The due date for filing Income Tax Return (ITR) for the financial year 2022-23 is July 31, 2023. It’s important to file an error-free ITR to avoid receiving notice for the Income Tax Department and also to get a quick refund.

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As the rush for filing ITR is expected to increase in the last week of July, it is important to keep your documents ready and be prepared with all details pertaining to your earnings, investments and tax liabilities.  

Here's everything you need to know to avoid penalties and file an error-free ITR:

Selecting the right ITR form

Selecting the correct ITR form based on your income and residential status is crucial to avoid filing defective returns. Each individual's tax scenario varies, and selecting the right form is the first step in error-free ITR filing.

Each individual's taxation is unique, and choosing the suitable form is the preliminary step towards an error-free ITR filing.

Salaried Individuals: Salaried individuals typically file their returns using ITR-1, which is meant for those with an annual income of up to Rs 50 lakh.

Retirees: If their income is solely from pension and interest, retired persons can use ITR-1. If they have income from capital gains or housing property, they should use ITR-2.

Freelancer Professionals: Freelancers with an annual income less than Rs 50 lakh commonly use ITR-3. Those with a higher income or a business typically use ITR-4 under the presumptive income scheme.

Businessmen: Businesspersons with a turnover exceeding Rs 2 crore, and those not eligible under the presumptive taxation scheme, must file ITR-3. Small business owners with a turnover of less than Rs 2 crore, under the presumptive taxation scheme, instead need to file ITR-4.

Indispensable documentation

Reliable documentation serves as the cornerstone of a valid ITR submission. This encompasses personal particulars, evidence of investments, Form 16, Form 26AS, PAN, Aadhaar, and the Annual Information Statement (AIS). Neglecting to supply precise information can engender discrepancies, culminating in a delay in the return processing4.

Effortless E-verification and prompt filing

E-verification offers the most straightforward method of authenticating your tax return. Upon wrapping up the ITR filing, you must carry out the verification within a 30-day span to sidestep penalties. Punctual filing is also instrumental in preventing penalties that can fluctuate between Rs 1,000 and Rs 5,000, contingent on your income level.

It's incumbent upon taxpayers to record all sources of income with accuracy, taking into account dividend income, capital gains, and foreign assets. Additionally, a cross-verification with Form 26AS and the Annual Information Statement (AIS) is crucial to collate information on all your income sources. Tax pundits underscore the significance of precise personal data, applicable deductions, confirmed bank details, thorough TDS cross-verification, meticulous record-keeping, and on-time filing to ensure a valid submission.

Optimising your tax refund

Exercising strategic deductions can secure the refund on any surplus tax paid. Eligible deductions encompass PF, PPF, NSC, NPS, insurance premiums, and home loan interest. It is also vital to capitalise on exemptions such as HRA, LTA, conveyance, medical expenses, and gratuity. The key lies in verifying tax credits, asserting all applicable deductions, and verifying bank account particulars for an unimpeded refund receipt.