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Employee Tax Guide
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Employee Tax Guide

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  • 1. How to Give yourself a pay hike of 30% The Tax Guide Surprising? Many of us will not even understand that taxes account for 30% of our pay packs. We fail to spend some time to plan our taxes, knowing little that we could save a sizable sum of our earnings with a little planning & foresight. Read on to find easy ways to understand and plan your taxes and the impact it has on your lives. Understanding Taxes 1. What is Income Tax? 2. What portion of my Income goes towards taxes? 3. Why does my employer deduct taxes? 4. On what basis does my employer deduct taxes? 5. What is a Form-16 4. How do I check if my employer is deducting taxes correctly? 5. What are the options available if taxes are wrongly deducted? 6. What is a Income Tax Return? Planning your Taxes 1. How to forecast your tax liability 2. Structuring your Payslip 3. Spending to save taxes 4. Investing to save taxes 5. Donating to save taxes Reducing Tax deductions 1. Communicating to your employer 2. Communicating to Tax authorities Filing your Tax Return 1. Getting your Form -16 2. Preparing your Taxes 3. Reviewing your Taxes 4. Filing your Tax Return 5. Using www.reachtax.com
  • 2. Understanding Taxes 1. What is Income Tax? Income tax as the name signifies is a tax paid to the Revenue authorities if you happen to earn income above the basic exemption limit (ie above Rs. 1,10,000/- per annum). Practically, in most occasions, The tax is deducted by your employer and paid to the authorities on your behalf. If your employer has not paid or short paid your taxes, the onus is on you to pay your taxes. 2. What portion of my Income goes towards taxes? Up to 30% of your Income goes towards taxes every year. It can be better explained as follows: If you earn less than 1,50,000/- 0% If you earn between 1,50,001 & 3,00,000 10% If you earn between 3,00,001 & 5,00,000 20% If you earn above 5,00,001/- 30% You get a additional 30,000 stretch if you are a women taxpayer. 3. Why does my employer deduct taxes? The government has asked your employer to calculate your tax liability for the year in advance and deduct the tax due from your salary in equal installments and remit it to the government on your behalf. This deduction is known as Tax deducted at Source (or) T.D.S 4. On what basis does my employer deduct taxes? Your employer calculates his taxes based on your projected earnings calculated at the beginning of the year. Your employer may not be aware of your tax saving investments and expenses unless you tell him. So how much your employer will deduct depends on two things 1. How much you earn 2. What information you provide to your employer. 5. What is a Form-16? You get a Form – 16 at the end of the year. It clearly shows what taxes has been deducted from your salary during the year. The information given in the form-16 forms a crucial part of your tax return. After receiving your form-16, it might be too late for planning. However you can claim for a tax refund, if you have made any investments or expenses which qualify for a tax deduction. 6. How do I check if my employer is deducting taxes correctly? 1. Log into www.reachtax.com 2. Download the Tax Estimator Tool from the website. 3. This tools asks for details of salary and investments 4. On providing requested details, it throws out the amount of tax to be deducted till date and also shows the balance tax to be deducted.
  • 3. 7. What are the options available if the employer has deducted taxes wrongly? Depending on whether your employer has over deducted or under deducted your taxes, you become eligible for a refund or become liable to pay balance taxes. By preparing your taxes using www.reachtax.com, you will be able to accurately understand your position. 8. What is a Income Tax Return? An income tax return is the declaration we make to the tax authorities every year, indicating the income earned by you and calculating the tax due in that regard. It is mandatory to file a tax return before 31st July of every year. Willful default is liable to fine and may land you in jail for 3 months (sec 276 CC) Planning your Taxes 1. How to forecast your tax liability? 1. Log on to www.reachtax.com 2. Download the Tax Estimator Tool from the website. 3. This tools asks for details of salary and investments 4. On providing requested details, it throws out tax liability for the year. 2. Structuring your pay slip. After estimating your tax liability, you can look at tax planning options. If you have just taken up a new job, its most likely that your employer allows you to structure your pay slip in the most tax efficient manner. Walk into your nearest Reach Tax branch (http://reachtax.com/branches-close-to-you.html) and discuss your tax situation with a tax expert. 3. Spending to save taxes. If you have been thinking about spending on the following expenses for quite some time, think about incurring them this year. It is bound to give you a edge during tax time. 1. Paying Interest on a Housing Loan 2. Paying Life Insurance premiums. 3. Insuring for medical expenses 4. Spending for critical illness 4. Investing to save taxes The following investments can give you the required tax advantage. 1. Investment in tax shield mutual funds. 2. Investment in annuity schemes 3. Buying a house 4. Investing in Infrastructure bonds 5. Investing in Post office savings schemes.
  • 4. 5. Donating to save taxes If you want to benefit by your philanthropic ways, try donating to the following funds. 1. Prime ministers relief fund 2. Charitable funds approved under sec 80G Reducing Tax deductions 1. Communicating to your employer Your employer may not be aware of your tax saving investments and expenses unless you tell him. He might continue to deduct taxes, he has calculated at the beginning of the year without considering your tax planning options. So it is important that you communicate your tax saving plans to the deducting authority. Most employers discuss your tax position by January every year. Make sure that you discuss your plans completely and submit proof of your investment and expenses well in advance. 2. Communicating to the Tax authorities. There is no need to communicate your tax saving plans to the tax authorities till the end of the financial year. However if you have not submitted your tax saving options to your employer on time, its most probable that he has deducted taxes without considering your investments. Filing your Tax Return 1. Getting your Form -16 Your employer is bound to issue Form-16 to you before 30th of April every year. A Form – 16, clearly shows the amount of deduction during the year. Log-on to www.reachtax.com and download the tax estimator tool. Check if the amount of deduction matches with the Form-16. In case of a difference, discuss with your employer and find out disconnects. 2. Preparing your Taxes Preparing your taxes is now child’s play. Reachtax.com allows you to prepare your own taxes by answering a few easy questions. 1. Log into www.reachtax.com 2. Sign up to create a Free Account 3. Answer easy questions 4. Check tax liability 3. Reviewing your Taxes After preparing your taxes for free, you can review your taxes to estimate your actual tax liability. If required you can also walk into the nearest reach tax branch and have a tax professional review your taxes.
  • 5. 4. Filing your Tax return Once you have reviewed your taxes, you can choose to file your tax returns electronically. 1. Log on to www.reachtax.com 2. Prepare your taxes 3. Just complete the payment formalities requested in the website 4. Your tax returns will be filed electronically with the tax authorities 5. The provisional acknowledgement will be e-mailed to you within 4 days. 6. Print two copies of the acknowledgement and sign one of them. 7. Deposit one of the acknowledgements in the address mentioned in the mail. 8. For support call the Reach Tax Office.