Startling income tax data was in the news recently: that only 1.2 crore, or 1% of Indians, paid income taxes. Checks with the tax department revealed that the data was somewhat unrepresentative, as it only considered taxes on salaries. The number of individuals paying taxes is close to 5 crore or 4% of the population. 

At the same time, the tax department did confirm that the number of individuals claiming to have an income greater than Rs 50 lakh annually is only 150,000 in a country of 120 crore people. Note that modest two bedroom apartments in Mumbai suburbs alone cost Rs 3 crore. One wonders who is buying them, isn't it? 

Hence, the tax department's assertion that there is significant amount of tax evasion in the country may not be incorrect. And the so-called hostility with which our tax officials approach taxpayers is somewhat justified. They could argue that if people behaved, they would not have to be so rough. 

At the same time, there are constant reports of genuine taxpayers claiming harassment and persecution by tax officials. The tax department, many income earners say, starts with the assumption that the taxpayer is in the wrong, deliberately complicates rules, comes after you only because you decided to pay taxes (while ignoring or remaining blissfully unaware of the real tax evaders) and doesn't seem to be getting any better. 

As the Indian economy gets bigger, we invite more foreign investment, and try to expand our tax base, some reforms are needed in the way the tax department does its job. It is one of the few government departments that are in constant touch with citizens. If it continues to operate in an archaic and hostile manner, much of the benefits of policy reforms will never accrue to the economy. Here are ten concrete, doable ideas on what the tax department can do to tax, but with love. 

First, treat the taxpayer as a customer. The current tax department mentality is to act like the police and approach the taxpayer as a criminal, unless proved otherwise. It is tough to make people part with their money in any case. The last thing you should do is not be gracious about it. Without the taxpayer, the government can't function. Seeing the taxpayer as a customer means taking constant feedback, having service benchmarks (eg, turnaround times) and not presuming guilt. 

Second, simplify forms. The government has tried but sadly failed to do this. The tax department should download some forms from the Hong Kong or Singapore tax department websites. These are some of the simplest and best forms in the world. Please emulate them. 

Third, a good, robust and modern website. India is the land of IT companies. Hire a good company to revamp the customer interface. Again, if you see the taxpayer as a customer, you will approach the website differently. The layout, downloads, language used should all change. Yes, we need an app too. 

Fourth, good quality paper. Current tax department communication seems from the 1980s, with cheap quality super thin sheets and envelopes, and poor quality black and white printing. Come on. We are one of the world's top economies. 

Fifth, simpler nomenclature. Names like ITR4 and 26AS intimidate people. Sit down one day and rename and reorganise all the forms that have been amended and become complicated in nomenclature over the years. It's scary enough to pay taxes. Don't make it scarier. 

Sixth, say thanks and mean it. People who pay taxes are nation builders. Seeing rich people as thieves is a throwback to evil landlord and poor peasant movies of the 1970s. You don't only become rich by stealing from the poor. You also become rich from creativity, innovation, hard work and enterprise. How can you punish people for that? Not just the top taxpayer, but the top 10% of taxpayers should get a nice letter and memento (not cheap quality please) to thank them. 
Seventh, don't send scary letters. The department officials are under pressure to increase revenue. However, you cannot scare taxpayers. For instance, the department sends letters saying we believe the way things are going you should make 20% more money this year so we hope you will (and better) pay that much more tax. Really? Do we need to be so intimidating? 

Eighth, have tax guidance centres. People should be able to go somewhere and figure out how to do their taxes, which doesn't require a private advisor. Have taxpayer training, inquiry and guidance centres that run well. Again, make them nice. They should not be like a sarkari torture chamber with endless waits and creaky fans. This is the last department that can claim it doesn't have money. 
Ninth, share macro data. Without giving individual details, macro data should be shared with the public to enable us to understand how tax collections are going. Tenth, share where the tax money was used. Of course, funds are amalgamated at the top. However, it would be nice to hear that your tax last year helped make this road. 

As Veda Vyasa said in the Mahabharata, a king should collect taxes like a bee collects nectar from flowers, painlessly. It is about time we behaved like a modern, world-class economy when it came to tax collection and learned to tax with love. 

It is time to start work on your income tax return. Although the last date to file for individuals is July 31, it helps to start early so that one is not rushed at the last minute. Here are all the links you need to help you e-file your tax return on your own and also a step by step guide on how to do it.

