Advocate Selvakumar

Renovate, the right way

Renovate, the right way

As Bangalore grows at an impossible pace, many of us who have old houses consider ourselves lucky to live in areas that are well-connected and centrally located. Yet, these houses, that are at least five decades old, need constant maintenance and do not have many amenities that are needed today. So, after a lot of thought and planning, we decided to renovate our house to maximize space and light, modernize the bathrooms and generally make it easy to maintain. Here are some of the lessons we learnt along the way:

Magic masonry

Old, independent houses used to be built like fortresses. In the absence of pillar construction, there would typically be parallel supporting walls of 15-inch thickness. The problem is that even the non-supporting walls were thick since they accommodated double-doors or built-in cupboards. Knocking them down not only opens up the area, but also allows more light into the house.

Identify the supporting walls from the original blueprint. If you don't have a blueprint and don't want to hire an architect, any experienced contractor will be able to identify the supporting and non-supporting walls.

Do not alter the supporting walls, especially if there is a floor above.

If necessary, plan openings (doorways or windows) only at the end of a supporting wall. When moving a doorway, ensure that the original opening is walled up before the new opening is made. This transfers the load correctly. Openings can also be made where a cupboard niche existed.
Most walls in those days used to be built with a lintel (mostly rough granite slabs) at a height of around six feet. This restricts doorways to that height, unless you cut through the lintel (which is difficult and leads to weakening due to vibrations) and support the wall further up.
Non-supporting walls can be demolished completely. It is interesting that the bricks of those days are at least twice as heavy as present-day bricks. Clay rather than cement was used as a binder.
For demolished non-supporting walls, affix a steel I-beam just beneath the ceiling to be safe. Openings in the supporting walls can also have a stone slab or a small I-beam across the gap for support.
For old and wet patches, identify the source of the leak and fix it before plastering the wall with waterproofing material.
For cracks in the wall, the mason should use a wire mesh to hold two sides of the crack together and then, plaster the portion.
Ensure that the plastering is done evenly and smoothly. No amount of putty or white cement will hide the ugly undulations on the walls.
If you plan to fix cladding tiles to some walls inside the house, ensure an uninterrupted and even surface is available. Remove small outcrops and borders, plaster indentations, if any.

For safe sparks

From a safety point of view, the wiring of the entire house should be earthed. Old houses generally had three-pin plug points only in the AEH (all electric home) connections. You may have experienced a music system or the computer giving mild shocks from lack of earthed connections. In fact, rewiring the whole house is a good idea.
Concealed wiring was prevalent five decades ago, but the conduits were made of GI pipes. Rewiring allows you to replace the GI pipes with PVC wherever possible.
In the earlier days, plug points were restricted to a couple of two-pin points. Convert all these to three-pin, earthed connections.
Plan new connections so that a switch or a two-way switch that lights up the room is just beside or near the door.
Conceal telephone and cable connections in all the relevant rooms so that there are no wires entering the house through openings in the windows.
In the bathrooms, mark the height of the light above the mirror or washbasin taking into account how high the floor will be.
Keep the plug points for ACs, geysers, exhaust fans, washing machine and refrigerator as close to the actual position of the appliance as possible. For some reason, the length of the wire that comes with the appliance is very short. The switch to operate the appliance may be placed at a convenient height.
Plan to have 15A plug points for places where heating elements (electric irons, coffee makers, microwave ovens) or mixer-grinders and water purifiers are to be used.
Check the position of the fan hooks and connections. Removal of a wall to enlarge a room may require re-positioning of fans.

Sanitary concerns

Typical houses built in the 50s and 60s had concrete overhead tanks that sat flat on the terrace.
Although these houses are taller (ceilings are usually nine ft high instead of the eight ft height of ceilings these days), the water pressure may not be sufficient for water to rise to a geyser, shower-head or water purification unit.
A regular plastic tank may be raised on a fabricated metal stand to deliver the required water pressure.
Alternatively, a pressure pump (a half to one 1 HP should do) can be fitted to achieve the required water pressure.
If there is no problem with the sanitary pipes, it is best to leave them alone. The old ceramic pipes that were fitted one into the other are sturdier against bandicoot attacks than the PVC pipes available today.
Mark the height of the washbasins, taps, mixers and showerhead taking into account how high the floor will rise, since these connections are done before the flooring.
Ensure the correct space (five-six inches) is maintained between the cold and hot outlets for the mixer.
Ensure a minimum of seven inches gap is maintained between the side of the commode and the wall for ease of use of a health faucet.

