ITR Filing Important Guidelines that Taxpayers must be aware of
The deadline to file income tax returns for the financial year 2023-24 (AY 2024-25) is July 31, 2024, for those salaried taxpayers whose accounts aren’t subject to audit. In the last few years, the Indian government has taken various steps to streamline the process of tax filing for taxpayers. Some initiatives are given that will help in achieving this goal.
Pre-filed ITRs
The Income Tax Department has provided this facility to taxpayers that their income tax return forms automatically populate with the information obtained from employers, banks, and investment entities.
This initiative of the tax department saves a lot of time and eliminates errors during the process of filing.
Simplified ITR forms
For different categories of taxpayers, different Income Tax Return (ITR) forms are made available by the tax department. ITR Forms like ITR-1 (Sahaj) and ITR-4 (Sugam) are specifically designed for individuals with genuine income sources such as salary, pension, and interest earnings to make the filing process simpler.
Online filing of Return
The Tax Department urges taxpayers to file their income tax returns online. This online option of filing offers convenience and decreases the reliability of physical paperwork.
Taxpayers can file their returns with an accurate guarantee by following the tips mentioned above and minimise the chances of getting notices and queries from the income tax department and other related issues.
Here are given some important guidelines for Taxpayers:
Choosing the right ITR form
It is essential to select the correct ITR Form for accurate filing of taxes and to avoid delay and penalties. Choosing the correct ITR Form is important as it ensures precise reporting of income enables the taxpayers to claim the eligible exemptions and deductions and reduces the chances of getting a notice of “defective return” from the IT department because of incorrect submission of an ITR.
Factors affect the choice of ITR form:
Sources of Income – The nature of income of taxpayers such as salary, capital gain and business income, remarkably impact the selection of the ITR Form.
Residential Status – The residential status of the taxpayer in India determines the tax regulations that apply to you. If the taxpayer is a resident or non-resident of India, the tax implication will be different respectively.
Other Criteria – Other factors such as the type of business, foreign income and agricultural income can influence the decision of choosing the form.
Widely used ITR Forms:
There are 4 income tax return forms for Individuals based on nature of Income.
ITR-1: This form is used by taxpayers who have income from one house property, salaries, pension and agricultural income up to Rs. 5000.
ITR-2: This income tax return form is used by residents of the country and Hindu Undivided Families (HUFs) whose income sources are more than one like business income, capital gains, foreign income and ownership of multiple residential properties.
ITR-3: Usually used by HUFs and individuals in business or related professions.
ITR-4: Individuals having income from business or profession eligible for presumptive Taxation Scheme can file this ITR.
Selecting the right Tax Regime
For an Indian taxpayer, choosing the correct tax regime is indeed important. Union Budget 2023 made the new tax regime, the default tax regime for taxpayers. However, taxpayers have the option to choose the tax regime that suits the taxpayer best. Tax departments also provide tax calculators that let them determine their tax liability under both tax regimes – new tax regime and old tax regime, and whichever tax regime gives the most benefit to them they can choose that regime.
Reconciliation of Income Before Filing ITR
Income reconciliation is crucial for taxpayers before filing their tax returns. Let’s understand why:
1. Reconciliation provides assurance of the correctness and completeness of all income sources by recognizing and reporting them correctly. Income reported in Forms 16/16A, Form 26AS and Annual Information Statement (AIS) are all included in this.
2. Income reconciliation prevents discrepancies that occur when you fail to file your return. There is the possibility of differences in your ITR and the data that the Tax department has collected from different sources. These differences can lead to interest costs, penalties, inquiries or even a tax notice from the department.
Filling TCS Details
Tax Collected at Source (TCS) is an important component of filing taxes in India. It operates as a mechanism where a predetermined percentage of tax is withheld by a seller from the buyer during specific transactions. This withheld amount of tax is then submitted by the vendor to the government. This TCS Application includes reservations for foreign travel, specific financial transactions and automatic purchases.
Details about TCS deductions provided by Form 26AS and AIS are available on the tax department website. If a taxpayer received TCS deductions, he can claim credit for this tax amount deducted while filing the tax return.
For taxpayers, verifying all TCS deductions made during the year are correctly shown in your Form 26AS and AIS, it very important.
Reducing Tax Credits while Filing ITR
Tax Credits consist of various taxes like advance tax, TDS, TCS and self-assessment tax that are deducted or paid in advance during the year. Be sure that you are only paying your net tax liability if you accurately report them in your ITR.
It’s essential to accurately provide all relevant information when putting these tax credits into your ITR form.
Claiming previous Losses
Claiming eligible losses is a beneficial way to reduce the tax burden in India.
Taxpayer can offset their taxable income by reporting business, capital, and other qualified losses. This indicates the possibility of lower taxes and even a refund of taxes.
In ITR Filing, taxpayers can claim the losses which incurred during the current financial year. Furthermore, unclaimed eligible losses from last year can also be availed in the current ITR.
IT department allows carry forward of unclaimed losses for a specific period. Mentioning these unutilized losses in the relevant part of the ITR form guarantees that taxpayers posses the opportunity to use them in the following years.
Declaration of Foreign Assets
Disclosing the foreign assets and income generated from them is the most important thing for Indian taxpayers who are either residents or ordinarily residents. The Tax Department is enhancing transparency and issuing notices to verify the offshore investment details. ROR taxpayers must report the Foreign assets owned by them in ITR.
Not disclosing the foreign assets by taxpayers may lead to the imposition of penalties and possibly legal action by the department.
Submission of Correct Bank Account Details
Taxpayers have to make sure that the details of the bank account they are providing to the income tax department are correct and up to date when filing the ITR form to successfully receive a tax refund, if any. The bank details comprise – Account number, IFSC Code and Name of the Bank. Taxpayers must provide details of an active and verified bank account.
Filing ITR before the Due Date
Filing the ITR on the stipulated time is crucial to avoid issues and conflicts with the tax department. Failure to file the return on a specified deadline can cost the taxpayer late fees and fines. Even delay in filing the return causes various losses like not being able to claim tax benefits or cannot carry forward the capital losses to offset the taxable income. Lastly, filing late returns leads to getting the tax refund late.
Verification of ITR
After submitting the Income Tax Return, verification of ITR is a must. Without verifying the ITR, its legitimacy can’t be confirmed. The ITR verification must be done within 30 days of submitting it.
ITR can be verified through Aadhaar OTP, Net Banking and Physical ITR-V. ITR will become null and void if it doesn’t authenticate within 30 days of filing.
