Mastering Your Tax Filing: Essential Steps and Tips for a Smooth ITR Submission

Published On - July 2, 2024

admin Income Tax

Mastering Your Tax Filing: Essential Steps and Tips for a Smooth ITR Submission

Who should file ITR for FY 2023-24?

Under the old regime, individuals below 60 years of age have to file an ITR if their income exceeds Rs.2.5 lakhs and individuals above 60 years of age have to file an ITR if their income is more than Rs.3 lakhs.

However, under the new regime, the basic exemption limit for individuals below the age of 60 years is Rs.3 lakhs.

Note: If you are filing ITR for FY 2023-24, the basic exemption limit under the new regime was Rs.2.5 lakhs. This limit was increased to Rs.3 lakhs in budget 2023, applicable for ITR filing in FY 2023-24.

In India, for the Financial Year 2023-24 (Assessment Year 2024-25), the following individuals and entities are required to file an Income Tax Return (ITR):

  1. Individuals: Individuals whose total income before deductions exceeds the basic exemption limit. For the FY 2023-24, the basic exemption limit for individuals below 60 years of age is likely to be determined by the government.
  2. Senior Citizens: Individuals aged 60 years or above but less than 80 years, with income exceeding the specified exemption limit.
  3. Super Senior Citizens: Individuals aged 80 years or above, with income exceeding the specified exemption limit.
  4. Companies: All companies, irrespective of whether they have made profits or incurred losses during the financial year.
  5. Firms: Partnership firms, LLPs, and other entities falling under the definition of ‘firm’ under the Income Tax Act, 1961.
  6. Trusts: Entities registered as trusts or other similar organizations that are required to file returns under the Income Tax Act.
  7. Non-resident Individuals and Foreign Entities: Non-resident individuals earning income in India and foreign entities with income accruing or arising in India.
  8. Individuals with Foreign Assets: Residents of India who hold any foreign assets or have signing authority in any foreign account.

What Happens if my Taxable Income is Less than the Basic Exemption Limit?

As per the Income Tax Act of India, individuals are required to file an ITR only if their annual income exceeds the basic exemption limit. However, there are certain conditions in which you might be required to file an ITR even if your income falls within the basic exemption limit. Given below is a list of such conditions –

  • Bank Deposits of more than 50 lakhs – If the annual savings bank deposit of an individual in one or more accounts exceeds Rs.50 lakhs, then, such individual must file ITR.
  • Current Account Deposits of more than Rs. 1 Crore – If an individual deposits Rs.1 crore or more in one or more current accounts during the financial year, then he/she must file an ITR.
  • Annual Sales Turnover above Rs.60 lakhs – Individuals having an annual sales turnover of more than Rs.60 lakh are required to file an ITR.
  • Professional income above Rs.10 lakh – If the professional income exceeds Rs.10 lakhs during a financial year, then he/she has to file an ITR.
  • Electricity Bill Exceeding Rs. 1 Lakh – If an individual’s electricity bill during the year exceeds Rs.1 lakhs, he/she is required to file an ITR.
  • TDS/TCS exceeding Rs.25,000 – If the TDS/TCS of a person is more than Rs.25,000, ITR filing is mandatory. However, this threshold is Rs.50,000 for senior citizens.
  • Income from foreign assets – If an individual has an asset in a foreign country or is a beneficiary of an asset in a foreign country, he/she must file an ITR.
  • Expenses on foreign travel – If an individual spends Rs.2 lakh or more on foreign travel for himself or for another person during the financial year, then such an individual has to file an ITR.
  • Resident taxpayers with overseas assets or signing authority – In India, if you’re considered a resident for tax purposes and have any overseas assets or interests, filing an ITR becomes mandatory. This includes assets you directly own or those you benefit from as a beneficiary owner.

You need to file an Income Tax Return even if you are an authorized signatory for an account managed outside of India. The asset you hold outside of India may be movable or immovable. For example, if you went abroad, opened an account, and forgot to close it upon returning to India, you must file an ITR.

Who is Exempted from ITR Filing in India?

