ITR Filing: Last date is fast approaching! Important things to keep in mind while filing Income Tax returns

The income tax return (ITR) filing due date for individuals is here, and those who have not filed their returns yet, should not wait till the last day. Also, return filing after the due date attracts a penalty of up to Rs.5000. There are other drawbacks like many losses get disallowed for set-off and carry forward if you file the return after the due date. 

One should keep in mind several things before you file your return so that you do not miss anything. This is because taxpayers won't have sufficient time to revise the return before the due date in case of any error. Archit Gupta, Founder and CEO – Clear, shares his knowledge on the checklist points one should tick to avoid any last-minute goof-up:-

1. Choose the correct ITR form: "There are different ITR forms for different categories of income. It is essential to select the right ITR form type according to the income earned by the taxpayers. For instance, ITR-1 is applicable for individuals with salary income, house property income (one house only) and income from other sources, with total income less than Rs.50 lakhs. Also, one cannot file ITR-1 if they have capital gains income. Likewise, many other conditions are applicable which should be considered for choosing the correct ITR. Not selecting the proper ITR form may be regarded as 'defective return' filing, so one has to be careful," says Archit Gupta.

2. Choosing appropriate tax regime: Gupta adds, "Finance Act, 2020 introduced a new tax regime that gives an option to pay taxes at concessional rates. However, the taxpayers will have to forgo major tax deductions and exemptions if they choose the new tax regime. Hence, the regime's choice must be evaluated as the best fit would be different from one individual to another. All ITR forms seek a declaration if the taxpayers want to pay taxes according to the new tax regime."

3. Disclosure of bank account details: "The ITR filing portal now requires the disclosure of all bank accounts held by the taxpayer. A taxpayer has to mention the details of all types of accounts like current account, savings account (single and jointly owned), all foreign accounts, Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts, accounts held with co-operative banks, etc. However, dormant account details need not be mentioned. To add these accounts, information like the account number, bank name, IFSC code will be required. Also, taxpayers will have to choose one of these accounts for a tax refund. For this, make sure that the account details are pre-validated for smooth processing of income tax refund," as per Gupta. 

4. Dividend income reporting: "The dividend received from an Indian company was exempt until 31 March 2020. However, the Finance Act, 2020 abolished the DDT and moved to the classical taxation system where the dividend is taxable in the receiver's hands, i.e. investor/ shareholder. This provision is applicable for all the dividend income received on or after 1 April 2020. So do not make the mistake of reporting your dividend income under the 'exempt income' head. Depending on the classification, it will be reported under 'business income' or 'other sources'," Gupta added.

5. Verify Form 26AS, and AIS: "The finance ministry recently launched the Annual Information Statement (AIS) on their new portal which will gradually replace the current Form 26AS. Presently, Form 26AS (tax credit statement) offers information of taxpayers like TDS (tax deducted at source), TCS (tax collected at source), self-assessment or advance taxes paid, etc. In contrast, AIS is an expanded version of Form 26AS. It provides additional details of taxpayers like interest earned, dividend income, mutual fund transactions, foreign remittances, salary breakup, off-market transactions, etc. In addition to this, AIS has a facility to submit online feedback for inaccurate details reflecting under taxpayers PAN. This will help fix genuine errors quickly and reduce the notices from the income tax department," according to Gupta.

6. Pre-filled returns: "The income tax department has launched a new e-filing portal that offers pre-filled information relating to the taxpayers. With this, it is a must for the taxpayers to verify the pre-filled information with the source documents as well as Form 26AS/AIS and make any changes or provide feedback for corrections. 

7. Disclosure requirements: "ITR form requires various disclosures like:
1. Disclosure of any unlisted shares holding
2. Disclosure of ‘directorship’ in Indian and foreign companies
3. Disclosure in Schedule AL (assets and liabilities) applicable to individuals earning income above Rs.50 lakh. 
4. Disclosure in Schedule FA (foreign assets)"

8. Reporting of exempt income: "Taxpayers should report exempt income such as LIC maturity receipt, agricultural income, etc., under the 'exempt income' head."

9. Balance payment of taxes: "The taxpayers may have a tax liability even if TDS has been deducted from their income. This is because they might have earned income from capital gains or other sources. Hence, one should evaluate the tax liability after taking the tax deduction credit and make the payments of balance tax payable. Ensure that the outstanding tax liability is paid within the due date to avoid interest penalty on late payment."

10. Claim all eligible deductions- "Taxpayers should claim all the eligible deductions available under Chapter VI-A if opting for the old tax regime. For instance, 
1. Deduction up to Rs.1.5 lakh under Section 80C for contributions to Equity Linked Savings Scheme (ELSS), Provident Fund, principal amount repayment of house loan, tuition fees repayment, etc. 
2. Claim additional deduction of Rs. 50,000 if invested under Section 80CCD (1b) towards National Pension Scheme (NPS).  
3. Claim medical insurance deduction under Section 80D. Here remember you can also claim preventive health check-up deduction up to Rs.5000 and medical expenditure deduction for un-insured senior citizens up to Rs. 50,000.
4. Claim eligible House Rent Allowance and Leave Travel Allowance exemptions. 
5. Claim deduction for donation made under Section 80G
6. Savings interest income deduction under Section 80TTA and 80TTB (for senior citizens), and many more."

*List of deductions mentioned above is not exhaustive. 

11. Verify your return: "Verification is compulsory for processing your ITR. Without verification, the return filed will not be considered valid. The income tax department gives 120 days from the date of ITR filing to verify the return. However, there are several modes to verify the return online. Verification will take less than a minute if your Aadhaar number is linked with PAN. If not, then there are other options through which you can e-verify," Gupta concluded.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)