Filing income tax return can be a complex process if you do not understand the process and applicable tax laws. Therefore before filing your ITR, you need to make sure that all the documents are collected, relevant information is obtained and you know exactly how to process the ITR form.
In this article we have listed 8 most important things that every taxpayer should remember before filing their annual return of income.
Know the right Income Tax Return form
Each year the government issues tax return or ITR forms for taxpayers to file their annual return of income. These forms are to be used for filing based on assessee’s source of income. The basic ITR form that most salaried individual uses to file their return of income is ITR-1.
However ITR-1 is also not applicable to certain class of salaried individual. For instance, if you are a director of a company, then ITR-1 is not applicable to you even though your income is from salary.
Similarly we have a separate form for an individual who has income from profits and gains from business or profession in addition to salary.
Government has also issued different form for partnership firms, private and public limited companies.
If you do not choose the right ITR form for your income tax filing, then the return may get rejected. In case of rejection, your IT return will be considered as invalid, this means it will be treated as if it’s not filed. Therefore, it’s important to decide which ITR form is applicable to you before preparing for return filing.
Compute taxable income before filing tax return
Salaried individuals think that they are not required to calculate their total taxable income as employer has already calculated for them and issued form 16 for it. This is one of the biggest mistakes most of the salaried individuals do every year.
To cross check the accuracy of your employer’s calculation, we suggest you to recalculate your tax liability. Here are a few reasons for which we suggest you to recalculate your total taxable income including salary;
Interest on bank deposits or other Income not disclosed to employer
Total interest on bank deposits and saving accounts can be known to you at the end of the year. For calculating tax liability you have to take interest for the whole previous year.
Instead of calculating on your own, you can ask for an interest certificate to your bank to know exactly how much you have incurred from different deposits for the whole year.
Your employer might not have considered the whole amount as your income while calculating TDS on salary. Therefore, it’s your responsibility to calculate your interest income and include it in your ITR.
Miss calculation
Your employer might have miss calculated your tax liability. Due to miss calculation your employer might have deducted more tax compared to actual liability.
Two or more employer during the year
If you have switched jobs or worked for more than one employer but not disclosed previous employer’s salary to present employer, then TDS amount deducted out of your salary would not be sufficient to settle with your actual tax liability. In this type of case, the only option you have is to include it in salary income and pay balance self assessment tax. To find out net tax liability, you need to recalculate your tax liability by including previous employer’s salary in your ITR.
There can be other mistakes your employer might have done. In order to identify and to file a correct return of income, it’s always advised to recalculate your income at the year end after getting form 16 and before filing ITR.
Know your eligibility for tax deductions under chapter VI-A
Government has allowed tax deductions under Chapter VI-A to an individual based on the investments he made or amount spent. For instance, section 80C lists down a number of investments and expenses on which an individual can claim a tax deduction of up to Rs 1, 50,000 per year. Similarly you have other sections like section 80D for medical insurance premium and section 80CCD (1B) for national pension scheme (NPS) to claim tax deductions.
A salaried individual can claim these deductions by submitting tax proof to employer. You employer might not have taken certain deductions or exemptions into account due to non-submission of proof or delay in submission or for some other reason. If it’s not taken into calculation by employer, then you can include it in ITR to get a refund for the excess tax deducted by the employer
If you have incurred interest from your savings account on which TDS has been deducted by bank and it’s not included by your employer in your tax calculation, then you can claim a tax deduction under section 80TTA and take the interest income under the head “income from other sources” to your tax calculation.
Know TDS deducted out of your income
Before calculating your net tax liability to be paid, you must take into account the tax amount that has been deducted by your employer and other payers. This means from total tax liability you need to deduct the TDS amount before arriving at the final tax liability.
To know exactly how much tax has been deducted, you can check your salary slip, form 16, 16A and 26AS. Your form 26AS will list down all the tax credits that you have received from different parties.
You need to check Form 26AS to know whether the entire TDS amount that has been deducted from your income has been deposited to your permanent account number. In case it’s not done, then take up the matter with the deductor. You should check form 26AS after May 30 of the assessment year relevant to the previous year.
If TDS details entered by you do not match with form 26AS, then return filed can be considered as incorrect. Due to which assessing officer may send your form back for correction.