Sturdy doors & windows

Teak, all the wood used in those days were sturdy and would have weathered another 50-odd years in the house. So, replacing them should be carefully considered since majority of the wood available today is not seasoned.

The biggest advantage of modern sliding windows or single doors is that nothing juts into the room or outside. Sliding windows with clear glass allow much more light into the room than windows with wooden frames and frosted glass. A single door that opens against a wall also gives a sense of space.

Retain the doors or windows and use them as such with a repaired frame and new hinges. However, of all the above-mentioned woods, only teak can be refashioned into new furniture.

A good carpenter may be able to fashion new frames out of the old ones. Very few saw mills agree to re-lathe the wood since it gives off too much dust. The wood is also so brittle with loss of oil that it may crack with the gentlest blow of the hammer.

Among sliding windows, aluminum frames have a longer life than UPVC frames. The latter are less expensive but their long-term durability in our weather conditions has not been tested. It is best to get a local fabricator to do the windows - some of them are really good and it works out cheaper than the UPVC windows.

Of 'wow' flooring

Old houses usually had cement floors with or without red oxide. It is commendable if the red oxide can be retained and someone can spruce it up! However, if the house has poor natural light, the dark red color of the floor will not help in any way. Also, if the floor is pitted in several places, faded unevenly or (since these houses are more often than not on the ground floor) if there are patches of dampness, it is better to remove the flooring completely. The floor should definitely be removed when the doorways are only about six feet high since it is not advisable to raise the height of the floor by another three inches.

For houses that have poor natural light, consider a light-colored floor in shades of white, cream, beige or fawn.

Natural stone is the most attractive choice for floors. However, all sandstones and slates are porous and when laid on the ground, the floor may throw up the same water seepage problem as cement floors. Sandstone or limestone also stains easily. Ask anyone with a white marble floor how much they need to bleach the floor to keep it sparkling! Granite floors are hard on the feet but last forever and are relatively easy to maintain. The only problem is that it is difficult to find light shades in granites.

Fully vitrified tiles are truly value for money. They are 100% waterproof, easy to maintain and available in a mind-boggling variety of shades and patterns.

Whether you decide on tiles or stone, get the mason to make a sufficiently deep (1.5-2.0 inches) groove of 3-4 inches width above the floor. This will allow the tile or stone layer to fix the skirting flush with the wall.

Even the stone sourced from the best quarries or tiles manufactured by the best brands may have some defects. Ensure the defective part is hidden by using the piece for skirting or in an inconspicuous corner of the room.

Make sure the floor is laid with the level sloping in the right direction towards the drain in the kitchen, utility and bathrooms.

Grouting must be done within a day or two after laying the floor so that the dust does not get into the fine joints between the tiles or slabs.

Acid washing of tiles is mandatory to remove the excess grout or cement on the floor. Scrubbing the floor with soap and water is an option if there are chrome- plated fixtures that may blacken due to acid fumes.

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Tuesday, July 19, 2016

Analyse and invest

Anticipating a revival in earnings and demand growth is a dangerous way to plan your equity investments

Investors in the Indian equity markets have been swinging between wild optimism and quiet pessimism since 2012. Many attribute the lackluster performance of the markets to the lack of fast-paced structural reforms or a deeper cut in interest rates. The real culprit, however, is the lack of earnings growth. Persistent single-digit earnings growth clearly indicates that corporate profits do not back early market optimism. The inordinate delay in cyclical catch-up should concern investors.

