With the due date of July 31 fast approaching, it is that time of the year again when the nation’s tax payers scramble to file I-T returns. After all, filing of tax return is compulsory for everyone whose gross total income exceeds the basic exemption limit.
Thus, if your income for the year exceeded the exemption limit, you will be required to file the return by the due date. “You need to file the tax return even if you are not paying any tax or even if your employer has deducted tax at source,”
However, despite all the precautions taken by you, rush-hour filing may mean that you could inadvertently miss out on certain details and disclosures, and therefore be on the bad books of the taxman. If not that, you might just forget to make the most of the tax breaks available to you, thus paying more tax in the process and claiming no or less return. Here are 10 important things to do before filing your I-T return:
Identify Sources of Income
Firstly, you need to identify your sources of income under different heads. Under the I-T Act, all incomes earned by persons are classified into five different heads, such as income from salary, income from house property, income from business or profession, income from capital gains, and income from other sources.
Thus, you should identify all your incomes from different sources, just to ensure that you haven’t missed out something while filing your return.
Refer to the Basic Documents
Some basic documents/information that should be referred to while filling the return includes:
- Form No 16 (issued by the employer): This shows the income from salary and tax deducted by the employer on the same.
- Summary of all bank accounts during the year: This summary gives an idea about the income earned during the year, investments made and other expenses. This will ensure that neither any income nor any eligible deductions are left out in the return.
- Details of tax paid during the year: This is required in case the individual has paid any advance tax during the year.
- Income of a minor child: This is to be included (except in few cases) even if it is a small amount, e.g. bank interest.
Compute Your Tax Liability
Having identified your sources of income and after referring to the basic documents, you need to compute your tax liability for the year. If you are familiar with the process and are comfortable with doing it, you can do it all by yourself. If not, you should take the help of a tax expert or a CA or some other qualified professional. This is important as a wrong computation of your tax liability can land you in trouble later on.
You also need to ensure that “if any tax is payable, the same has been paid as ‘self assessment tax’ before filing the tax return. Further, if any interest is payable for late payment of tax, then the same has also been deposited,”.
Chose the Right Form
Once the details in respect of income and expenses are collated, you should check which tax return form is applicable to you. With the introduction of new forms, based on the nature of income earned during the year, you should select the right income-tax form.
For example, there are two I-T return forms — ITR-1 and ITR-2 – available for salaried individuals, and your sources of income will decide which form to use. Use the first form if your income is from salary, pension or interest earned in the financial year, and use the second one in case of any capital gain, income or loss from house property and income from any other source. There is another form – ITR-4 – which is meant for individuals having income from a business or profession. The Tax Department will refuse to accept your form in case you have chosen the wrong one.
Fill in Correct Personal Details
Ensure that you fill in correct personal details in the form meant for you, especially your name, address, bank account details and PAN number. Bank account details include the bank account number, type of account and the bank’s MICR code. “This is crucial, especially if you are claiming a refund. Likewise, your PAN is very important because the tax laws levy a fine for not quoting or misquoting your PAN number,”.
Claim all Deductions
Ensure that you have, under various sections of the I-T Act, claimed all the deductions that you are eligible for. For example,
- Under Sec 80 C – For investments made like PF, PPF, NSC, school tuition fees of children, insurance premium, investments in specified mutual funds etc.
- Under Sec 80 G – Donations made to charitable organizations
- Housing deduction for interest on housing loan etc.
Information of Specified Investments/ Exempt Income
You also have to fill in information in respect of specified investments, as per prescribed limits, such as:
- Property bought or sold in excess of Rs 30 lakh
- Mutual funds, in excess of Rs 2 lakh
- Cash deposits in excess of Rs 10 lakh
- Credit card payments in excess of Rs 2 lakh
- Bonds etc in excess of Rs 5 lakh
It is also important to know that certain income that is exempt (i.e. income which is not taxable) is also required to be disclosed in the I-T return form. For example, dividend received and receipt of PF balance, among others. Not disclosing these incomes may land you in trouble also.
Claiming a Loss
If you are planning to claim a loss in the income-tax return, which you would like to carry forward, the same can be done, only if the return is filed by the due date. If this filing deadline is not met, then the loss claimed would not be allowed to be carried forward for future set off against income.
File By Due Date & In the Right Tax Jurisdiction
After the tax return is filled in, the next step is to file it appropriately, by the due date. For individuals having salary and interest income only, the due date of filing the tax return July 31. The return may be filed either electronically or in printed form. In few cases, even the electronically-filed return has to be filed in printed form within a given time period.”One must also ensure that the return is filed with the right tax officer (tax jurisdiction). This is determined based on the address of the individual. In case of salaried employees, the jurisdiction is determined by particulars of the employer,”.
“One must also ensure that the return is filed with the right tax officer (tax jurisdiction). This is determined based on the address of the individual. In case of salaried employees, the jurisdiction is determined by particulars of the employer,”.
The proof of filing the return is the acknowledgement, which is stamped and signed by the tax officer and a copy is returned to the individual.
One important thing to remember is whether it is electronic filing or paper filing, now individuals do not have to attach any document or attachment with the return of income.
Maintain Documents For Future Reference
The documents based on which the return is prepared may be requested at a later stage by the Income Tax Officer to check the correctness of the claims made. Failure to submit details may lead to disallowance of the deduction claimed, resulting in an increase in the tax liability or a decrease in refund. “Hence, it is advisable that all the documents required to substantiate the return are maintained by the tax payer for future reference,”.
“Hence, it is advisable that all the documents required to substantiate the return are maintained by the tax payer for future reference,”.
These are the few important points which you should bear in mind while filing your return. The golden rule is to be organized in your paper work and be timely in paying tax and filing the tax return.