Are you a resident Indian with a gross taxable income exceeding Rs250,00 yearly? Or do you own any movable or non-movable assets in this country? If yes, then you need to file your Income Tax Returns (or ITR) every year.
Filing your ITR is not the same as paying your income taxes – in the form of TDS (or Tax Deducted from Source), that is deducted by your employer from your income every month. What is ITR? ITR is a yearly statement that you submit to the Indian tax authorities about the income you have earned – including salary, capital gains, house rent, or any other sources like fixed deposits or stock exchange – during the last financial year.
Are you filing your ITR for the first time this year? Here are some useful tips that will help you understand this process more clearly:
Remember the due date of filing ITR
If you are an individual income earner – salaried or self-employed, you need to file your ITR each year by the 31st of July. For example, for the financial year 2019-20, you need to file your ITR by 31st July of the assessment year 2020. As this year has been impacted by the corona pandemic, the deadline date has been relaxed till December 31st.
What happens when you miss this deadline? Late ITR filing could attract late fees – of up to Rs10,000, and take away any tax benefits from losses incurred under any income source.
Know your total taxable income after deductions
Your taxable income is your gross income (earned from your salary and other sources) minus your tax-saving deductions. Deductions include all the investments you may have made during the financial year (for example, your insurance premiums, house rent allowance, home loan payments, and more.
Once you calculate your taxable income, apply the prevailing tax rate for the income bracket that you fall under.
Based on this calculation, you can calculate your tax liability (or the right amount of income tax that you should pay based on your income).
Collect your Form-16 from your employer
If you are a salaried employee, remember to collect your Form-16 (or 16A) statement from your current employer. The Form-16 provides an account of the salary earned from the employing company (for the entire financial year) – along with the TDS on your income that the company has deposited with the tax authorities.
If you have joined another company during the financial year, remember to collect the Form-16 statement from your former employer and submit it to your new employer. This will help your new company determine your overall tax liability – and deduct the right income tax value.
Verify your Form 26AS for deposited tax
While the Form-16 shows how much TDS your employer has deducted, Form 26AS is a tax credit statement that shows the total tax amount that has been deposited with the government. You must verify if the deposited tax (in Form 26AS) exactly matches your tax liability.
Based on this verification, you can then determine if you need to request a tax refund (if you have paid more tax) or need to deposit more tax (when you have paid tax less than what is due).
Ensure that you have all the supporting documents for ITR filing
Apart from your Form-16, you must ensure that you have all the other supporting documents that are required at the time of filing. This includes your bank account statements, your PAN details, and any interest certificates.
If you have earned any capital gains (for example, from a home sale or mutual fund redemption), include the appropriate supporting documentation for the same. On a similar note, if you have earned any interest on fixed deposits, your bank can issue a Form-16A certificate for the tax deducted from the paid interest.
File your IT returns on time
The last tip is to go ahead and file your ITR on time on the Income Tax e-filing website. If you have paid more tax, you can claim for a refund only by filing your ITR – along with the bank account details where the IT department can credit your refund amount through direct bank transfer.
After filing your ITR, the final step is to verify your returns through the electronic mode. As a taxpayer, you have up to 120 days to verify your ITR. Through the online electronic mode, the IT department will send an e-verification mail to you to confirm the verification.
As a taxpayer in India, it is quite easy to file your IT returns on time – thanks to the convenience of the e-filing website. ITR filing is essential every year for availing services like buying a new home or starting a new business.
Hope this article has helped you in getting a better understanding of the ITR filing process.