10 Things You Need to Know Before You File Your ITR

Filing ITR is a fiscal responsibility, needing precision, obedience to law as far as taxation is concerned, and an understanding of relief from taxation. Being aware of the process keeps you away from penalty but opens avenues for maximum tax-assistance. Below are 10 significant points before you arrange for filing of ITR in India.

Deciding the Correct Form of ITR

Choosing the right form is crucial to avoid rejection. The available forms for individuals are:

• ITR-1: For salaried residents with income up to ₹50 lakh.
• ITR-2: For those with capital gains, multiple house properties, or foreign income.
• ITR-3: For professionals and businesspersons.
• ITR-4: For those under the presumptive taxation regime (income up to ₹50 lakh).

Check Your Form 26AS and AIS

Your tax passbook, Form 26AS, displays TDS payment, advance tax payment, and self-assessment tax payment. The Annual Information Statement (AIS) also displays information of financial transactions against your PAN.

Why Check Form 26AS and AIS?

• Verifies that all TDS credits are accurately reported.
• Avoids discrepancies between your books and tax department records.
• Assists in authentication of high-value transactions.
• Identifies any disparity that may lead to questioning..

Link Aadhaar with PAN

Aadhaar linking with PAN is compulsory for ITR filing. Aadhaar not linked with PAN makes PAN inoperative, causing problems while filing the tax returns and claiming refunds and inviting penalty and higher TDS.

How to Link Aadhaar with PAN?

• Go to the Income Tax e-filing portal.
• Click on 'Link Aadhaar' and provide details. Your details on Aadhaar and PAN card such as name, date of birth and father’s name etc. must be an exact match.
• Verify through OTP.
• Make sure it is linked before the due date to escape penalty.

Know Your Sources of Income

• Except salary, report the following income separately:
• House Property: Rent income, notional rent for vacant property.
• Capital Gains: Gain on sale of shares, property, or mutual funds.
• Interest Income: Fixed deposit, savings account, bonds.
• Freelancing or Business Income: Income from self-employment work.
• Agricultural Income: If applicable, report separately.

Claim Eligible Deductions & Exemptions

Make use of tax-saving opportunities under Section 10, 80C, 80D, 24(b), and other sections to minimize taxable income.

Common Deductions Under the Income Tax Act

Utilize deductions under:

• Section 80C: ₹1.5 lakh for PPF, EPF, ELSS, life insurance.
• Section 80D: Health insurance premium.
• Section 24(b): ₹2 lakh home loan interest.
• Section 80E: Education loan interest.
• HRA & LTA: Rent and leave travel allowance.

Select Between Old and New Tax Regime

From FY 2020-21, taxpayers can opt between:

• Old Tax Regime: Higher tax rates but offers deductions/exemptions.
• New Tax Regime: Lower tax rates without any deductions.

Consider which regime is advantageous in accordance with your income and investment pattern. Utilize online tax calculators to compare regimes before filing.

Report Foreign Assets and Income

Resident taxpayers are required to report foreign bank accounts, investments, and income in their ITR. Failure to report invites harsh penalties under the Black Money Act.

Penalties for Not Reporting Foreign Assets:

• Tax department scrutiny.
• Risk of disqualification of tax benefits.

Avoid Mistakes and Mismatches

Maintain consistency in:

• PAN details
• Refund bank account numbers
• Income declaration consistency with AIS/Form 26AS
• Name and identity information consistent with Aadhaar records

Common mistakes are incorrect claims of deductions, no credit of TDS, or incorrect bank details, all of which result in delay of refunds.

File Your ITR on Time

Key ITR Filing Dates:

• Individuals (Non-Audit Cases): 31st July of the year of assessment.
• Businesses to be audited: 31st October.
• Belated Return: 31st December (Late fee payable).

Late filing incurs penalties up to ₹5,000 and forfeiture of carry-forward losses.

Check Your ITR After Filing

Filing is incomplete without confirmation. Confirm within 30 days through:

• Aadhaar OTP.
• Net banking.
• Sending signed ITR-V .

Not confirming in time results in invalidity of return, necessitating fresh filing.

Filing ITR in the correct order is tax compliance and achieving maximum tax savings. Keep yourself updated on tax legislations, verify your income data, and file within the prescribed time to save penalties.

To start filing your ITR, visit the official portal: Income Tax e-filing portal.

FAQs on Filing ITR

1. What if I do not submit the ITR within the time limit?

You can submit a return with penalty, but relief such as set-off of loss cannot be claimed.

2. Can I make corrections in my ITR after submitting it?

Yes, revised returns can be submitted by 31st December of the year of making the assessment.

3. Is submission of ITR compulsory if I have nil tax liability?

If you have income exceeding ₹2.5 lakh (regular exemption), you are required to file. It also facilitates visa sanction and loan disbursement.

4. Can I file ITR for earlier years?

You may file a delayed return for the earlier year till 31st December of the following immediate year, but at a penalty.