The income tax department has provided an easy to use platform for users to pay taxes, file ITRs, cross-check TDS through TRACES, download forms, claim refunds, check status of dues, refunds, challans etc. However, a technically-challenged tax-payer may find it difficult to use these services. Below are quick links for: Registering for e-filing, viewing your form 26AS, Income tax calculator, e-payment of taxes, checking your dues, e-filing the income tax return (ITR), downloading ITR forms and other relevant forms, checking refund status, rectification of return, e-verification of return etc.

Steps in filing your Income Tax Return 

1. Collect your TDS certificates, which have to be mandatorily in TRACES format, from all deductors. In case of digitally signed TDS certificates ensure that there is a check mark on the digital signature indicating it has been verified. Non-verified certificates will have a question mark over the digital signature. Cross check the TDS figure on the certificate with that shown as deducted from your income e.g. TDS figure on salary slip with the figure on the TDS certificate. Check whether deductor has deducted and deposited the tax with the government. TDS certificates are in Form 16 for salaried employees and Form 16A for other deductors.
2. Download your tax credit statement (Form 26AS) from TRACES and cross-check the amount of tax deducted with that mentioned in TDS certificates. You should be getting certificates for all TDS reflecting in your Form26AS and all the TDS from your income should reflect in Form26AS. You need to log into your e-filing account on the income tax e-filing website to download your Form26AS. You can also download it via net-banking wherever the bank provides for this.

Links to access Form 26AS:
https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html?nextPage=taxCred http://contents.tdscpc.gov.in/en/netbanking.html 

3. In case of any difference in the TDS amount shown in Form 26AS and TDS certificates, take up the matter with the deductor (employer, or others, as the case may be) and request for rectification.

4. Now compute your total income for the relevant financial year by adding income under all 5 heads and claiming all the relevant deductions, rebates and setting-off the current year and brought forward losses. Make sure that you don't miss any income in computing your total income which is chargeable to tax.

5. Compute your tax liability by applying the applicable tax rates in force for the financial year for which you are calculating the tax - FY2015-16 for most filers.

Links for Tax Calculator 
Comprehensive calculator: http://incometaxindiaefiling.gov.in/ (Tax Calculator) 

6. Next compute your final tax dues payable or refund of taxes. This is done by deducting the taxes that you have already paid for the year by way of - TDS, TCS, and Advance Tax from the tax liability computed above and adding interest payable under sections 234A, 234B, 234C, if any. Finally pay the final tax dues, if any. Tax can be paid physically via cheque or online using challan ITNS 280. Income tax payments made after 15th March of the financial year for which return is to be filed are called payment of self-assessment tax. The same should get reflected in your Form 26AS within 2-3 working days from the date of payment which you should cross check.

Link to e-pay taxes: 
https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp 
Link to see your dues: 
https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html?nextPage=taxDemand 

7. Once you have paid your taxes, file the return. The deadline for filing individual tax returns ( except for those whose accounts are required to be audited as per section 44AB or those who are required to furnish the Transfer pricing report) is normally July 31 of the year immediately after the financial year for which the return is being filed.

Link to e-file the return: 
http://incometaxindiaefiling.gov.in/ 

8. To e-file the return, log in to income tax department's e-filing website with User ID, Password, Date of Birth and enter the Captcha Code. Once you login, you will see different tabs like "dashboard", "my Account" etc.
http://incometaxindiaefiling.gov.in/ (Login)

9. In case of new user - Register yourself with income tax site first. You need to choose your status (individual, chartered accountant, tax deductor etc.) and fill in your basic details like address, DOB, PAN to get registered. Only then you can log in to e-filing.
http://incometaxindiaefiling.gov.in/ (Register yourself)

10. After signing in, choose the form applicable to you for the purpose of filing return.

Useful link 
http://www.incometaxindia.gov.in/Pages/downloads/income-tax-return.aspx (and read instructions) 

11. In case Form ITR-1 or ITR-4S is applicable to you, then you can simply file your return electronically without any need to download and upload the ITR forms.

Link to quick e-file ITR-1 and ITR-4S 
https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html?nextPage=efileItr1 

12. In case of other forms like ITR-2A, ITR-2, ITR-3 and ITR4, you need to download the relevant form from the website (either in excel utility or Java utility).

Links for downloading the form 
http://www.incometaxindia.gov.in/Pages/downloads/income-tax-return.aspx 

13. Once you have downloaded the relevant form, you need to fill in your personal details, income details and other details required in the form. After filling the form completely, the same is to be uploaded to the website and the return will be filed.


14. Filing of return (whether directly or after uploading the ITR-forms) is not valid without its verification. Return once filed has to be verified by the user.

15. Verification of return can be done by any one of two modes i.e. e- verifications of ITR and Physical verification of ITR.

