Recovering your 6% tax amount when filing your income tax return can be a crucial process to ensure you claim the correct amount of tax paid. The 6% tax rate often applies under the presumptive taxation scheme of Section 44AD of the Income Tax Act, of 1961. This scheme is designed to simplify tax compliance for small businesses that receive payments digitally. This detailed guide will walk you through the steps to recover your 6% tax amount effectively.
Understanding the 6% Tax Rate
What is the 6% Tax Rate?
The 6% tax rate is part of the presumptive taxation scheme under Section 44AD of the Income Tax Act. This scheme is available for small businesses with a turnover of less than ₹2 crore, and it allows them to declare their income at a flat rate. For businesses receiving payments through digital means, the presumptive income is calculated at 6% of the total turnover or gross receipts.
Eligibility Criteria
To qualify for the 6% tax rate under Section 44AD.
a. Eligible Assessees: Individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs) engaged in any business except those engaged in.
- Plying, hiring, or leasing goods carriages.
- Agency businesses.
- Businesses earn income from commission or brokerage.
b. Turnover Limit: Gross receipts or turnover should not exceed ₹2 crore in a financial year.
Step-by-Step Guide to Recover Your 6% Tax Amount
Step 1: Gather Necessary Documents
Before you start the recovery process, ensure you have the following documents.
a. Income Proof: Documents such as bank statements, digital transaction records, and invoices that verify your total income.
b. Tax Deduction Certificates: Form 16 or Form 16A, which are certificates of tax deduction issued by employers or others who have deducted tax at source.
c. Previous Year’s Tax Returns: Copies of the tax returns filed for the previous financial year.
d. Other Relevant Financial Documents: Any additional documents that may support your income and deductions.
Step 2: Calculate Your Presumptive Income
Under Section 44AD, if you receive payments digitally, you can declare presumptive income at 6% of your gross receipts. Here’s how to calculate it.
a. Identify Total Digital Receipts: Sum up all your digital receipts for the financial year. Digital receipts include all payments received through electronic means such as bank transfers, credit card payments, etc.
b. Calculate Presumptive Income: Multiply the total digital receipts by 6% to get your presumptive income. For example, if your total digital receipts are ₹10,00,000, your presumptive income would be ₹60,000 (10,00,000 x 6%).
Step 3: Prepare Your Income Tax Return (ITR-4)
Use the ITR-4 form, which is designed for taxpayers who opt for the presumptive taxation scheme. Here’s how to fill it:
a. Personal Information: Enter your personal details, including name, PAN (Permanent Account Number), and contact information.
b. Income Details: In the “Income from Business & Profession” section, enter the presumptive income calculated at 6%.
c. Total Income: Sum up your total income from all sources, including any other income like salary, interest, or rental income.
Step 4: Claim Deductions and Exemptions
Under Chapter VI-A, claim any deductions you are eligible for, such as.
a. Section 80C: Investments in specified instruments like PPF (Public Provident Fund), LIC (Life Insurance Corporation) premiums, ELSS (Equity Linked Savings Scheme), etc.
b. Section 80D: Premiums paid for medical insurance for self, spouse, children, and parents.
c. Section 80G: Donations made to specified charitable institutions and funds.
Step 5: Pay Self-Assessment Tax
If your tax liability exceeds the amount of tax already paid, pay the balance using the self-assessment tax option. You can do this online through the Income Tax Department’s portal.
Self-Assessment Tax: The tax that is calculated and paid by the taxpayer on his/her own assessment of total income. This is done before filing the income tax return if there is any tax payable after considering advance tax and TDS (Tax Deducted at Source).
Step 6: File Your Income Tax Return
After filling in all the details and claiming the necessary deductions.
a. Verify Details: Double-check all the entered details to ensure accuracy.
b. Submit ITR: Submit the ITR-4 form electronically through the Income Tax Department’s e-filing portal.
c. E-Verification: Complete the e-verification process using Aadhaar OTP (One-Time Password), EVC (Electronic Verification Code), or Net Banking.
Step 7: Track Your Refund
If you have overpaid taxes, you can track the refund status on the Income Tax Department’s website.
a. Log in: Log in to the e-filing portal.
b. Refund Status: Go to “My Account” and select “Refund/Demand Status.”
c. Details: Check the status of your refund request, including the date of issuance and any adjustments made.
Tips for Successful Recovery
a. Accurate Records: Maintain accurate records of all digital transactions and tax payments. This helps in substantiating your claims in case of any scrutiny by the tax department.
b. Timely Filing: File your returns before the due date to avoid penalties and delays in refunds.
c. Professional Help: Consider seeking help from a tax professional if you have complex financial transactions or multiple income sources. A professional can help ensure all deductions and exemptions are correctly claimed.
Conclusion
Recovering your 6% tax amount when filing your income tax return involves understanding the presumptive taxation scheme, accurately calculating your presumptive income, and correctly filling out the ITR-4 form. Following the steps outlined in this tutorial, you can ensure a smooth and efficient tax filing process and recover any excess tax paid.