The turnaround of a bear market into a bull market is typically led by a fall in interest rates. This provides immediate relief to businesses burdened by borrowings and inventory . Then the operating margins improve, riding on lower input costs and operating leverage, as capacity utilization increases. Soon, businesses are in a position to post a growth in revenue and expand volume and value of sales, as demand picks up. With sustained demand, businesses become confident about making further capital investments, and the bull cycle is complete.

The main shocker in the past three years has been the failure of earnings to match up. Estimating earnings is a dangerous game, and in each of the last 12 quarters, analysts have rued that earnings have missed estimates, or the downgrade cycle of earnings has persisted.The single-digit earnings growth that we have seen for Indian equity is unprecedented and unexpected at what seemed to be a turn of the economic cycle.

A chunk of the equity markets is in structural distress. While oil and metals suffer from the downturn in commodity prices, banks are going through the pain of balance sheet restructuring. Infra and capital goods have been hit by lack of investments, and export-led businesses have been impacted by slow global economy . Auto, consumer durable and real estate face lack of demand. The absence of investment is damaging, and the low rate of growth in bank credit implies businesses are not expanding. This structural logjam is holding the markets back.

A very frequently cited explanation about the poor earnings story is that it could be a `one-time extraordinary event'. This term refers to a charge in income that is large and negatively impactful, but not expected to persist. Discussions about balance sheets of banks are rife with such comments. Is the stress in the banking system just an accounting and reporting problem, or is there a serious structural limitation to quality of earnings? It is dangerous to show bravado about a turnaround in earnings, when what is touted as `extraordinary' is only the beginning of a long rework.

There is a lot of optimism about demand revival, with the monsoon being the messiah. This time we also have the Seventh Pay Commission. The idea is that if the rainfall is normal, the purchasing power of rural masses will return. Add to this the purchasing power in the hands of government employees, who will use their higher salaries to buy stuff, and we should see a revival in demand for goods and services. Those looking at sectors such as real estate, consumer durable and automobiles are enthused by this revival. Let's consider one real estate to see how this might be an overly optimistic argument.

The real estate market in India boomed due to the runaway optimism of the early 2000s, and struggled to keep up after the global financial crisis. After a period of bravado, the reality of large unsold stocks has become stark. That's why the sector is at the forefront of lobbying for lower interest rates. However, neither a low interest rate nor a pickup in demand would help. What the sector needs is a steep drop in prices, a correction that vested interest of partly completed projects will not allow, leading to a structural logjam.

Another fallacy is that of valuation. Every time an earnings forecast goes wrong, enthusiasts point to how the markets have become cheaper. They declare that at 16 times forecast earnings, the Indian markets are so much more attractive than in the past. Price-earnings ratios have never been about the price-they are about earnings alone, and that the stubborn denominator should justify the wild gyrations of the numerator. Falling PE multiples in a market that screams turnaround should sound alarm bells about earnings not matching up.

The lack of revival in earnings points to serious structural and qualitative problems in corporate and banking balance sheets, and sector-level and company-level differences in performance. The focus for the equity investor should be on the micro-level selection of businesses that show relatively better quality, with sturdy models that have stood the test of time; businesses that have been conservative and consistent; and businesses that are not burdened with debt and are therefore able to capture any revival in demand.

Instead of being blindly optimistic about a revival in earnings and domestic consumption demand taking care of everything, it would be wise to acknowledge that these are times for good old-fashioned hard work around stock selection and hard-nosed fundamental analysis.

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Sunday, July 17, 2016

Will you evade tax if you can?

Will you evade tax if you can?

More than half the respondents to a survey said they would hide income to save tax

Nearly 58% of taxpayers will under-report their income to save tax, according to an on line survey conducted by ET Wealth last month. The survey had 953 respondents across age groups and income levels. On the face of it, the results of the survey validate Prime Minister NarendraModi's recent assertion that “Indians are inherently honest“. Over 82% of taxpayers have never knowingly given incorrect information in their tax returns and 13.6% have done it just “once or twice“. A mere 4.4% are the bad apples who have under-reported their income many times in their returns. Likewise, 86% will dutifully pay tax on gains from intra-day trading of stocks even though there is a very slim chance that anybody but their broker will know of it (see graphics).

