Filing income tax return? Include income from all sources

The clock's ticking away and the taxman's waiting. If you haven't managed to get your act together yet, here is a quick guide to calculating your tax liability. Doing it right is more than a matter of being conscientious; you'll have to cough up a penalty of 100-300% of the tax amount you're caught evading.


In addition, you'll be liable to pay interest at the rate of 1.5% a month on the outstanding amount, which is charged from the day your tax returns ought to have been filed. It's far simpler to get your math right and to do it before the due date of 31 July.

To compute your total tax liability, you need to consider more than the Form 16, and the profit & loss account. Don't forget to factor in 'Income from other sources' lest you find yourself an unwitting tax offender. Here are some of the other sources from which you can derive an income.

Interest income
Never mind how minuscule the amount, the interest earned on your savings account, fixed deposits, bonds and National Savings Certificates (NSC) is taxable and must be declared. Be sure to factor in any accrued interest. This refers to any interest amount that you've earned during the year even if you expect to receive the money after the deadline for filing returns. The total interest earned has to be added to your income and taxed according to the slab that applies to you.

Gifts
Cash gifts of over Rs 50,000 received in a financial year from anyone who does not qualify as a specified relative falls in the ambit of income from other sources. Specified relatives include parents, grandparents, spouse, siblings, your spouse's or your parents' siblings, children, grandchildren and their respective spouses. All non-cash gifts too have to be accounted for and the value to be declared is the cost of the asset on the day it was gifted. However, gifts received on your wedding as well as any inheritance will not be taxed.

Income from gifts
If you invest the cash gifted to you in, say, shares, the income generated from this will be taxed. Though the one who receives the gift has to bear the tax burden on any interest earning from it, the case is different in the case of spouses. Says Homi Mistry, partner, Deloitte Haskins and Sells: "Suppose a man gifts his spouse Rs 5 lakh and the entire amount is put in a fixed deposit earning 9% interest a year. This means that the wife will earn Rs 45,000 as interest income, but this money will be added to the husband's account and he will have to pay tax on it."