Section 194P, which was introduced in Budget 2021, provides conditional relief to citizens above 75 years of age from filing income tax returns. However, this exemption is subject to the following conditions –

  • Senior citizens should be more than 75 years of age.
  • Senior citizens should be ‘Resident’ in India in the previous years.
  • He earns income from interest and pension only. The interest income earned should be from the same bank in which he/she is receiving pension income.
  • The senior citizen has to file a declaration stating some details with the specified bank.
  • The bank must be a specified bank as notified by the Central Bank. Such banks will deduct the TDS of senior citizens after considering the deductions and rebates. After such TDS deduction, senior citizens will not be required to file income tax returns.

What if I Fail to File my ITR?

If you fail to file an ITR by the due date, there can be various consequences. Given below is a list of the consequences.

ITR not Filed by 31st July 2024

  • Late filing fees of up to Rs 5,000 (for incomes above Rs 5 lakhs) or Rs 1,000 (for incomes below Rs 5 lakhs) may be levied under Section 234F for late filing.
  • As per section 234A, the taxpayer has to pay interest @1% for every month or part of the month thereof, starting from the date following the ITR filing due date, i.e. 31st July.
  • If you fail to file ITR on time, you will not be eligible to receive the benefit of carry forward of losses.
  • Non-filing of ITR can be seen as tax evasion by tax authorities, and you could face imprisonment for 6 months to 7 years.

It is recommended to file an Income Tax return in India for the following reasons:

  1. Legal Compliance: Filing ITR is mandatory as per the Income-tax Act, 1961.
  2. Tax Refund: To claim a refund if excess tax is paid.
  3. Carry Forward Losses: To carry forward business losses to future years.
  4. Proof of Income: ITR is proof of income and financial stability.
  5. Loan and Credit Applications: Required for loan and credit applications.
  6. Visa Applications: Required for visa applications.
  7. Government Benefits: Required for government benefits and subsidies.
  8. Avoid Penalties: To avoid penalties and interest on tax dues.
  9. Improved Credit Score: Filing ITR regularly improves credit score.
  10. Easy Access to Loans: Easy access to loans and credit facilities.
  11. Tax Benefits: To claim tax benefits and deductions.
  12. Financial Discipline: Filing ITR promotes financial discipline and record-keeping.
  13. Audit and Scrutiny: To avoid scrutiny and audit by the Income Tax Department.
  14. Tax Planning: To plan taxes and minimize tax liability.
  15. Peace of Mind: Filing ITR gives peace of mind and avoids legal issues.

If you don’t file your Income Tax Return (ITR), you may face the following consequences:

  1. Penalty: A penalty of ₹5,000 to ₹10,000 may be imposed under Section 234F.
  2. Interest: Interest may be charged on the tax due, as per Section 234A.
  3. Notice from IT Department: You may receive a notice from the Income Tax Department, asking why you haven’t filed your ITR.
  4. Prosecution: In extreme cases, you may face prosecution, which could lead to a fine or even imprisonment.
  5. Loss of Refund: If you’re due a refund, you won’t receive it if you don’t file your ITR.
  6. Carry Forward of Losses: If you don’t file your ITR, you can’t carry forward losses to future years.
  7. Impact on Loans and Credit: Non-filing of ITR may affect your ability to get loans or credit in the future.
  8. Impact on Visa Applications: Non-filing of ITR may affect your visa applications.
  9. Legal Action: The IT Department may take legal action against you for non-compliance.
  10. Reputation: Non-filing of ITR may damage your reputation and credibility.

Before filing your Income Tax Return (ITR), here are some important things you should know:

1.Income Sources: Gather information on all sources of income including salary, business income, rental income, interest, dividends, capital gains, etc.

2.Deductions and Exemptions: Be aware of deductible expenses and exemptions such as investments under Section 80C, home loan interest, medical insurance premiums, etc., that can reduce your taxable income.

3.Filing Deadline: Know the due date for filing your ITR. It typically falls on July 31st for individuals in India, but this can vary based on your country’s tax regulations.

4.Forms and Documents: Choose the correct ITR form based on your income sources and gather necessary documents such as Form 16 (for salary income), bank statements, investment proofs, etc.

Old Tax Regime Scheme vs New Tax Regime Scheme: The next step is deciding which scheme to opt for. This time, the default scheme is the New Tax regime, so be very careful. If you have decided to opt for the old tax regime scheme, then please fill out form 10IEA, which is eligible only in the case of the old scheme. Pay close attention to the various heads of income and other details to be included in the ITR.

