Income Tax: A guide for salaried taxpayers to file returns for FY 2023-24

As the final date to submit the income tax return (ITR) for the financial year 2023-24 (assessment year 2024-25) without late fees approaches, salaried employees have started receiving Form 16 from their employers. ITR filing is a crucial financial task for all salaried employees. It involves reporting their annual income and paying taxes accordingly. Filing ITR not only ensures compliance with tax laws but also offers several benefits such as claiming tax refunds, carrying forward losses, and obtaining financial documentation for loans or visas.

Why should employees file ITR? 

As per Manikandan S, Tax Expert, Cleartax, it is mandatory for one to file income tax returns in India if he comes under any of the following conditions:

>> Individuals who fall within the respective tax slabs.

>> If it's a Company or Firm, irrespective of the profit or loss made in a financial year.

>> If a tax refund needs to be claimed.

>> If a loss under a head of income needs to be carried forward.

>> If one is applying for a loan or a visa.

>> If being a resident of India, one has an asset or financial interest in any entity located outside India & one is a signing authority in a foreign account.

>> If an NRI derives any or all of his/her income through sources in India, that income is liable to be taxable in India.

>> If one receives income derived from property held under a trust for charitable or religious purposes or a political party or a research association, news agency, educational or medical institution, trade union, a not-for-profit university or educational institution, a hospital, infrastructure debt fund, any authority, body or trust.

Here is a step-by-step guide through which employees can file their ITR: 

Step 1: Collect necessary documents:

>> Form 16 is issued by an employer, summarising the salary and tax deductions.

>> Form 26AS which is a consolidated tax statement that can be downloaded from the Income Tax Department's website, showing tax deducted and deposited.

>> Bank Statements to report interest income on one's savings.

>> Investment proofs for claiming deductions under Section 80C, 80D, etc.

>> Rent receipts if one is claiming House Rent Allowance (HRA).

Step 2: Choose the correct ITR Form: Employees typically need to file either ITR-1 or ITR-2.

Step 3: Log in to the income tax e-filing portal by using a PAN card.

Step 4: Download and fill out the appropriate ITR Form:

Step 5: Verify and calculate tax liability:

Step 6: Submit ITR:

Step 7: E-verify returns

Which ITR forms should be filed by salaried employees?

As per Gaurav Kumar, the Co-founder & CEO of Compliance Calendar LLP, salaried employees should file either ITR 1 or ITR 2 forms.

Kumar believes that ITR filing of salaried individuals requires an understanding of whether to file ITR Form 1 or ITR Form 2. 

As per Kumar, ITR-1 (Sahaj) is for individuals with income up to Rs 50 lakh from salary, one house property, other sources (interest, etc.), and agricultural income up to Rs 5,000.

Furthermore, he said that  ITR-2 is for individuals and Hindu Undivided Families (HUF) not having income from profits and gains of business or profession and it is suitable for employees with income above Rs 50 lakh, multiple house properties, or foreign income/assets.

Further ClearTax explains Form 16 is a salary tax deducted at source (TDS) certificate an employee receives from the employer. Form 16 provides the details of gross salary and exemptions such as HRA and LTA. The form also contains the details of the net taxable salary, any other income/loss reported by the employee, tax saving deductions, and salary TDS.

Similarly, Form 26AS contains details of tax deducted at source or TDS on various incomes such as salary, interest, and the sale of immovable property. The form also contains details of self-assessment tax, advance tax paid by a taxpayer, and specified financial transactions.

What should salaried employees keep in mind while filing ITR?

As per experts following should be kept in mind: 

>> All personal and income details should be accurate to avoid ITR discrepancies.

>> Choose the correct ITR form 1 or 2 based on income sources and amount.

>> Claim all eligible deductions under IT sections like 80C, 80D, 80E, etc.

>> Verify that the TDS details in Form 16 match those in Form 26AS correctly.

>> Provide correct bank account details for refund processing while filing ITR.

>> Keep all supporting documents handy for the tax authorities in case of verification.

>> File your ITR before the due date (July 31 for salaried employees) to avoid penalties.

>> Complete the e-verification process to ensure your ITR is successfully processed on time.

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