Gearing up to file your Income Tax Return!

Get Ready to File Your Income Tax Return (ITR) – A Comprehensive Guide for AY 2023-2024

As the deadline for filing your Income Tax Returns approaches, it’s time to prepare everything you need to know about filing your ITR. The due date for filing ITR for AY 2022-2023 is July 31, 2023, if audit is not applicable and October 31, 2023, if audit is applicable. It’s essential to file your ITR on time and disclose all your incomes accurately and completely.

To ensure the accuracy and completeness of the information requested by the Income Tax Department in the applicable ITR form, you should keep all the required documents handy in advance and be ready with up-to-date information. Here are some essential things to keep in mind while filing your ITR.

New Vs. Old Tax Regime

The government introduced a new optional tax regime in Budget 2020. From FY 2020-2021 onwards, individual taxpayers can choose between two tax regimes. Under the new regime, taxpayers can offer their income to tax at a lower slab rate. However, they need to forgo various deductions and exemptions available under the old regime. Taxpayers are generally advised to choose the regime at the beginning of the year. However, if you were unable to make planned investments or expenses against which you could claim the tax deduction under the old regime, you can switch to the new regime provided it leads to lower tax liability for you. The slab rates for Assessment Year 2023-24 (AY 2023-24) are as below :

ITR Forms 

Choosing the appropriate ITR form for filing your Income Tax Returns is crucial. Failure to do so can result in your return not getting processed by the income tax department. The selection of ITR form is based on the nature of income or the category to which the taxpayer belongs. You are most likely to receive a defect notice from the department if you file an incorrect return form, which must be rectified within the specified time limit.

ITR 1 (SAHAJ)

This form is for Resident Individuals and Hindu Undivided Family (HUF) having total income up to INR 50 lakh from Salaries, One House Property, and Other Sources (Interest, Dividend, etc.).

ITR 2 

This form is for Individuals and HUFs having income from Salaries, House Properties (more than one house property), and Other Sources more than INR 50 lakhs. Individuals having Income from Capital Gains, Foreign Income/Foreign Assets also need to file this ITR Form. It is also applicable for Individuals/HUFs holding unlisted equity shares or directorship in a Company.

ITR 3 

This form is for ​Individuals or HUFs having income from ‘profits and gains of business or profession’ from a proprietary business or profession. ​​​ ITR 3 is also required to be filed by a person whose income chargeable to tax under the head “Profits and gains of business or profession” is in the nature of interest, salary, bonus, commission or remuneration, due to, or received by them from a partnership firm.

ITR 4 (SUGAM)

This form is for Resident Individuals/HUFs/Firms (Other than LLP)​ whose total income for the year includes:

(a) Business income computed as per the provisions of section 44AD or​ 44AE of the Income Tax Act, 1961; or​;

(b) Income from Profession as computed as per the provisions of​ section 44ADA of the Income Tax Act, 1961; or

(c) Income from salary/pension up to INR 50 lakhs; or

(d) Income from one house property (excluding cases where loss is brought forward from previous years); and/or sources of income, and ensure that all required information is accurately and completely disclosed in the appropriate ITR form.

ITR 5

ITR 5 is for firms, Limited Liability Partnerships (LLP), Association of Persons (AOP), (Body of Individuals (BOI), Artificial Juridical Person (AJP), Estate of deceased, Estate of insolvent, Business trust and investment fund.

ITR 6

ITR 6 is for Companies other than companies claiming exemption under section 11 (Income from property held for charitable or religious purposes). This return has to be filed electronically only.

ITR 7

ITR 7 is to be filed by persons including companies required to furnish returns under section 139(4A)/section 139(4B)/section 139(4C)/section 139(4D)/section 139(4E)/section 139(4F).

DEDUCTIONS

There are several deductions that each individual is eligible to claim in his/her ITR. It is very important to claim a deduction based on investments done during the year under Section 80C, 80CCC, and 80CCD, of the Income Tax Act, 1961. For example, interest on NSC will be first added to income from other sources and then it can be claimed for deduction under Section 80C. Similarly, Principal Repayment of Home Loan, Investments made in PPF, etc. are eligible for claiming deductions under section 80C. However, the maximum deduction available is INR 1,50,000 as mentioned in Section 80E. The assessees can also claim deduction for Premium on Mediclaim (Section 80D), Donations (Section 80G), Interest on Education Loan taken for self, spouse, children for higher studies (Section 80E), etc.

