Income Tax Return filing: 10 important things individual taxpayers must know before filing ITR

For individuals [not subject to tax audit provisions under Income-tax Act, 1961 (‘the Act’)], the income tax return (ITR) filing deadline for Financial Year (FY) 2020-21 (Assessment Year 2021-22) has been extended from 31 July, 2021 to 30 September, 2021 owing to the ongoing COVID-19 pandemic. ITR forms (Forms 1, 2 and 4) for FY 2020-21 have already been notified by the Central Board of Direct Taxes (CBDT).

In this article, a few important aspects which one must consider before filing ITR have been
1. Choose correct ITR form

It is important to select the applicable ITR form depending upon the taxpayer’s residential status and income earned from various sources for an accurate filing. For example, form ITR-1 can only be used by a resident individual having total income up to Rs 50 lakh from salary, one house property and income from other sources. It cannot be used by a taxpayer who is a non-resident or a not ordinary resident or have capital gains for which form ITR-2 has to be used.
2. Choose new tax regime or old tax regime whichever is more beneficial

The Finance Act, 2020 introduced a new optional tax regime for taxpayers with modified tax slabs and rates, in lieu of foregoing prescribed exemptions and deductions. Taxpayers will have the option to choose from the old and new tax regimes while filing the tax return. Salaried taxpayers can also change the regime, which they have already declared to their employer at the time of filing ITR.
3. Prefilled ITR forms

This year, ITR forms will import pre-fill information such as personal details of the taxpayer along with details of salary income, dividend income, interest income and capital gains as available in the Form 26AS. This would aid taxpayers in ease of filing ITR as most of the essential details would already be captured therein.

It will, therefore, be relevant for individuals to verify this information and make necessary additions of income not reported therein in the tax return.

However, in case the information is incorrect it may be advisable to reach out to the bank/ payor of income etc. to correct the data in their quarterly TDS returns/ other filings so that accurate information is resultantly reflected in your Form No. 26AS.
4. Verification of prepaid taxes with Form 26AS

It is pertinent for taxpayers to verify their prepaid taxes including tax deducted at source, advance tax and self-assessment tax with Form 26AS. Any discrepancy therein should be notified either to the employer (in case of salary income) or other payers (in case of other incomes) or banks (for advance tax/ self-assessment tax payments) for necessary rectification which is essential for seamless processing of the tax return by the tax department.
5. Payment of balance taxes

Once the total taxable income is determined, post including income under all heads and claiming necessary deductions available under Chapter VI-A of the Act, applicable tax rates should be applied to compute the total tax liability. Any taxes due on the tax return after claiming credit of prepaid taxes should be paid including applicable interest if any before filing the tax return. It would be pertinent to note that if such self-assessment tax exceeds Rs 1 lakh, it should be paid before 31 July 2021 to avoid additional interest liability even though the tax return filing deadline is extended to 30 September 2021.
6. Various disclosure requirements

Following disclosures of various assets and financial investments forms an integral part of an ITR:

# Specified details of all Indian bank accounts
# Specified details of unlisted equity shares
# Details of directorship held in Indian or foreign companies.
# Schedule Assets and Liabilities: Details of specified assets [such as land, building, movable assets etc.), financial assets (bank deposits, shares & securities, cash in hand, etc.)] and corresponding liabilities are to be disclosed in case the total income of an individual exceeds Rs 50 lakh.
# Schedule Foreign Assets: Ordinarily Resident individuals are obligated to furnish details of their assets held outside India (both as an owner and as a beneficiary) as per specified disclosure guidelines.
7. Reporting Exempt Income

Taxpayers are required to report the exempt income under ‘Schedule EI’ such as agriculture income, exempt income of minor child, income not chargeable to tax as per Double Taxation Avoidance Agreement, etc.
8. Change of employment during the year

In case the taxpayer has furnished requisite salary, income details earned from previous employer(s) to the current employer, a consolidated Form 16 and 12BA can be issued by the current employer basis which an ITR can be filed. Otherwise, it may lead to shortfall in TDS owing to duplication of slab benefit, deductions, exemptions provided by all employers. In that scenario, additional taxes due on the return along with applicable interest should be paid before filing the tax return.
9. Mandatory filing of an ITR in certain cases

Finance (No. 2) Act, 2019 mandated the ITR filing for select individuals who fulfill certain specified criteria during the relevant FY, even if such individuals are not mandated to file an ITR by virtue of having taxable income. They would be required to furnish the same if they enter high-value transactions during the relevant FY as under:

i) Payment of electricity bills aggregating over Rs 1 lakh;
ii) Deposit of more than Rs 1 crore in aggregate in one or more current bank accounts;
iii) Spent more than Rs 2 lakh in aggregate on overseas travel for self or any other person.
10. Implications of non-filing of ITR by due date

The taxpayer may not be able to furnish the ITR by due date owing to multiple reasons such as non-availability of relevant documents/ information, lack of time, personal exigencies, etc. Regardless of the reason, in case ITR filing deadline is not met, it may lead to varied consequences under the Act such as levy of late filing fee, payment of interest on balance tax liability, ineligibility to carry forward certain losses, etc.

To summarise, it would be prudent for taxpayers to assess their taxable income as per the provisions of the Act and also verify all underlying documents/ information while computing the final tax payable / refundable as the case may be. In doing so that should take cognisance of aforesaid aspects amongst others, for filing their ITR accurately without attracting any penal consequences.enumerated:

Source:https://www.financialexpress.com/money/income-tax/income-tax-return-filing-10-important-things-individual-taxpayers-must-know-before-filing-itr/2296840/

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