ALL YOU NEED TO KNOW BEFORE FILING INCOME TAX RETURNS
Every year, by the 31st of July, we see taxpayers running from pillar to post in order to file their tax returns and often get caught in the complex web of tax laws which are meant in order to help the taxpayers. To make things simpler, we will run a series on how to file your Income Tax returns, fast & easy, with an aim to help you file your tax returns without any hassle.
Before we start, I believe you know that the last day to file your tax returns for the last financial year has been extended to 31st August, unlike 31st July every year, but I would strongly suggest you file your tax returns at the earliest, and not wait for the last day to start collating all the details.
Let us understand few important parameters and address a few questions before you go about filing your tax returns:-
1. What is the meaning of filing tax returns?
A. Return of Income i.e. Tax Filing is a process, wherein a person reports/declares to the government about all their income and taxes as paid by them. It is like an NOC from your college library, which you have to take before leaving your college even though you had never visited the library. It establishes the fact that you do not have outstanding obligation, or if at all there were any dues, they had been cleared.
2. Who needs to file Income tax Return?
A. A person is required to file his or her “Return of Income”, if their taxable income exceeds INR 2.50 lakhs in a particular financial year; so, anyone earning more than basic exemption limit needs to file his or her tax return by the due date as prescribed by the government.
3. I have a permanent account number (PAN). Do I still need to file IT Return?
A. Just having a PAN number does not mean that you need not file your tax return. As mentioned above, you are required to file a “Return of Income”, if your taxable income exceeds INR 2.50 lakhs in a particular financial year. However, you need to have a PAN in order to file tax returns. It’s like how having a driving license does not mean that you have to compulsory drive but if you want to drive then you must have a driving license.
4. What are the benefits of filling income tax returns (ITR)?
A. Filing returns or not has never been a choice, as it is a legal obligation and must be fulfilled by everyone who falls under the prescribed category as mentioned above. Though apart from a legal obligation, filing tax return is always helpful in the following situations:-
For availing loan facility like home, or personal.
For visa and immigration processing
You can use it as an income proof/ Net worth certificate
For claiming excess tax paid via refund
Applying for a higher insurance cover
And last and most important is your peace of mind!
5. My tax is already deducted at source by my employer and paid to the government, then why do I need to file income tax return?
A. Although tax has been deducted and there is no further liability to pay tax, you have to compulsorily file your income tax return if your income exceeds the basic exemption limit.
6. I have not been able to submit my Investment details for e.g. life insurance premium etc. to my employer and excess tax has been deducted. So can I still declare & claim the benefit?
A. Yes, you can claim these benefits while filing Income Tax returns and can submit your refund claim.
7. What are the different sources of Income?
A. Before you start your tax filing, you need to first determine sources of your total income. Does your income comprise of only salary and interest on savings bank account or you also earn rental income, capital gains or income from any other source?
Let’s see different heads and “Sources of Income” as per Income Tax Act as follows:-
Rental income from House Property
Profit & gains from Business or Profession
Capital gains on sale of shares or mutual funds or capital assets
Other sources like bank interests etc.
So, you need to add income under each “Head” and then compute your taxes. Don’t forget to include income received by your minor kid. A minor is not required to file a separate return of income but income arising on account of let’s say interest on Fixed Deposits in the name of your minor kid needs to be clubbed in parents’ income.
8. What are the documents required before filing income tax return?
Form No.16: Issued by your employer summarizing your income from salary and tax deducted at source.
Form no 16A: Issued by all the payers who have deducted tax while making payment to you during the year. For example Banks where you have FDs.
A/C statements: All your operating accounts during the year for arriving at interest income earned during the year.
Property details: If you have bought any property or put up existing property on rent then details for the rent received and receipts of municipal taxes paid during the year would be required. If the same is purchased through a loan then copy of loan certificates for interest & principal.
Contract Notes: For sale & purchase of shares during the year for calculating capital gains.
Tax Challans: Details of tax payments made during the year in case you have made advance tax or self-assessment payments.
Others: Any other documents for a financial transaction involving tax implications for computing your taxes.
Important Point: You don’t need to submit any of these copies to the I-T department during the process of filing income tax returns, and even originals are also not required to be given to your CA, if you are taking professional help. These documents are required to help you prepare your tax computation and you do need to keep these copies ready in your file/records in case if IT department asks you to furnish the same at a later stage.
I hope, the above information will help you in setting your tax figures right. Next, I will share a detailed article on how to file income tax returns and the latest changes in the tax forms/rules and processes. Happy filing.
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