt income also?
Yes, you have to declare all your income irrespective of the fact that they are tax-exempt or not.

38. Are any deductions allowable from taxable interest on securities?
In case of taxable dividend income and interest from securities, any reasonable sum paid by way of remuneration or commission for the purpose of realizing such income including interest on borrowed capital if such borrowed capital is used for making investment in shares or securities would be allowed as a deduction.

39. I am receiving family pension. Will I get any deductions from the same?
In case of family pension received by legal heirs of an employee, a standard deduction of 1/3rd of such amount or Rs 15,000 whichever is less will be allowed by way of deduction.

Tax Deduction at Source:

40. What is the procedure under Tax Deduction at Source?

Tax deduction at source means the tax required to be paid by the assessees, is deducted by the person paying the income to him. Thus, the tax is deducted at the source of income itself.
Examples: Employer deducting tax before paying salary, Contractee deducting tax before making contract payments etc.

41. What are the common types of income for which tax would have been deducted?

The following are the common TDS payments:
Salary and all other positive incomes under any head on income
Interest on securities
Interest other than interest on securities
Payments to contractors and sub-contractors
Payment of rent
Payment of fees for professional or technical services

42. Which is an authentic source of information for viewing the details of the tax deducted at source?

The details of tax deducted at source and other pertinent information can be viewed on the website www.tin-nsdl.com.

43. How to ensure that I smoothly claim the credit for the TDS deducted from my income?

Whenever any person deducts TDS from the payments to you, ensure that you are tracking the same. You have to insist on being provided a Form 16/16A with all relevant complete details mentioned therein. You can then claim credit for the TDS based on these certificates.

Deductions from Income:

44. What do you mean by deductions from income?

Deductions from income refer to the amounts that can be deducted from the gross total income by a taxpayer. These deductions are allowed based on the investments/payments made by the taxpayer for the specified purposes.

45. What are the common deductions from income?

The most common deductions are those specified in section 80C. These include payments such as:

• Life Insurance Policy premium payments
• Principal portion of the housing loan repayment.
• Provident Fund payments
• Investments in National Savings Certificate
• 5 year Bank Deposits
• Equity Linked Saving Schemes
• Investments in equity oriented mutual funds.
• Tuition fees payment for children

 46. What is the overall limit for deductions under section 80C?

The limit for deductions under section 80C is Rs 100000. This means that if you have made the specified payments exceeding Rs 100000, still your deduction will be limited to Rs. 100000.

47. Are payments for medical insurance premiums also deductible?

Yes, payments made for medical insurance premiums are deductible under section 80D subject to the conditions regarding mode of payment and for whom the payments have been made.

48. I have made donations to some charitable institutions. Can I claim any tax benefits for the same?

Donations made to approved funds, financial institutions would be eligible for deduction from the total income. It may be noted that certain donations are 100% deductible while others are 50% deductible based on institution/fund to which the donation has been made.

49. Can I claim a deduction for the interest paid on any education loan?

You can claim a deduction for the interest paid on higher education loan that satisfies the prescribed conditions. It may be noted that this deduction is for the interest component of the loan.

50. My minor child has a PPF account which has earned interest. Will this be taxable?

No as the interest earned on a minor child’s PPF account is not taxable.

51. What is the tax treatment for the interest earned on the National Savings Certificate?

The interest earned on the NSC has to be declared as income. However it is also to be noted that the same is deductible under section 80C from the total income.

52. I have made medical insurance premium payments for my dependent parents. Can I claim this also as a deduction?

Yes, you can claim the medical insurance premium payment made for your dependent parents as a deduction from your total income.