TDS and TCS details 

Tax deducted at Source (TDS) and Tax Collected at Source (TCS) should be correctly mentioned in the ITR in order to avoid any issues while processing returns. Incorrect particulars can lead to notice being issued and penalty being levied. It is important to check Form 26AS before filing the ITR. Form 26AS includes all the income details, TDS, advance tax paid by you, self-assessment tax, etc. A salaried person must cross verify the details in Form 16 issued by the employer with Form 26AS. In a case where the TDS is not reflected in Form 26AS, you will not get a credit for tax deductions that are not mentioned therein. It is the taxpayer’s obligation to make sure that the information in Form 26AS is up-to-date and correct.

OTHER IMPORTANT POINTS 

1. Clubbed income – If there is any income of a minor child or spouse that is clubbed in the hands of the taxpayer, it must be disclosed in the form.
2. Exempt income – The details about all the income earned during the previous year must be filled out in the ITR including such incomes which are exempted from tax. Exempt Income should be separately mentioned in the schedule for reporting tax-exempt income in the ITR.
3. Bank account details – it is mandatory for every assessee to mention the bank details of all the bank accounts held by them. In case of multiple bank accounts, you need to select one account in which you want to receive refunds.
4. Details of unlisted equity shares held – A taxpayer is required to mention details of unlisted equity shares held by him/her. Details such as name and Permanent Account Number (PAN) of the company, number of shares acquired and sold during the year.
5. Schedule of assets and liabilities – Individual taxpayers who have net taxable income of more than Rs 50 lakh in a financial year are required to report details of specified assets such as land, building, movable assets, bank accounts, shares & bonds and the corresponding liabilities against those assets if any. This disclosure is to be made in Schedule AL (Assets and Liabilities).
6. Profit on sale of jewellery, paintings and more – The items such as jewellery, archaeological collections, sculptures, drawings, paintings are counted as capital assets by the Income Tax Department. So, any capital gain from selling such items must be mentioned in the ITR.

Filing an Income Tax Return can be a daunting task, but with proper planning, organization, and knowledge of the relevant rules and regulations, it can be completed smoothly and successfully. So, as the deadline for filing Income Tax Returns approaches, make sure to gather all the necessary documents and information, select the appropriate ITR form, and file your return with complete and accurate disclosure of all incomes and deductions.

FAQs about ITR

Sure, here are 5 frequently asked questions (FAQs) about filing Income Tax Returns (ITR):

1. When is the deadline to file ITR for Assessment Year (AY) 2023-24?

The deadline to file ITR for the financial year 2022-2023 (AY 2023-24) is July 31, 2023, for individuals and non-audit cases. However, for businesses and entities that require audit, the deadline is October 31, 2023.

2. Do I need to file ITR if my income is below the taxable limit?

If your total income is below the taxable limit of Rs. 2.5 lakh, then you are not required to file ITR. It’s important to note that even if your income is below the taxable limit, there may be circumstances where filing an ITR voluntarily can be beneficial. For example:

1. Claiming a refund: If you have paid taxes deducted at source (TDS) or advance tax, you can file an ITR to claim a refund of the excess tax paid.
2. Establishing financial records: Filing an ITR can help establish a record of your income and financial activities, which may be useful for various purposes like loan applications, visa processing, or applying for government schemes.
3. Carrying forward losses: If you have incurred a loss in a particular financial year, filing an ITR can enable you to carry forward those losses for set-off against future taxable income.

It’s always advisable to consult with a qualified tax professional or refer to the latest guidelines issued by the Income Tax Department of India to ensure compliance with the applicable tax laws.

3. What are the documents required to file ITR?

The documents required to file ITR include your

• PAN card,
• Form 16/16A,
•  salary slips,
• bank statements,
• investment proofs,
• and any other relevant document related to your income or tax deductions like PPF, Home loan documents, LIC , Mediclaim , etc..

4. Can I file ITR online?

Yes, you can file ITR online through the Income Tax Department’s e-filing portal. You need to register on the portal using your PAN.

5. What are the consequences of not filing ITR?

If you are liable to file an ITR and fail to do so, you may be subject to penalties and interest charges. The penalty can range from a minimum of Rs. 5,000 up to Rs. 10,000, depending on the time and circumstances of non-compliance. Additionally, interest may be levied on any unpaid taxes. Further, filing an ITR allows you to claim any tax refunds due to you. By not filing, you forfeit the opportunity to receive any refunds for excess tax paid.