However, the honesty demonstrated by Indian taxpayers could have more to do with the lack of opportunity than integrity. Over 22% will not report cash received for freelance work and 23% will not mention rent received in cash in their returns. If an insurance plan is closed within two years of buying, the tax benefits availed of in those years have to be reversed. Over 30% of taxpayers will choose not to pay tax because they believe nobody will get to know of the transaction.

For salaried taxpayers, there is very little scope for tax evasion because of the tax deduction at source (TDS). They can, however, under-report the income they receive from other sources.

We filtered the results to identify respondents who would not commit any of the 10 transgressions mentioned in the survey. Only 42% of the 923 respondents made the cut. These include people who have never submitted incorrect information in their tax returns. They are willing to cross the line if they know they can get away with the evasion. Many of them do not realize that the I-T department is keeping a close eye and a scrutiny could have grave consequences.

Take for instance, the common fallacy that a taxpayer who changed jobs during the year can get away by paying lower tax. Although he will get double tax deduction and exemption from both employers, the mistake will be discovered when he files his return. The double exemption and deduction will automatically get reduced and the taxpayer will have to shell out a huge tax. “If the unpaid tax exceeds `10,000, after the due date, there is a penal interest of 1% per month of delay,“ says Vaibhav Sankla, Director, H&R Block India.

The problem won't go away if he doesn't file his tax. The income from both employers will be reflected in the Form 26AS, so he is likely to get a notice for not filing tax return. A taxpayer can't pass the blame on the employer for not deducting the due tax. “The employer deducts tax on the estimated annual income of an individual based on the declaration and investment proof submitted by him.It is the duty of the employee to verify the particulars reflected in the Form 16,“ says Sankla.

“If there is an error in Form 16, the employee must immediately alert the employer. The employer shall make the necessary correction and if required shall also furnish a revised TDS return,“ says Archit Gupta, Founder and CEO, Clear Tax. Though 31% of the respondents chose this path, that's the long route. The easier way to correct the mistake is quoting the right numbers in your ITR form.

In a monthly address to the nation, the Prime Minister had exhorted Indians to pay their taxes honestly. But many taxpayers also lend their ears to diametrically opposite advice: one in four taxpayers tends to listen to tax evasion tips from friends even if he doesn't follow them fully . And 5.7% not only take the advice on tax evasion but spread it among friends and family.“There is a rise in the number of defaulters because taxpayers neither fear the law nor perceive any benefit in honesty and tax compliance,“ says Sudhir Kaushik, Co-founder and CFO, Taxspanner.

No social stigma

One disturbing finding of the survey is that few people are willing to take proactive steps against tax evasion by family members. If their spouse or close relative is evading tax, only 32% of the respondents will forcefully dissuade them from doing so. Nearly 54% will gently advise them against it and 14% will not even interfere in the matter. “There is no social stigma for being a tax offender in India. Even if someone gets caught for evasion or is served a scrutiny notice, it is acceptable in society,“ adds Kaushik.

This social acceptability of unethical tax practices is surprising, given that a vast majority (73%) of taxpayers feel that Indian tax rules are not fair. Interestingly, 68% of those who complain that the system favours the dishonest have fudged their returns or are willing to under-report their income to save tax.

Honesty is best policy

The tax department is under a lot of pressure to improve compliance because the Prime Minister wants the tax base to increase from the current 5.43 crore assesses to 10 crore assesses. Notices are being sent out to non filers, more details are being sought in tax forms and greater efforts are being put into catching defaulters. Tax evaders should remember that the penalty can be up to 300% of the tax sought to be evaded, imprisonment or both. As the prime minister pointed out in his address, honesty is the best policy. “By running away from rules, we lose our peace (of mind). Anybody can harass us. Why should we let that happen?

Why don't we give correct information to the government about our income, about our wealth instead?“ He says. As you get ready to file your tax return this year, keep his words in mind.

