Experts tips! Filing Income Tax Return (ITR) for the first time? Here's what you must know
Income Tax Return (ITR) is needed to be filed by every person who is earning and falls under taxable income bracket.
The due date for filing Income Tax Return (ITR) for assessment year 2019-20 is July 31, 2019. ITR is needed to be filed by every person who is earning and falls under taxable income bracket. Currently, the income tax brackets (slabs) are divided in this manner - Rs 2.5 lakh, over Rs 2.5 lakh to Rs 5 lakh, over Rs 5 lakh to Rs 10 lakh and above. Filing ITR is compulsory for those who earn above Rs 2.5 lakh, as below this income bracket there are no taxes levied. However, for every first time earner the ITR filing would definitely feel like a critical process to do. That is because, being a fresher you start understanding what are gross monthly income,incentives, reimbursements, HRAs, allowances, Form 16, TDS and much more. While these already sounds so complicated and can be time consuming, it is quite understandable for confusions arising in regards to ITR filing as well.
Archit Gupta, Founder & CEO at ClearTax said, "People who have just come out of college and started earning their first salary will find it challenging to file their income tax returns. These first time earners may find the tax filing process tedious and confusing. One may be confused with the words PAN (Permanent Account Number), TDS (Tax Deducted at Source), tax saving, tax investments and so on. Also, they may not be aware of the benefits of tax filing and implications of non-filing."
One needs to understand the importance and obligations associated with tax filing and the essential requirements for a tax filing. Hence, let's have an quick review ITR filing basics, as per Gupta.
What is income-tax?
Income-tax is a calculated amount you need to pay on your total taxable income for a financial year.
Do you have taxable income?
First-time earners/taxpayers may be confused in identifying and aggregating their income for tax purposes. Your income will consist of income from your employment i.e., salary, other sources such as interest on savings bank accounts and fixed deposits, rental income from any property owned by you, capital gains on the sale of assets/investments and income from business or profession. The aggregate of these incomes is called gross total income. If your gross total income exceeds Rs 2.5 Lakh in the financial year 2018-19, you are required to file your income tax returns.
From the gross total income aggregated above, you are entitled to claim deductions towards your investments such as provident fund contribution, life insurance premiums, repayment of home loan and payment of tuition fees for children. The balance amount would be your taxable income for the purpose of computation of your taxes.
What is the taxable period?
Income is aggregated for the taxable period. Your taxable period would be the financial year beginning April 1 to March 31 of next year e.g., 1 April 2018 to 31 March 2019. You have to aggregate and calculate your income as mentioned above for the taxable period. The assessment year is the year in which such income is assessed, the assessment year (AY) for FY 2018-19 is 2019-20.
Is it important to file returns?
You have to mandatorily file an income tax return in case your income crosses the basic exemption limit as discussed above.
However, in certain cases e.g., when you have income below threshold limit but have to claim TDS credits or declaring tax-exempt income, you would need to file an income tax return.
Additionally, filing an income tax return would also serve as a document proof while applying for a home loan, visa processing to travel abroad and obtaining a vehicle loan.
How do you file your income tax returns?
The first step is to obtain your PAN. You can apply for a PAN in form 49-A either online or offline. PAN is a unique 10 letter alpha-numeric number. It is mandatory to have a PAN to file income tax returns.
You can file income tax returns through the e-filing website https://www.incometaxindiaefiling.gov.in. or any of the online e-filing websites.
Which ITR form should you choose?
You can file an income tax return using the ITR form applicable to you. For the AY 2019-20, you can use ITR-1 in case you have income up to Rs 50 Lakhs. The form ITR-1 is basically applicable to resident individual taxpayers having income from salary, one house property and other sources. In case you are ineligible to file ITR-1, you can file ITR-2. The other ITR forms prescribed are ITR-3 and ITR-4 in case you have income from business or profession.
Investment deductions and claim for TDS
You can fill in the details of your income in your ITR form.
As mentioned above, a taxpayer can claim deductions for certain eligible investments. You should also claim deduction/credit for TDS on your salary, interest income etc. TDS is the tax your employer deducts on your salary or banker deducts on your interest income. You can claim credit for the TDS while filing your income tax return.
When is the last date for filing taxes?
Last but not least, it is important to file your income tax return before the due date. The due date for AY 2019-20 is 31 July 2019. In case you miss the deadline, you can file your returns after paying a late filing fee which is Rs 5,000, if the return is filed after 31st December, late fee is Rs 10,000. However, it is restricted to Rs 1,000 for those with total income of Rs 5L.
The above process is time-consuming and tedious. There are a few online portals that help you in filling up your tax returns, offering easy to use and easy to navigate features. Lastly, do not forget to verify/e-verify your income tax return uploaded for a successful e-filing.
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