E-verification can be done by: (i)) Making use of internet Banking, (ii) or by using the OTP sent on your mobile number after you have linked your aadhar with your account on the e-filing portal of the Income tax department or by generating the EVC. (iii) Another method for verification of your ITR is through bank account-based validation system if you don't have Aadhaar number or internet banking facility.

On the other hand ITR can be verified physically as well. An acknowledgement or ITR-V is generated by the e-filing website immediately after you file/upload your return. To verify your return physically, you need to take a print-out of this acknowledgement, check and sign it and send it to the address mentioned on this acknowledgement.

Link to e-verify the return 
http://incometaxindiaefiling.gov.in/ (after signing in, go to "e-file" tab and click on "e verify")

16. Once you have received the acknowledgement of your e-verification filing of your return is complete. You should receive an email confirming that your ITR-V has been received by the IT department i.e. your return stands e-verified. The email will be sent to the email you have registered in your e-filing account on the income tax department's e-filing website.

The new 10 per cent Dividend Tax will be payable only on dividend income over and above Rs 10 lakh threshold in a year, according to an amendment to the Finance Bill 2016 approved by Lok Sabha.


Finance Minister Arun Jaitley had brought 21 amendments when he replied to the debate on Finance Bill 2016 in the Lok Sabha yesterday. The Bill and the amendments were approved, making the culmination of the three-stage budgetary process in Lok Sabha. The Bill will now go to Rajya .

One of them seeks to "clarify that tax shall be chargeable on dividend income only to the extent it is in excess of Rs 10 lakh in aggregate as received from a domestic company or companies," the narration of the amendments released by the Finance Ministry here today said.
This essentially means, tax payers whose dividend income crosses Rs 10 lakh would now have to pay an additional dividend tax on the excess income besides the dividend distribution tax being paid by the company/companies declaring such dividends.

This amendment will be effective for the assessment year 2017-18 and subsequent assessment years.
One of the amendments was to put into effect the announcement of rollback of proposal to tax employee provident fund (EPF) withdrawals.
post Budget
But the proposal of 40 per cent exemption given to National Pension Scheme (NPS) subscribers at the time of withdrawal will remain, it said.

Another amendment cut the duration for holding of shares in an unlisted company for being classified as long term capital asset. The duration of holding has been reduced from 36 months to 24 months.
Yet another amendment extended the benefit of weighted deduction of 150 per cent of expenditure incurred on notified agricultural extension projects till March 31, 2020 (FY2019-20 or Assessment Year 2020-21) instead of Budget proposal to restrict the deduction to 100 per cent from 2017-18 fiscal (Assessment Year 2018-19).

What is Sales Tax?

Trade has formed an integral part of world history, shaping the world into the form it is in today. It is hard to imagine a world without any trading, be it of goods or services. It was this desire to trade that led to countries embarking on voyages to find new trading partners, eventually changing the entire demography of Earth.

The world survives and thrives on trade and governments across the globe have found a way to use trade to fill their coffers. Sales Tax is a form of tax paid to a governing body for the sale of goods and services. Sales tax is an indirect tax and is generally charged at the point of purchase or exchange of certain taxable goods, charged as a percentage of the value of the product. The sales tax depends on the government in power and the individual policies enforced by it, generally being simple to calculate and collect. In simple terms, the sales tax is an additional amount of money paid while purchasing goods or services.

Types of Sales Tax:

The concept of sales tax depends on the governing principles followed by governments, but there are some universal sales taxes applicable in most countries. The different types of sales taxes are mentioned below.

Retail Sales Tax – This is a tax charged on sale of retail goods and is directly paid by the final consumer.
Manufacturers’ Sales Tax – This tax is levied on the manufacturers of certain goods.
Wholesale Sales Tax – This tax is levied on individuals who deal with wholesale distribution/sale of manufactured goods.
Use Tax – This is a tax levied on the consumer for goods which are purchased without sales tax (generally from vendors who are not under the tax jurisdiction).
Value Added Tax – This is an additional tax levied on all sales by certain governments.
Sales Tax in India:
India has emerged as a sound democracy has achieved great economic progress compared to most countries. A major reason for the growth and development of the country can be attributed to the taxes collected by the Government. India follows the system of a central union government at the centre and state governments in each state, with each government choosing to follow a taxation policy to meet their demands.

Central Sales Tax Act, 1956:

The Central Sales Tax Act governs the taxation laws in the country, extending to the entire country and contains the rules and regulations related to sales tax. This Act allows the Central Government to collect sales tax on various products. The Central Sales Tax is payable in the state where the particular goods are sold.