In case tax has been deducted but not deposited in your permanent account number, then take up the matter to the deductor. If your deductor is not listening then you can write to the income tax officer.
Submit tax proof to employer before the time allowed
It’s important to submit all the necessary documents with your employer to avail deductions and exemptions based on your eligibility. For instance to claim house rent allowance exemption, you need to submit rent receipts, agreement copies and PAN of the house owner to your employer.
Similarly, in case of life insurance policies, home loan repayments and health insurance, you are required to submit tax proof to your employer in order to claim deductions. If due to some reason, you are unable to produce it to your employer, then your employer might have deducted tax without considering applicable deductions for you. Therefore, we suggest you to keep all these documents ready before your employer ask for it and submit with all the details to claim full tax deduction and exemption.
Many salaried individuals think that tax proofs are to be submitted to IT department not to the employer. IT department has asked employer to collect these documents and calculate tax liability based on the deductions and exemptions allowed to employee. Therefore, instead of submitting it to the IT department, you need to submit it to the employer. However, if its asked by the IT department during scrutiny, you are required to submit it to the assessing officer.
For non submission of documents to your employer on or before time, you will not get the full deduction and exemption benefit resulting in a higher deduction of TDS on salary. These deductions and exemptions will also not reflect in form 16. In this type of cases you need to recalculate your tax liability by taking all eligible deductions and exemptions before filing IT return.
Know your Login ID and password
You must know your income tax login User ID and password. Many taxpayers are dependent on professionals for filing their ITR. While it’s a good idea to take the help of a professional for filing ITR, but it’s also important to keep all the relevant information and details with you in case of urgency instead of totally being dependent on professionals.
In case of User ID and password, we suggest you to have it with you and let your professional know it while filing your IT return.
We also suggest you to update your own email ID and mobile number with IT department to get access to your account in case you have forgotten your password. Updating email ID and mobile number with IT department helps you to get all the important information and updates from government which includes confirmation on filing of return, e-verification confirmation, etc.
Pay self assessment tax before filing Tax Return
After calculating your total income and tax liability, if you are liable to pay tax to the government, then you must pay it and fill up the payment details in ITR before filing your return of income.
Many salaried individuals fill up wrong payment details in ITR to file their return of income or they pay it after filing the return. In such a case, your ITR may get rejected or you may receive demand notice from department asking you to pay the amount along with interest and penalty.
You need to find out your net tax liability after deducting all TDS deducted from your account, tax paid by you and TDS on interest on bank deposits or savings account from your actual total tax liability. If after deducting you are required to pay taxes to the government, then you need to pay it first and then fill up bank BSR code, Date of payment, challan number and amount paid in your self assessment tax paid section before filing the return. You need to make sure that while filing, your income tax liability is zero or you have refund from IT department because of excess TDS deduction.
If your total tax liability is more than Rs 10,000, then you are liable to pay advance tax in installments during the financial year. Advance tax provisions apply to certain types of taxpayers including salaried individuals, freelancers and self employed persons.
Know tax return filing due date to avoid last minute rush
Last date of filing ITR is 31st July of the assessment year relevant to the previous year for which you are filing your return of income. For the financial year 2018-19, last date of tax return filing for salaried individual is 31st July 2019. Now it has been extended to 31st august 2019 by CBDT. Therefore, the last date of filing will be considered as 31st August 2019.
For the financial year 2019-20, last date of tax return filing will be 31st July 2020. As it’s known to you well before time, you need not wait till the last date to file your return. You can plan it to file your ITR before time to avoid a last minute rush. Last minute filing or not knowing the last date of filing can create following problems;
- Filing wrong ITR form with IT department.
- Filing incorrect details in the ITR.
- Unnecessary revision for wrong information in ITR may lead to scrutiny by IT department.
- Might be required to pay late filing fee for missing the deadline
- Interest and penalty may be levied by IT department for non payment or lower tax payment.
In order to avoid a last minute rush, we suggest you to plan before to finish up your filing before time instead of waiting for the last date.
Now you know 8 most important things that a salaried person should know before filing his income tax return. We will be updating this article based on changes to tax laws. If you have any questions, then use our comment section below.
