10 things to keep in mind while filing income tax returns
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10 Things to Keep in Mind While Filing Income Tax Returns for the First Time in India

Wed May 03 2023

Filing income tax returns can be daunting, especially in India, where the tax system is complex and ever-evolving. Whether you are a salaried employee, a freelancer, or a business owner, filing income tax returns accurately and timely is crucial to avoid penalties and maintain a good tax record. However, with the numerous forms, deductions, exemptions, and deadlines, it is easy to confuse and make errors.

To make your first-time income tax return filing experience smoother and hassle-free, we have compiled a list of ten essential things to remember. These guidelines cover everything from calculating taxable income, choosing the correct form, claiming deductions, and verifying returns, to name a few.

So, without further ado, let's dive into the ten things you should remember while filing income tax returns in India.

1. Selecting the correct ITR Form

The first step in filing your taxes correctly is choosing the correct ITR form that best fits your income pursuit. Here is a brief outline of the different form types to choose according to your annual income and the source of that income:

  • ITR Form 1: This form should only be used by individuals with an annual income of Rs. 50 lakhs received from their salary, interest from a savings account, income earned from renting out a property, and so on.
  • ITR Form 2: This form is to be used by HUFs or individuals not involved in a profession or business under any proprietorship.
  • ITR Form 3: This is for HUFs and individuals who receive a source of income from a profession or business under a proprietorship
  • ITR Form 4: This form should be used by individuals with presumptive income from their profession with a total annual income of up to Rs. 50 lakhs.
2. Identify your relevant income slab

Another crucial step in filing income tax correctly involves -identifying the category of your income slab. The income slab applicable to you for an assessment year will further determine your tax liability. Now, whether the income tax slab rate will change or remain the same is decided every year in the budget session.

3. Choosing the ideal tax regime

A new tax regime has been introduced for taxpayers in the budget of 2022-23, which is instead of upcoming prescribed deductions and exemptions. Taxpayers now have the option to choose the best tax regime suitable according to their income. Salaried taxpayers can also change the tax regime they want to opt for, despite giving their employer a declaration before filing their ITR.

4. Keep all your proof handy

It is essential to keep all your documents handy while you sit down to file your income tax. Here are some of the details that you must keep with you for efficient results:

  • Specified details of all your Indian Bank accounts
  • Specified details of all your unlisted equity shares
  • Schedule Assets and Liabilities: keep documents of specified assets, including -properties that you own, any movable assets, and financial assets such as - shares & securities, bank deposits, cash in hand, and more.
  • Schedule Foreign Assets: As per the specified guidelines of disclosure, an Indian Resident individual is required to furnish the details of their properties held outside of India (either as a beneficiary or owner)
5. Include all of your income sources

When we talk about income tax filing and refer to the term "income" here, it doesn't necessarily refer to the organization where you are employed. Returns earned from investments, savings, rent, freelancing, etc., are a part of your income source, irrespective of whether these earnings are exempted from taxation. Therefore, you need to take into account your income source. Also, when filing the ITR, calculate the total of your income source as GTI (Gross Total Income).

6. Use insurance plans to save tax

Health insurance plans are the best way to save taxes. How? According to the guidelines of Section 80C, the premium you pay every year for Health Insurance or ELSS, you are eligible for tax benefits of up to Rs. 1.5 lakhs.

You can refer to our blogs for more detailed information on how investing in tax-saving mutual funds and health insurance plans can help you save taxes.

7. Cross Verify prepaid taxes using 26AS

As a taxpayer, to avoid any discrepancies in disclosing your income or incorrect filing of taxes, cross-verify all the prepaid taxes imposed on your transactions, including the tax deducted at source (TDS). By downloading Form 26AS, you can avoid errors in self-assessment or advance taxes.

8. Change of employment during the year

In case of employment change within the financial year, the taxpayer must furnish the requisite salary and income details earned from the previous job. Once you have provided these details to your current employer, the current employer can issue a consolidated Form 12BA and Form 16, which will further be used in filing ITR.

Suppose you fail to comply with the respective details. In that case, it may result in falling short of TDS owing to duplication of deductions, exemptions, slab benefits, and other such facilities offered by your employer. In this scenario, additional taxes due on the return, added with interest, must be paid before filing your taxes.

9. Payment of balance tax

Once you have determined your GTI and included the deductions and exemptions, you can calculate your Net Taxable Income (NTI). Any tax return on claiming the credits from prepaid taxes must be paid, including if any interests are imposed before the filing of ITR. Make sure to pay the balance tax by 31st July if the self-assessment value increases by Rs. 1 lakh.

10. Reporting Exemption Income

Taxpayers also need to report any exempt income under Section 'Schedule EI,' which includes revenue from agriculture, exemption of taxes on a minor child, and the payment, which is not tax imposed according to the Agreement of Double Taxation Avoidance.

Final Thoughts

Remember to calculate your taxable income correctly, choose the suitable form, claim deductions, and verify your returns before submission. With these guidelines, you can file your returns with ease and confidence.

TaxNodes is committed to providing our readers with the most reliable and up-to-date information on various finance topics, including taxes. We understand that taxes can be complicated, so we offer expert advice and guidance to help you easily navigate the process. For more information on finances and how to correctly file your taxes, visit TaxNodes today.

Rhea Tripathy

byRhea Tripathy

Meet Rhea Tripathy, a word wizard with a pen in one hand and a paintbrush in the other. By day, she slays as a content writer and by night, she indulges in her artistic passion. With a keen eye for the markets and a knack for literature, this certified trader brings her sharp mind and creative flair to everything she does. When she's not crafting clever content, you'll find her analyzing the latest market trends or getting lost in a good book.

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