It’s that time of the year again where tax season takes over and everyone chaotically rushes to their accountant’s office to help comply with the tax laws of the country. This frenzy is generally accompanied by several misconceptions and pandemonium. We are here to help you prepare for this frenzy in an organised manner.
Here’s a beginners summary of some basic things to know before wading into the Income Tax Pool, especially for the neophyte taxpayers!
Who is eligible to file ITR?
Every Indian citizen who’s Gross Total Income exceeds the taxable limit, must file an ITR. This includes individuals and HUFs (Hindu Undivided Families) with total annual income exceeding Rs. 2, 50,000. The taxable limit is Rs.3, 00,000 for Senior citizens between 60-80 years of age and Rs. 5, 00,000 for very senior citizens aged above 80 years.
Benefits of filing ITR:
Filing your ITR is mandatory for a person with Annual Income above the basic exemption limit specified as per the classification of the individual. It is also mandatory for individuals who own an asset outside the country. Nevertheless, an individual is advised to file Nil Return even if their Annual Income falls below the Basic Exemption Limit, just for the record as it acts as proof for various purposes.
Know which Tax slab you fall under:
In accordance with India’s progressive tax regime, the high income earners are taxed more than the lower income ones. Taxpayers are categorised into groups as per their Annual Income, which is known as slabs. It is necessary to know which slab rate your income falls under to proceed further.
Income tax slabs for resident individual below 60 years of age:
Up to Rs. 2,50,000 - Nil
Rs. 2,50,001 to Rs. 5,00,000 - 5%
Rs. 5,00,001 to Rs. 10,00,000 - 12,500 + 20% of total income exceeding Rs. 5,00,000
Above Rs. 10,00,000 - Rs. 1,12,500 + 30% of total income exceeding Rs. 10,00,000
Income Tax Slab Rate for Senior Citizens (Age 60 years or more but less than 80 years):
Up to Rs. 300,000 - Nil
Rs. 3,00,001 to Rs. 5,00,000 - 5% of Income exceeding Rs. 3,00,000
Rs. 5,00,001 to Rs. 10,00,000 - 20% of Income exceeding Rs. 5,00,000
Above Rs. 1,000,000 - 30% of Income exceeding Rs. 10,00,000
Claim your deductions:
Deductions are benefits provided as per The Income Tax Act, which help reduce your tax liability. Tax saving investments u/s 80C, 80CCD or paid premiums for health insurance u/s 80D are eligible deductions. Some other deductions are also available such as deductions u/s 80G, in case of donations to certain institutions, 80TTA, 80E, etc.
Know your forms:
It is necessary to understand the types of forms and choose the one which fits the bill for you. There are various forms such as ITR-1, ITR-2, ITR-3, ITR-4, etc., each for a different category of taxpayers, depending on your type and source of income. ITR-1 is for Resident individuals with income < Rs. 50 Lakh from salary, One house property or other sources. Majority of individuals fall under this category.
Keep all relevant documents ready.
All documents required to file ITR, such as TDS certificates (Form 16/16A), salary slips, interest certificates need to be kept ready. Information from these documents help in filing your ITR.
Form 26AS keeps a track of the tax deducted from your income during the FY 18-19 and deposited against your PAN. The individual can download and check this form and details from the website.
Filing the ITR online is always convenient as compared to physical filing. To file the ITR online, you first need to create an e-filing account on the Income Tax website- www.incometaxindiaefiling.gov.in, and get yourself registered.
Verification of your ITR:
Verifying your ITR is a very vital step as non-verification will be deemed as non-filing, thus attracting penalties. There are 6 ways to verify your ITR, 5 of which being electronic methods. Your ITR has to be verified within 120 days of filing your ITR.
Penalties attracted on non-compliance:
Non-filing of ITR, attracts a penalty, which varies as per the slab rates. Non-compliance can attract both monetary penalties and/or jail time as per The Income Tax Act.