Filing income tax return is considered as a challenging task for many, especially new taxpayers. However, it is essential to file return, not only to declare your earnings & assets and pay taxes but also to get a tax refund, if you are entitled to one. Income tax return is a statement that records the details of your earnings from various sources along with the tax that you pay to the department, and there are several things you should know before filing your next return.
Though one needs a professional help to understand the procedure in detail, a few points mentioned below can help you gain an insight into filing the right way. And, if you are new to this process, then these points are necessary for your knowledge before you start filing.
- Who Needs to File Return? Taxpayers are the people who earn money from any source either by working in a company or on an individual basis. Some people think they don’t need to declare their income to the income tax department if their income is less than the minimum taxable limit. This is a misconception as the law requires every individual above 18 years of age, who earns an income, to file the return irrespective of the taxable limit.
- What is a PAN Number? Once you know that you have to file a return when you start earning, the first thing you need to do is get a PAN number before you can file an ITR. PAN (or Permanent Account Number) is the identity of an individual, family, and a corporate entity that is required for any correspondence with the income tax authority, and the account linked to that number stores all the financial details of its holder.
- What is TDS? TDS (Tax Deducted at Source) is the tax deducted by the employer (for salaried people) and deposited to the IT department on the employee’s behalf. The details of the tax deducted can be checked through form-16, which can be obtained from the employer. In addition to this, TDS can also be deducted by banks and/or other financial institutes/organizations in case of any taxable liability on interest earned above a certain limit per year.
- What is Form 26AS? Form 26AS is an integrated annual tax statement, available on the income tax department’s website and can be downloaded by using the PAN. The form contains the details of a taxpayer’s income from all the sources and relevant taxes deducted on the taxpayer’s behalf by the employer, bank, or any other organization/institute. This form also contains the details of TDS on sale of immovable property and rent of property which gives the clarification of the taxpayer’s financial situation. In addition, it contains the detail of any advance tax paid by the taxpayer as well. Tax Deduction & Collection Account Number (TAN) is also mentioned in this form with details, which is allotted to the organizations who can deduct tax on the taxpayer’s behalf. You can download this form from the TRACES website.
- Is the Aadhaar Number mandatory to file a return? As per law passed by the Income Tax Department in July 2017, all the ITRs need to quote aadhaar number of the taxpayer in order to file an ITR. You must ensure that your PAN card is linked to your Aadhaar Number otherwise you may face difficulties when filing your return online, or you may also face the risk of cancelation of your PAN Number.
- Which ITR Form to Fill to File a Return? When trying to file a return online, people often get confused between the various types of ITR forms available. There is a number of forms to choose from, when you start to file returns as per the Central Board of Direct Taxes (CBDT). Out of those, ITR-1, ITR-2, ITR-2A, ITR-3, ITR-4 and ITR-4A are for individuals whereas ITR-5, ITR-6, and ITR-7 are meant for companies and firms. With every form applicable to a different income value, type, and source, you need to choose the right one for you.
- What is the difference between the Assessment Year and Financial Year? Financial (or accounting) and assessment years start from 1st April and end on 31st March. All the income and interest related documents, as well as forms, are to be presented in the ITR for the same time period.The financial year is the year for which you are going to file your return whereas the assessment year is the one during which the income is being assessed and ITR is being filed. In general terms, the assessment year is the current April-March period while the financial year is the previous April-March period.
- Don’t Ignore Income from Previous Employer if you changed Job within the Financial Year: It happens at times that people change their jobs during any time of the year. In such a case, the new employer starts calculating the employee’s annual income based on the current income and deducts the tax accordingly, without taking into account the income from previous employer during the same financial year. This leads to an inaccurate tax deducted at source, combined from all the employers during the year. Thus, when filing ITR, the taxpayer needs to furnish details of the total income earned and applicable tax and make the necessary payment if less tax is deducted than actual, or get a refund if more tax is deducted than actual.
- Disclose Foreign Assets and Income: Taxpayers qualifying as ROR (Resident and Ordinarily Resident) are liable to pay tax in India on their income earned across the world. In addition to this, taxpayers also need to disclose any asset held by them outside the nation anytime during the financial year. Any non- or under-reporting of any such income/asset may attract penalties or other implications under the Black Money and Imposition of Tax Act, 2015.
- Follow the deadline: Apart from all the technical terms, there is a deadline to file return every year. However, if you miss this deadline due to any reason, you can still file your ITR with a penalty within the date of filing with penalty. But, you shouldn’t miss the second deadline as this might lead to failure in filing the income tax return, and could attract legal, financial, or any other implications.
Keep in mind these key points and details when filing your income tax return next time, to avoid making any mistake or attracting any penalty or implication.