Objectives of Central Sales Tax Act:

The Central Sales Tax Act was formulated with the goal to make tax collection simpler and streamlined. The main objectives of CST Act are highlighted here.

Provide provision for levying, collection and distribution of taxes collected from sale of goods through interstate trade.
Frame principles to determine when sale and purchase of goods occurs.
Classify certain goods as being of special importance for trade and commerce.
Be the competent authority to settle interstate trade disputes.
Sale Price:
Sale price refers to the amount payable to the dealer/trader in lieu of the goods sold. It includes the cost of packing, insurance charges (if any), incentives to attract buyers, and the sales tax paid by the dealer. It does not include cash discounts, installation costs, delivery costs and goods exchanged or returned by the buyer.

Inter-State Sales:

Inter-state sales refer to sales which lead to movement or transfer of goods from one state to another, achieved by transferring the title documents while the goods are being moved.

Example 1: If an individual in Karnataka sells goods to a person in Maharashtra.

Example 2: If Ramesh from Telangana delivers goods to Harish in Gujarat, who in turn sells it to Krishna in Bihar by transferring the documents of title during the transfer of goods from Telangana to Bihar.

CST Transaction Forms:

All dealers need to follow certain guidelines and give declarations in prescribed forms to the buyer. Sales Tax authorities print and supply different forms for various purposes, each form being listed below.

Form C – This form allows the purchasing dealer to get goods at concessional rates from the seller.
Form D – This is issued by the government department which purchases the goods.
Form E1 – This is issued by the dealer who initiates the inter-state movement of goods.
Form E2 – This is issued by the subsequent seller when the goods move from one state to the other.
Form F – This is issued when the goods are sent to a different state.
Form H – This is issued by an exporter for the purchase of goods.
Form I – This is issued by dealers in Special Economic Zones.
State Government Taxes:
Individual State Governments have the power to levy sales tax to meet their financial requirements. The sales tax in different states vary for different products, with Value Added Taxes forming a big chunk of state income. It is for this reason that certain goods are cheaper in a particular state compared to another state. States categorize individuals associated with sale of goods into manufacturers, sellers and dealers, with each one needing certificates to work under the ambit of the law.

Sales Tax Exemptions:

States offer tax emptions in certain cases, which can be humanitarian or to avoid double taxation.

Sellers with genuine state resale certificates are exempted from tax when they resale products.
Products sold to charities or schools are provided tax exemptions.
There are a list of essential and local commodities which are exempted from sales tax.
Calculation of Sales Tax:
Sales Tax might seem like a complicated term to a lot of people and a lot of us think that calculating it is extremely hard, if not impossible. It is however far from the truth, as calculating sales tax is no Herculean task if one gets the basics right.

Total Sales Tax = Cost of item x Sales tax rate

For Example: if Mr. Kumar purchases a box of chocolates which cost Rs. 100 which have a sales tax component of 10%, then the total sales tax paid by him becomes (100 x 0.10) = 10

Thus he pays a sales tax of Rs. 10 on the product.

There are a few points one needs to remember while calculating sales tax.

Sales tax might vary from state to state and it pays to be informed of the rate in your particular state and city.
Sales tax is calculated as a percentage.
Add the prices for multiple items before calculating the sales tax.
Violation of Sales Tax Rules:
Taxes can sometimes be complicated and an individual might not necessarily realise when he/she violates any provisions of the laws. Here are some of the most common violations when it comes to sales tax.

Providing false and misleading information in the forms.
Failing to obtain registration according to the CST Act.
Not following the security provisions mentioned in the CST Act.
Misappropriation of goods purchased at discounted rates.
Falsely impersonating a dealer or projection oneself as a dealer.
Unregistered dealers collecting sales tax from consumers is a violation.
Providing incorrect statements about purchased goods.
Central Board of Direct Taxes:
The Central Board of Direct Taxes is an apex body which is in charge of administration of taxes in the country. It is a statutory authority and functions under the purview of the Central Board Revenue Act of 1963. It is a division of the Ministry of Finance, working under the ambit of the Department of Revenue.

Composition of Central Board of Direct Taxes:

The Central Board of Direct Taxes is composed of the following members.

Chairman
Member (Income Tax)
Member (Legislation and Computerisation)
Member (Revenue)
Member (Personnel and Vigilance)
Member (Investigation)
Member (Audit and Judicial)
Functions:

The Central Board of Direct Taxes looks after all issues and matters relating to the levy and collection of direct taxes in the country.

It provides necessary inputs to frame policies for direct taxes .
It is in charge of the administration of direct tax laws in collaboration with the Income Tax Department.
Processes and investigates complaints related to tax evasion .