5.Analysis of 26AS – Tax Credit Statement:

  • TDS
  • TCS
  • Refunds received during the year
  • TDS defaults

6.Analysis of AIS – Annual Information Statement: Additional details such as payment of taxes (advance tax and self-assessment details), SFT transactions (e.g., sale and purchase of immovable properties, mutual fund transactions), demand and refund, and other information will be there in AIS.

7.Before Filing ITR: It is advisable to check Form 26AS and AIS completely and match them with all your taxable incomes and supporting documents.

8.Tax Computation: Understand how your taxable income is calculated and compute your tax liability. You can use online tax calculators or seek assistance from a tax professional if needed.

9.Filing Methods: Determine whether you’ll file your ITR online or offline. Most tax authorities prefer online filing, which is convenient and often mandatory for certain income levels.

10.Penalties and Consequences: Be aware of penalties for late filing or incorrect information. Timely filing helps avoid penalties and interest on unpaid taxes.

11.Details of capital gains:

(a) If you have invested in shares or mutual funds, gains on such investments are taxable under Income Tax. Therefore, ask your broker for Capital Gain Statement (Tax P&L) for FY 23-24 and also holding statement as on 31st March 2024.

(b) In case you have sold any property during the FY 23-24, get ready with a copy of sale deed and original purchase deed for calculation of capital gains on such sale.

12.Details of Other Income:

  • Crypto Transaction Statement (if traded in cryptocurrency)
  • Statement of Profits from Gaming transactions
  • Interest Certificates from banks (for income on fixed deposits)
  • Interest income details from other parties (if you have extended loans to other parties)
  • Agriculture Income details (in case of agriculture income)
  • Dividend Income Details (calculated from Bank Statements/ Broker’s statement/ AIS)
  • PPF Pass Book (if having PPF Account)
  • Details of NSC/ KVP (for calculating interest income on NSC/ KVP)
  • Post Office Account Passbook

13.Verification: After filing your ITR, verify it using options like Aadhaar OTP, net banking, or sending a signed physical copy. Verification is crucial to complete the filing process.

14.Refund Status: If you expect a tax refund, track its status after filing your ITR. Refunds can be delayed if there are discrepancies or if additional verification is required.

15.Record Keeping: Maintain copies of filed returns and supporting documents for future reference. These records are important for audits or any queries from tax authorities.

16.Time limit for filing belated and revised returns:

  • Belated returns for A.Y. 2024-25 can be filed till 31st December 2024 subject to payment of late fees.
  • Returns filed for A.Y. 2024-25 on or before due date can be revised till 31st December 2024 in case you find any error in income declared.

17.Time limit for filing Updated Return for FY 2023-24 (AY 24-25):

If not filed till 31st December 2024, ITR for AY 24-25 can still be submitted. The Income Tax Department allows you to file “Updated Return” for FY 23-24 (AY 24-25) till 31st March 2027 i.e. two years from the end of the relevant assessment year.

Precaution:

Don’t miss the initial deadlines of 31st July & 31st October 2024 for filing of ITR. Belated filing of ITR will lead to penalty under section 234F and also interest under section 234A. Please ensure that you have checked form 26AS and AIS/ TIS for ensuring that you have considered all incomes in your ITR. In case you are having any foreign assets or foreign income, it is compulsory to make a disclosure in the ITR. Therefore, please ensure that you have correctly declared all foreign assets and foreign income in your income tax return. By understanding these key points before filing your Income Tax Return, you can ensure a smoother and more compliant tax filing experience.

Conclusion :

Filing your Income Tax Return (ITR) is not just a legal obligation but also a crucial step towards financial responsibility and compliance. By ensuring timely and accurate filing, you not only contribute to the nation’s development but also secure your financial future. It’s an opportunity to review your income, deductions, and investments, ensuring they align with your financial goals. Moreover, filing on time helps avoid penalties and keeps your tax records clean, facilitating hassle-free financial transactions in the future. Remember, filing your ITR isn’t just about numbers—it’s about taking control of your financial narrative and staying on the path towards a stable and secure financial future.