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

Taxpayers are required to report the exempt revenue beneath ‘Schedule EI’ corresponding to agriculture revenue, exempt revenue of minor baby, revenue not chargeable to tax as per Double Taxation Avoidance Agreement, and so on.

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

In this text, a couple of important points which one must take into account before filing ITR have been enumerated:

1. Choose right ITR type

It is important to pick the relevant ITR type relying upon the taxpayer’s residential standing and revenue earned from numerous sources for an correct filing. For instance, type ITR-1 can solely be utilized by a resident individual having complete revenue as much as Rs 50 lakh from wage, one home property and revenue from different sources. It can’t be utilized by a taxpayer who’s a non-resident or a not strange resident or have capital good points for which type ITR-2 must be used.

2. Choose new tax regime or previous tax regime whichever is extra useful

The Finance Act, 2020 launched a brand new non-compulsory tax regime for taxpayers with modified tax slabs and charges, in lieu of foregoing prescribed exemptions and deductions. Taxpayers may have the choice to select from the previous and new tax regimes whereas filing the tax return. Salaried taxpayers also can change the regime, which they’ve already declared to their employer on the time of filing ITR.

3. Prefilled ITR kinds

This year, ITR kinds will import pre-fill data corresponding to personal particulars of the taxpayer together with particulars of wage revenue, dividend revenue, curiosity revenue and capital good points as obtainable within the Form 26AS. This would assist taxpayers in ease of filing ITR as a lot of the important particulars would already be captured therein.

It will, due to this fact, be related for people to confirm this data and make mandatory additions of revenue not reported therein within the tax return.

However, in case the data is inaccurate it could be advisable to succeed in out to the financial institution/ payor of revenue and so on. to right the information of their quarterly TDS returns/ different filings in order that correct data is resultantly mirrored in your Form No. 26AS.

4. Verification of pay as you go taxes with Form 26AS

It is pertinent for taxpayers to confirm their pay as you go taxes together with tax deducted at supply, advance tax and self-assessment tax with Form 26AS. Any discrepancy therein needs to be notified both to the employer (in case of wage revenue) or different payers (in case of different incomes) or banks (for advance tax/ self-assessment tax funds) for mandatory rectification which is important for seamless processing of the tax return by the tax division.

5. Payment of stability taxes

Once the overall taxable revenue is set, publish together with revenue beneath all heads and claiming mandatory deductions obtainable beneath Chapter VI-A of the Act, relevant tax charges needs to be utilized to compute the overall tax legal responsibility. Any taxes due on the tax return after claiming credit score of pay as you go taxes needs to be paid together with relevant curiosity if any before filing the tax return. It could be pertinent to notice that if such self-assessment tax exceeds Rs 1 lakh, it needs to be paid before 31 July 2021 to keep away from extra curiosity legal responsibility despite the fact that the tax return filing deadline is prolonged to 30 September 2021.

6. Various disclosure necessities

Following disclosures of varied property and monetary investments kinds an integral a part of an ITR:

# Specified particulars of all Indian financial institution accounts
# Specified particulars of unlisted fairness shares
# Details of directorship held in Indian or international firms.
# Schedule Assets and Liabilities: Details of specified property [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 overall revenue of an individual exceeds Rs 50 lakh.
# Schedule Foreign Assets: Ordinarily Resident people are obligated to furnish particulars of their property held outdoors India (each as an proprietor and as a beneficiary) as per specified disclosure pointers.

7. Reporting Exempt Income

Taxpayers are required to report the exempt revenue beneath ‘Schedule EI’ corresponding to agriculture revenue, exempt revenue of minor baby, revenue not chargeable to tax as per Double Taxation Avoidance Agreement, and so on.

8. Change of employment in the course of the year

In case the taxpayer has furnished requisite wage, revenue particulars earned from earlier employer(s) to the present employer, a consolidated Form 16 and 12BA will be issued by the present employer foundation which an ITR will be filed. Otherwise, it could result in shortfall in TDS owing to duplication of slab profit, deductions, exemptions supplied by all employers. In that situation, extra taxes due on the return together with relevant curiosity needs to be paid before filing the tax return.

9. Mandatory filing of an ITR in sure instances

Finance (No. 2) Act, 2019 mandated the ITR filing for choose people who fulfill sure specified standards in the course of the related FY, even when such people are usually not mandated to file an ITR by advantage of getting taxable revenue. They could be required to furnish the identical in the event that they enter high-value transactions in the course of the related FY as beneath:

i) Payment of electrical energy payments aggregating over Rs 1 lakh;
ii) Deposit of greater than Rs 1 crore in mixture in a number of present financial institution accounts;
iii) Spent greater than Rs 2 lakh in mixture on abroad journey for self or some other particular person.

10. Implications of non-filing of ITR by due date

The taxpayer might not be capable to furnish the ITR by due date owing to a number of causes corresponding to non-availability of related paperwork/ data, lack of time, personal exigencies, and so on. Regardless of the explanation, in case ITR filing deadline shouldn’t be met, it could result in different penalties beneath the Act corresponding to levy of late filing payment, fee of curiosity on stability tax legal responsibility, ineligibility to hold ahead sure losses, and so on.

To summarise, it might be prudent for taxpayers to evaluate their taxable revenue as per the provisions of the Act and likewise confirm all underlying paperwork/ data whereas computing the ultimate tax payable / refundable because the case could also be. In doing so that ought to take cognisance of aforesaid points amongst others, for filing their ITR precisely with out attracting any penal penalties.

(By Parizad Sirwalla, Partner and Head, Global Mobility Services – Tax, KPMG in India)

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