If you are a salaried individual, Form 16 is the most important document for filing your tax returns. It has details of PAN, TAN, address, salary earned and tax deducted
The tax return filing season has begun and with it surface questions and doubts that taxpayers usually have. There are a few essential things that tax filers must bear in mind about the return filing process. With these tips, you should be off to a flying start with your tax filing.
1. Select the right form
Selecting the correct ITR form applicable to you is the first important step. There are two important criteria for selecting the right form - one is the nature of income earned by you and the other is the total income threshold. The good news is that if you are filing your returns through a tax filing platforms, they automatically choose the appropriate return form based on the income details provided by you.
However, let’s understand how these forms vary - those who have salary income and own one house property they must file ITR-1. If they have capital gains or have total income in excess of Rs 50 lakh, they must file ITR-2.
ITR-3 can be filed by almost everyone as it covers all heads of income and situations, but it is mostly applicable to those who have earned income from a business or by pursuing a profession.
ITR-4 applies to those who have income from presumptive taxation, i.e. their income from business or profession is calculated on a fixed rate basis. Income is 6% of turnover for e-receipts for a business, 8% of turnover for other businesses, and 50% of receipts for professionals. Even though presumptive taxation can be opted for by those with turnover within Rs 2 crores (for businesses) and Rs 50 lakh (for professions), ITR-4 can only be filed by those with total income upto Rs 50 lakh.
Others, businesses with total income between Rs 50 lakh to Rs 2 crores, who have opted for presumptive taxation will now have to file ITR-3.
Another important thing to keep in mind is that ITR-1 cannot be filed by a taxpayer who is a Director in a company or who has held investments in unlisted equity shares at any time during the financial year. Such taxpayers will have to use ITR-2 or ITR-3 form for FY19.
2. Report all the income earned during the year including foreign income
You must disclose all the income earned during the financial year 2018-19, even if you have an exempt income. Interest income from bank savings account, family pension, capital gains, etc. make sure you have every income listed down for inclusion. Wherever TDS has been deducted, you may be able to locate details from your Form 26AS.
Also, if you have any foreign income from foreign assets such as a bank account, a retirement account, shareholding, or any other asset owned, it will also have to be disclosed in the ITR forms.
3. Make sure you have Form 16 and Form 26AS
Form 16 has the details of TDS deducted by the employer from salary paid to you. If you are salaried, Form 16 is the most important document for filing your tax returns. It has details of PAN, TAN, address, salary earned and tax deducted, which is required to be reported in your ITR. Starting this year, Form 16 format has been revised and made in sync with fields required in ITR. Some tax filing portals allow uploading of Form 16 and then they automatically populate your ITR, filing then becomes a breeze.
If you have worked with more than one employer in the past, income from the previous employer will also have to be reported in the ITR forms. Make sure that you have a Form 16 from your previous employer and include this income while filing tax returns.
Form 26AS is the consolidated statement that reflects TDS deducted on any type of income you have earned, it includes TDS on salary, TDS on interest income from deposits, TDS deducted by buyer in case you have sold a property etc. This is a very important document as the tax department will only allow TDS to be adjusted against tax due, if it appears in your Form 26AS. Do review this form, it can be downloaded from the income tax department website.
4. Keep all tax deduction proofs
Make sure you put together a proper file to keep all payment receipts and proofs of tax saving investments made, deductions claimed, rent paid and any other tax benefit claimed by you. If there is a discrepancy in your ITR, you may be requested to provide proofs by the tax department.
5. Disclose correct personal details in ITR
Ensure that the personal details such as name, aadhaar number, phone number, date of birth, address, email id, etc. entered in the ITR form are correct.
Further, if you are claiming a refund, make sure that the bank details provided are accurate so that you receive your refund smoothly. Also, you have to report all bank account details held by you except dormant accounts (accounts which are inactive for the past three years).(The author is Founder & Chief Executive Officer of ClearTax.)Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.