A few crucial elements to consider before submitting an ITR have been listed in this article:
Also Read: Income Tax Return Filing
- Select the appropriate ITR form.
Selecting the appropriate ITR form based on the taxpayer’s residency status and income from numerous sources is crucial for accurate filing. For example, a resident individual with total income up to Rs 50 lakh from wages, one residential property. And other sources can only utilize form ITR-1. A taxpayer who is a non-resident or a non-ordinary resident, or who has capital gains for which form ITR-2 is required, cannot use it.
- Choose between the new and old tax systems, depending on which is more beneficial.
In lieu of renouncing mandated exemptions and deductions. The Finance Act of 2020 created a new optional tax regime for taxpayers with modified tax slabs and rates. During the tax return filing process, taxpayers will be able to choose between the existing and new tax regimes. Salaried taxpayers can also amend the tax regime they declared to their employer when completing their ITR.
- ITRs with pre-filled information
This year, ITR forms will import pre-fill information from the Form 26AS, such as the taxpayer’s personal information and details of salary income, dividend income, interest income, and capital gains. This would make it easier for taxpayers to file ITRs because most of the necessary information would already be included.
Individuals will need to double-check this information and make any necessary adjustments for income not declared on the tax return.
If the information is wrong, you should contact the bank/payor of income, etc. To request that the data in their quarterly TDS returns/other filings be corrected so that proper information is shown in your Form No. 26AS.
- Form 26AS is used to verify prepaid taxes
Taxpayers can check their prepaid taxes, such as tax deducted at source, advance tax, and self-assessment tax, using Form 26AS. Any discrepancy should be reported to the employer, other payers, or banks for adjustment. As this is necessary by the tax department in order for the tax return to be processed successfully.
- Payment of outstanding taxes
After determining total taxable income and claiming essential deductions under Chapter VI-A of the Act, applicable tax rates should be used to calculate the total tax due. After claiming credit for prepaid taxes, any taxes owed on the tax return, including any applicable interest, should be paid before submitting the tax return. Even if the tax return filing date has been extended to 30 September 2021, if such self-assessment tax exceeds Rs 1 lakh. It should be paid before 31 July 2021 to avoid additional interest liability.
- Various disclosure obligations
An ITR must include the following disclosures of various assets and financial investments:
- Detailed information on all Indian bank accounts
- Specific information about unlisted equity shares
- Directorships held in Indian and foreign corporations are listed.
- Exempt Income Reporting
Exempt income, such as agriculture income, exempt income of minor children, income not payable to tax under the Double Taxation Avoidance Agreement, and so on, must be reported under ‘Schedule EI.’
- Changing jobs during the year
If the taxpayer has provided the present employer with the necessary wage and income details from previous employers. The current employer can issue a consolidated Form 16 and 12BA on which an ITR can be submitted. Otherwise, there may be a TDS shortage due to the duplication of slab benefits, deductions, and exemptions offered by all employers. Any additional taxes payable on the return, as well as any applicable interest, should be paid before the return is filed in this scenario.
- In some circumstances, filing an ITR is required.
The Finance (No. 2) Act of 2019 forced ITR submission for select persons who met certain conditions during the relevant fiscal year, even if they were not required to file an ITR due to taxable income. If they engage in high-value transactions within the relevant fiscal year, they must provide the following information:
- Payment of almost Rs 1 lakh worth of electricity bills;
- A total deposit of above Rs 1 crore in one or more current bank accounts;
- In total, I spent more than Rs 2 lakh on overseas travel for myself or others.
- Consequences of not filing an ITR on time
The taxpayer may be unable to file the ITR before the due date for a variety of reasons, including a lack of essential documents/information, a lack of time, personal obligations, and so on. If the ITR reporting date is missed for whatever reason, it may result in a variety of repercussions under the Act, including the imposition of a late filing charge, Ineligibility to carry forward some losses, payment of interest on the balance tax liability, and so on.
To summarize, taxpayers should estimate their taxable income in accordance with the Act’s provisions and verify all underlying documents/information before computing the final tax payable / refundable, as applicable. In doing so, they should consider the aforementioned factors, among others, in order to file their ITR correctly and avoid any penalties
- Select the appropriate ITR form.
Selecting the appropriate ITR form based on the taxpayer’s residency status and income from numerous sources is crucial for accurate filing. For example, a resident individual with total income up to Rs 50 lakh from wages, one residential property. and other sources can only utilize form ITR-1.
Suggested Read: Income Tax Notice