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Thursday, July 14, 2016

If you are a tax defaulter, a tougher I-T dept awaits you

If you are a tax defaulter, a tougher I-T dept awaits you

Even before football fans recovered from the news that Lionel Messi will no longer play for Argentina, they were in for another shock. The Spanish tax department sentenced Messi and his father Jorge Horacio to 21 months in prison apart from fining them a few million Euros for tax fraud.

It appears that both avoided Spanish income tax on his image rights by using shell companies in various countries. However, both may not have to spend time in prison since, as per Spanish law, prison sentences below two years are suspended - meaning they can be served anywhere including on a football field. It is apparent that the sentence was given for 21 months only to ensure that this benefit is availed.

Sports stars being penalised by the tax office is not a new phenomenon - Maria Sharapova and her father had their share of tiff with the tax department. Tax jurisdictions abroad may not arrest popular stars but they will not stop shy of naming and shaming them. This leads one to think aloud as to what would the tax office in India do with tax defaulters?

Sports stars in India may have the money but not the intention to defraud the tax office. Recently, there were reports of some arrests by the tax department but they were quickly denied. As with many things in India, the truth will never be known.

A strategy paper prepared by the department has some news in store for tax defaulters. In order to cripple and check (strong words these!) the activities of tax defaulters, the Income Tax Department has decided to block the Permanent Account Number (PAN) of such entities, get their LPG subsidy cancelled and take measures to ensure that they are not sanctioned loans. The taxman will block PAN in such a way that these defaulters are not sanctioned any loans or overdraft facility by public sector banks, as the same is bound to become non-performing assets.

With the objective of disincentivising the defaulters, it would recommend that the LPG subsidy which is directly credited to the bank accounts of the said defaulters be annulled. The taxman also proposes that the identities of such blocked PANs be circulated to the Registrar of Properties with a request not to allow any registration of immovable properties where such PANs are involved. Such defaulters' information has also been recommended to be circulated across tax offices so that their activities, loans or government subsidy can be plugged countrywide.

The department has also decided to subscribe to the Credit Information Bureau Limited (Cibil) data to check out the financial activities of defaulters and undertake action against them for recovery and freezing of assets. The department, beginning last year, also started to "name and shame" large tax defaulters by publishing their names and other credentials in leading national dailies and on its official web portal.

Beginning this financial year, it has decided to publicly name all categories of taxpayers who have a default of Rs 1 crore and above. While all these strategies are bound to draw attention, whether the tax department can curb the fundamental rights of a taxpayer to seek loans/LPG subsidy is a basic question that is bound to land up in the courts.

Amidst all this, an Income Declaration Scheme (IDS) is operational with effect from June 1, 2016. The government has been going on a marketing blitz in an attempt to get people to embrace the scheme. Sets of Frequently Asked Questions (FAQs) have been issued and IDS also found a mention during the prime minister's "Mann ki Baat" airing. The scheme will run for four months.

Undisclosed sum

The declared income and related assets will be taxed at an effective rate of 45%. The undisclosed sum can be held either in the form of assets or in any other form. If the taxpayer is holding undisclosed income in the form of an asset, the market value of the asset as on June 1 shall be used to compute the sum of undisclosed income.

It has also promised that those declaring undisclosed income or assets would not be subject to further enquiry or scrutiny. If our friendly neighborhood tax office discovers any undisclosed income or assets after the scheme closes, the offender can be assured of a tough time.

The IDS scheme may, at best, meet with a lukewarm response because of the high rate of tax at 45% and also the need to pay tax on assets at market value as on June 1. One of the examples given in the FAQs illustrates that tax will have to be paid on cash remaining on hand out of the undisclosed income - a concept unheard of by the Indian tax payer and which will certainly make him wary of going for the scheme.

At best, the tax office should get some limited comfort that those who declare any income/assets under this scheme will not be able to short-change them again. It is possible that the scheme may be extended beyond October but the response would increase only if a few sweeteners (such as a tax rate that gives comfort) are thrown in.

