The income tax return (I-T) filing season is back. The last date for filing is July 31, 2023 unless extended. During this time of the year, individuals are scrambling to get their Form-16s, TDS certificates, investment certificates, bank account statements in order to properly fill the form and pay balance taxes or claim refund, if any.
The I-T Department (ITD) launched a new website in 2021 which after facing initial glitches has stabilised over the years and has made tax filing very easy as most of the information is pre-filled from your Form 16, 26 AS, and the newly launched AIS (Annual Information Statement). So, if you have all the information and time you can file return yourself without the help of any CA.
Correctly filing your income tax return is very important. Wrong filing can lead to notice from the ITD, delay in processing of refund, imposition of penalties and/or the requirement of filing a revised return. Let’s take a look at the things which we need to keep in mind while filing ITR.
Selection of correct form
There are various forms available from ITR-1 to ITR-4 for individuals, which one should you choose. One should carefully look at the description of each form before deciding which one to use.
Form types
Income Profile
ITR – 1: Individuals having income <= Rs 50 lakhs from salary, one house property and other sources
ITR – 2: 1) Income > Rs 50 lakhs, Capital Gains (incl crypto), more than 1 house property, foreign assets / income, 2) Directorships, 3) Holding unlisted equity shares
ITR – 3: 1) All ITR-2, 2) Partnership in a firm, 3) Income from business / profession (including crypto)
ITR – 4: 1) All ITR-1, 2) Taxes to be paid under presumptive income option
If your salary is > Rs 50 lakhs or have capital gains (from shares / property etc.), crypto/foreign assets, you cannot use ITR-1, you have to use ITR-2. If you are a Director in a company getting a salary, you have to use ITR-3. If you are a self-employed person and are using presumptive income sections then use ITR-4. If you have income in the form of profits from business/profession use ITR-3.
Quoting correct Assessment Year
Assessment Year (AY) and Financial Year (FY) are two different concepts. The income earned in the financial year 2022-23 (1 April 2022 to 31 Mar. 2023) is assessed for tax in assessment year 2023-24. So for this year you should use AY 2023-24.
Reconciling income and tax deducted with Form 26AS
Form 26AS is an annual consolidated statement which includes information on tax deducted on your income by various deductors during the year, like employer (on salary), banks (on interest), vendors on payments in case of professionals etc. You can view this statement while filing ITR on the new website.
Essentially, you should take all incomes shown in this statement into account while filing your ITR, cross check with pre-filled data. Also what we should remember is that Gross income from a deductor (before TDS) has to be included and not net income (after TDS).
Salaried persons should ensure that their total income and tax deducted by the employer in the Form 16 matches with the Form 26AS, if not you need to raise it with your HR/Finance department.
Filing schedule of capital gains
Retail investor’s participation in stock markets have grown exponentially post-Covid, with significant addition to Demat accounts. If you are salaried and trade in equities then you have to use ITR-2/3 to report capital gains as the case may be. In most cases, the capital gains / losses number should be prefilled in your form.
All Demat account service providers nowadays have a break up of capital gains made during the year (both long-term and short-term) and you can cross check from there before filing.
Long-term capital gains up to Rs 1 lakh is exempt, while short-term capital gain is not. So, if you don’t have any short term capital gain and your long term capital gain falls within the exempt bracket then you may continue to use the regular form which is applicable.
If you have sold property during the year, then also you could have reported capital gains and need to account for in the schedule.
Matching all information with AIS
All your income, salary, business/profession, interest from deposits, dividends, interest on savings account, capital gains (if any) are already pre-filled from your AIS.
If you are receiving rental income, then you need to key in the number. Normally, you should not report a lower income than pre-filled data, however if income is more than pre-filled data then you can change the same.
In AIS, there is also information on purchase and sales of stocks and securities during the year as well as fixed deposits placed in the year. If you have purchased stocks/bonds/ fixed deposits higher than your income during the year, it is a red flag, you are likely to get notice, and this means you could have under reported income, so be prepared with your answers.
The ITD could come around and ask how come your savings is more than 30 per cent of your income which is the normal savings rate of India. This is particularly important for professionals/self-employed people who need to be very careful while filing this. Concealment of income (including cash receipts) from now on is going to be very difficult.
Pre-validating bank accounts for refund
If you don’t have a pre-validated bank account you cannot receive refunds. Refunds are transferred electronically only to your bank account that is linked with your PAN, effective from 1 March 2019. Your bank account can be pre validated using a simple procedure at the e-filing portal.
Dispatching ITR V in time in case you don’t e-verify
After having successfully filed your ITR online, you need to verify it. The IT Department starts processing your return, once it is verified. Refunds, if any, are processed for returns that have been submitted and verified. You can e-verify either through net banking or Aadhaar OTP.
In case you don’t e-verify you need to submit/courier ITR in physical form to the central processing centre in Bengaluru. Sometimes people forget and then their submission online is not valid.
If you notice a mistake in your ITR, you can file a revised return by selecting the “Revised return under section 139(5)” option under the “Return Filing Section” tab.
To sum up, keep in mind these simple things and enjoy a stress free filing!
Amitabh Tiwari and K. Shankar are SEBI Registered Investment Advisors and co-founders of Finanza Personale.
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