Filing income tax returns yearly may sound good to a philanthropist, who is willing to let the Government use everyone else's money to serve the general humanity. But the Government rarely lives up to those elusive promises and filing tax returns start seeming a pain. To add insult to the injury, the simple 'how to file income tax returns' question inevitably arouses dread. The problem plagues both arenas,individual income tax return as well as organizational filing. But with the systematic 8 step approach presented here, the question ends up losing its former horror.

Step 1: Self vs professional

With several professional income tax return softwares available, the cumbersome filing process can be immensely simplified. In fact, bulk filing lets professionals spend time delivering advice to their clients rather than lose their cool dealing with repetitive tasks.

Step 2: Get your Income Tax Return (ITR) form

The queue leading up to the form distribution centre should ideally be motivation enough, what with such a crowd ready to give the Government money. Tax returns can also be filed online. ITR forms come suited for different needs.

Step 3: Determine total income

An individual's income tax return is kick started with a consolidated look at the total income from different sources:

• Salary: this is the individual's salary, all inclusive of annuity, pension and the like.

• House property: the rental charges from the ownership of commercial/personal property go towards the total income.

• Businesses: the profits earned from a business holding aren't the individual's alone to cherish. They also form a part of the taxable sum.

• Capital gains: though gains is a rather misleading term, this refers to the purchase and sale price difference of a capital asset, again a part of the income.

• Miscellaneous: this covers money from a lottery or say, interest income.

Step 4: Deduct the exemptions

Be sure to note that some incomes are exempted from taxation. These include interest on EPF and PPF, agricultural income, capital receipts, equity fund dividends and commuted pension.

Step 5: Exempt the deductions

Deductions, as mentioned, need to be heeded as they reduce the actual amount on which tax will be levied.

• Section 80 L: While post office deposits and NSCs contribute Rs. 12000, Govt. securities lead to a deduction of Rs. 3000. Thus a maximum deduction of Rs. 15000 is allowed.

• Section 80 D: The deduction here is for medical insurance payment. While the standard is Rs. 10,000, senior citizens are allowed Rs. 15000.

• Conveyance allowance: It offers a monthly deduction of Rs. 800, if the employer provides it.

Step 6: Compute tax liability

This is calculated on the taxable income, left after Step 4 and 5.

Zero to Rs. 1,50,000: nil

Rs. 1,50,000 to Rs. 3,00,000: taxed at 10 %

Rs. 3 lakh to Rs. 5 lakh: taxed at 20 %

Above Rs. 5 lakh: taxed at 30 %

*The above slots represent the tax slabs (men) for 2008-2009.

Step 7: Rebates are your best friend

Rebates come as a whiff of fresh air when liabilities seem at their vicious best. Section 88 declares that investments up to Rs. 1 lakh are eligible for a rebate, varying with the income. Say, for income up to Rs. 1.5 lakh, a rebate of 20 % of the investment may be offered. This depends on the yearly Government rules.

Step 8: Get-set-pay

The figure obtained in step 7 is the final income tax return and ends up in the the Government's treasury.

So there. The 'how to file income tax returns' questions will never bother you again.