Over the years, the Indian taxpayer in general and the defaulting one in particular, has become a war veteran in fighting his battles with the department. Unless there is something in the deal for the taxpayer by way of an incentive, he is not going break into a sweat over the moves being proposed by the department or the income declaration scheme. It should not come as a surprise if a person with five undisclosed properties discloses only three under the IDS scheme and keeps the remaining two in stock for the next scheme to be announced in a couple of years.

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Wednesday, July 13, 2016

State affordable housing policy, a step in the right direction

State affordable housing policy, a step in the right direction

The timing has been right. The Karnataka government has cleared the affordable housing policy (KAHP). The Cabinet has passed the earlier housing policy of October 2013 by incorporating sensible modifications and additions in its efforts to provide "affordable homes" to the needy.

The urgency of a concrete policy by the government was more pronounced to immediately align with Prime Minister Narendra Modi's pet policy of Pradhan Mantri Awas Yojana (PMAY) under the credit-linked subsidy scheme (CLSS) which has the mission of providing two crore and four crore houses in the urban and rural areas, respectively, by 2022.

The KAHP in its new avatar lays stress on the state participation through Public Development Agencies (PDAs) - Rajeev Gandhi Rural Housing Corporation Limited (RGRHCL), Karnataka Housing Board, BDA, BBMP, Karnataka Slum Development Board. The RGRHCL is doing significant work in the affordable housing space.

The KAHP is applicable only to urban areas. The beneficiaries would be below poverty line (BPL), economically weaker sections (EWS) and low income group (LIG) households living as residents in urban areas for a period of not less than one year, fulfilling certain income criteria. The final selection of the beneficiaries under affordable housing schemes is by the state- level nodal agency (SLNA).

The KAHP has designed seven models of affordable housing to cater to different sections of the target group. The purpose of the beneficiary-led house construction and enhancement is to upgrade kutcha houses (walls with grass, mud, unburnt bricks) to pucca houses (brick, concrete, with mortar and metal). The beneficiaries will get a grant of Rs 1.5 lakh under the PMAY scheme.

For the beneficiary led new construction - specially designed for construction of a new pucca houses with direct financial assistance - will get additional financial support through the various ongoing schemes of the state government under the Basava Housing, Indira Awas Yojana, Vajpayee urban housing scheme along with the popular Credit Linked Subsidy Scheme (CLSS) of the Central government.

Two other models are dedicated for upgrading and redevelopment of slums by providing basic infrastructure such as water, drainage system, roads and lighting. Three more models - plotted development of sites with houses, group housing and township projects and affordable group housing - in partnership with private developers are thoughtfully and scientifically designed to boost the housing stock to cater to the urban poor. The paradigm shift and game changer of KAHP is the active involvement and participation of private developers under the PPP model by granting benefits and incentives to the builders.

The State government seems to have understood the dynamics of housing activity. Providing housing to the needy can no longer be the sole monopoly of the state. The builders, by partnering in these "non-remunerative ventures," get adequately compensated by the government by way of additional Floor Area Ratio (FAR) equivalent to the built-up area of the AHUs and additional transferable development rights (TDRs), by which builders can build extra floors and sell at commercial rates.

The KAHP proposes reduction in stamp duty from 7 to 5.5%, single window appro-vals with clear turnaround time for sanction of building plans, land conversions, issuance of commencement, completion and occupancy certificates. Housing activity through linkages with 200 ancillary industrial units will have multiplier effect on the economic development of Karnataka with positive impact on employment, income and savings.

There are certain critical inconsistencies, anomalies and show stoppers in the KAHP. The eligibility definition of an affordable housing unit is between 161 sft and 646 sft carpet area on a plot dimension 269 sft-1076 sft. The Central government under the CLSS has removed this requirement as cost of construction varies from place to place.

There is an anomaly in the income criteria too. Annual income of household up to Rs 1.5 lakh and Rs 3 lakh is the criteria considered for EWS and LIG by KAHP whereas it is double at Rs 3 lakh for EWS and Rs 6 lakh for LIG under CLSS. This is serious as it affects the very cherry-picking of the beneficiaries.

