Tax season is here, and with it comes the annual routine of filing income tax returns. This may seem like a lot of work to you, but it is inevitable for responsible financial management. Furthermore, with the proper knowledge and preparation, you may easily file your tax returns and apply strategies to improve your financial health. However, filing income tax returns may be sometimes overwhelming and stressful for you, if you do not know where to start.
So here, we have assembled some essential income tax return filing tips to help you navigate and file the same efficiently and accurately. Let’s get started with the fundamentals first.
Understanding Income Tax Returns
An Income Tax Return (ITR) is a document through which taxpayers report their earned income and tax obligations to the Income Tax Department. Filing your ITR not only ensures compliance but also can reveal opportunities for tax savings and financial planning. But who needs to file?
Who Needs to File Income Tax Returns?
Individuals
In India, whether you need to file an Income Tax Return (ITR) depends on your age and income level:
- Below 60 years: If your total income is more than ₹2.5 lakhs, you need to file an ITR.
- Between 60 and 80 years: You must file if your income exceeds ₹3 lakhs.
- Above 80 years: Filing is required if your income is more than ₹5 lakhs.
Businesses
Filing requirements for businesses depend on their structure:
- Sole Proprietorship: You need to file an ITR if your total income is above ₹2.5 lakhs, considering the age-specific thresholds mentioned above.
- Partnership Firms: Every partnership firm has to file an ITR, whether they made a profit or not.
- Limited Liability Partnerships (LLPs): LLPs must file a return, even if they incurred a loss.
- Companies: All Private Limited and One-Person Companies (OPCs) are required to file an ITR, irrespective of their income, profit, or loss.
Tips to File Income Tax Returns
Filing income tax returns (ITR) is a requirement for all taxpayers in India. It entails declaring your income for a specific fiscal year and paying the applicable taxes. Here are some helpful tips to file income tax returns, to make the process easier and help you stay compliant with the Income tax laws.
Identify the Correct ITR Form.
Filing income tax returns begins with choosing the right ITR form based on your income sources, residential status, and other financial information. The Central Board of Direct Taxes (CBDT) in India has defined multiple ITR forms for different types of taxpayers:
The ITR-1 (Sahaj) applies to individuals with a total income of up to ₹50 lakhs from wage, one housing property, interest income, or family pension.
ITR-2: For individuals and Hindu Undivided Families (HUFs) who do not make a living from a business or occupation.
ITR-3: For individuals and HUFs generating income through a business or profession.
ITR 4 (Sugam). This form is for individuals, HUFs, and businesses (except LLPs) that prefer presumptive taxation.
ITR-5: This one is for businesses, limited liability partnerships, AOPs (associations of persons), and BOIs (bodies of individuals).
ITR-6: For businesses that do not claim tax exemption under Section 11.
ITR-7:This form is for individuals and businesses that are required to file returns under various sections, such as Sections 139(4A) or 139(4B).
Organise Your Documents
Whether you are an individual or a corporation, organising your paperwork can help make the ITR filing process easier. Here are the important documents needed to prepare income tax returns:
Form 16: This form shows your salary and the tax deducted at the source (TDS) by your employer.
Form 26AS: This is a comprehensive tax statement from the Income Tax Department that includes all TDS deducted and credited to your PAN.
Annual Information Statement (AIS) and Taxpayer Information Summary (TIS): These provide a comprehensive view of your income from multiple sources.
Bank statements, investment proof, and receipts for tax-saving deductions: Keep documents for deductions and expenses claimed under sections 80C, 80D, and 80G.
Key Income Tax Return Tips for Individuals
Use Online Tools
You can make use of the Income Tax Department’s e-filing tools and portals, which provide detailed instructions and user-friendly interfaces for filing returns.
Verify TDS Deductions
To avoid any discrepancy, ensure that the TDS inputs in Form 26AS match those on your salary slips and other income documentation.
Claim All Eligible Deductions
Ensure that you maximise your deductions by claiming all eligible ones from sections such as:
Section 80C covers investments in PPF, NSC, ELSS, and life insurance premiums.
Section 80D addresses health insurance premiums.
Section 80E covers interest on loans for education.
Section 80G: Donations to specified nonprofit organisations.
E-Verify Your ITR
Once you have filed your return, don’t forget to e-verify it. You can use Aadhaar OTP, an electronic verification code (EVC), or Net Banking. This step helps speed up the processing of your returns.
Income Tax Return Tips for Businesses
Keep detailed records.
Make sure you keep track of all of your business’s income and costs. Keep receipts, invoices, and bank statements ready to help with tax deductions and calculations.
Know Your Business Structure.
Determine whether your company is a sole proprietorship, LLP, or a private limited company. Each structure has its own set of tax forms and filing deadlines, so understanding them is essential.
Use Deductions and Depreciation.
Make sure you depreciate your business assets. Don’t miss out on infrastructure and development deductions, which can drastically lower your tax burden.
Separate business and personal finances.
Separate your business and personal finances using different bank accounts and credit cards. This will make record-keeping considerably easy for you.
Seek professional help.
Consider hiring an experienced tax professional to guide you through complex tax regulations and keep you compliant.
E-Filing Your Income Tax Return
E-filing your Income Tax Return (ITR) online simplifies the procedure and assures that your submission is accurate and on time. Here’s the process for filing an income tax return online.
Log in: Visit the official Income Tax e-filing website and sign in to your account.
Start Filing: Access the section ‘File Income Tax Return’.
Select Details: Select the correct ‘Assessment Year’ and filing mode.
Choose Form: Select your filing status and the applicable ITR form.
Enter data: Fill out your income information and claim deductions.
Review and Confirm: Check pre-filled information, enter bank information, and confirm the summary.
E-Verify: Complete e-verifying your return with Aadhaar OTP, EVC, or Net Banking.
Additional Tips for Filing Tax Returns
Plan Your Tax-Saving Investments Early.
Begin your tax planning early in the financial year. This proactive approach promotes tax savings and long-term financial goals.
Handling ITR for previous years.
If you need to file ITRs for earlier years, use the ITR U form under certain conditions. It permits taxpayers to file returns for the previous two years beginning with the end of the relevant assessment year, subject to specific requirements and additional taxes.
Understanding Belated Returns and Penalties
A belated return is when you file your ITR beyond the due date. The evaluation year 2024-25 deadline is December 31, 2024. The penalties for late filing are:
Late filing fees under Section 234F are ₹5,000 if filed after the due date, but reduced to ₹1,000 if total income is less than ₹5 lakh.
Interest under Section 234A is 1% per month on the unpaid tax amount.
Ensure Accurate Reporting and Compliance
Accurate reporting and compliance with tax regulations are critical. Double-check all data to ensure that your reported income matches the information on Forms 26AS and AIS. To avoid penalties and scrutiny, swiftly address any irregularities.
Also Read: Form 10BA of Income Tax Act: Due Date, Applicability and more
Conclusion
Following the given income tax return filing tips will help you expedite your tax filing process and ensure that your tax returns are submitted smoothly and compliantly. Further, staying informed, and organised, and getting expert guidance will allow you to handle your tax returns better.
To maximise your tax savings, prepare a financial plan and update it as your pay changes. Make tax-saving investments early in the financial year to avoid hasty decisions at the end. Stay updated with tax filing strategies and consult with professionals to make the most of your tax planning and returns
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FAQs
What is the deadline for filing income tax returns?
Individuals have until July 31 to file their ITR, however, this might be extended to December 31 if they file late.
How can I check the status of my filed ITR?
Visit the Income Tax e-filing portal, log in, and look for the ‘Track Status’ option to verify your ITR status.
What are the penalties for late filing of ITR?
Penalties may include a late fee of up to ₹5,000 and interest on outstanding tax, based on delay and income level.