A large portion of households in the income band width of Rs 3-6 lakh per annum gets excluded from the scope of the KAHP. This will impact the beneficiaries who are eligible for an upfront subsidy of Rs 2.2 lakh by way of direct transfer under the CLSS if the AHU is in one of the 231 towns specified in the 30 taluka of Karnataka.

Woman as title holder

The KAHP should also incorporate woman of the household as one of the title holders of the property to be a beneficiary under the CLSS which has a rider that the applicant should not own any other residential property in the country.

Though the policy attracts private developers with additional TDRs and FARs, the condition that the FAR has to be "consumed" on the same site on which the AHUs are built for their commercial use will neither be attractive nor practical. Coexistence of residents of different economic and social strata would be difficult and can lead to social strife.

The affordable housing projects should be taken up within the city on government land. Under the PPP, the government should offer land at reasonable rates within the radius of 10 km to private developers to build quality affordable houses. Otherwise, the fate will be similar to certain projects wherein the houses are lying vacant and in dilapidated condition for want of occupancy.

The government should eliminate corruption which is rampant in the beneficiary selection stage. Also to be eliminated are middlemen and multiple funding of the same asset. Quality construction needs to be adhered to through fair practices code. Otherwise, the noble intentions of the new housing policy will be defeated.

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Even without a Form 16, one can e-file tax returns

Even without a Form 16, one can e-file tax returns

This is why the Form 16 is important. If you're a salaried employee, your employer is obligated to provide you with your Form 16. But in some rare cases, when the Form 16 is not given, you can still e-file your income tax returns. Here's how.

The Form 16 is one of the most important documents that is required to e-file income tax returns. Since it contains all the required information regarding your salary, tax deducted at source (TDS) on your behalf and your tax-saving deductions, among others, you can use the Form 16 to easily input the required information into the income tax return form and successfully file your returns.

This is why the Form 16 is important. If you’re a salaried employee, your employer is obligated to provide you with your Form 16. But in some rare cases, when the Form 16 is not given, you can still e-file your income tax returns. Here’s how.

Your Form 16 is basically a certificate or income proof that provides information on your taxable income and TDS. While all these details will be readily available to you if you have your Form 16, you can still calculate them by yourself if you don’t. To calculate your taxable income and TDS deducted, you would need the following documents and details:

Pay slips to calculate income

Form 26AS to calculate TDS

Rent receipts to calculate house rent allowance (HRA)

Details of tax-saving expenses and investments

Details of income other than salary

Once you have all this information in hand, you can calculate your total income and minus the TDS and deductions from it to arrive at your taxable income. Of course, doing all these are not as easy as it sounds. So let’s take a look at each of these steps in a little more detail.

Collecting pay slips: All your pay slips put together have the salary that you have earned through the financial year. This would work even if you have changed jobs during the year, you would have pay slips from the different employers to add up your total salary income.

Deducing TDS from Form 26AS: Also known as the tax credit statement, your Form 26AS contains information on the TDS deducted on your behalf when various payments are made to you. This includes the TDS deducted by your employers before paying your salary. You can download the Form 26AS from the income tax department website to check that there’s no discrepancy in the TDS.

Claiming house rent allowance: If you’re a salaried employee and you live in rented accommodation, you’re allowed to claim house rent allowance. To claim this deduction, you need to submit the house rent receipts to your employer. If, for some reason, you failed to submit the rent receipts, you can still claim house rent allowance as long as you have the relevant details.

Availing the benefit of tax-saving deductions: Individual taxpayers can save up to Rs 1.5 lakh in income tax by claiming deductions on certain investments and expenses. When filing your tax returns without a Form 16, you should have the details of such investments and expenses and enter them in the relevant fields.

Income from other sources: Quite often, salary income is not the only income that one earns. You will also be earning from house property or fixed deposits and other such investments. Even the interest earned on savings bank accounts is a source of income that needs to be mentioned while filing tax returns. This is how you can file your tax returns even without a Form 16. Of course, it is much easier if you do have a Form 16 so make sure you get it from your employer.

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