Gearing up to file your Income Tax Return!

As the due date for filing Income Tax Returns approaches, let's brace up with everything we need to know about filing an ITR.

The due date for filing Income Tax Return (“ITR”) for the Assessment Year (“AY”) 2022-2023 is July 31, 2022 in cases where audit is not applicable and October 31, 2022 in cases where audit is applicable.  This return pertains to the Financial Year (“FY”) 2021-2022.

It is extremely important not only to file the ITR in time but also with complete and accurate disclosure of all incomes generated during the year.

In order to maintain the accuracy and completeness of the information asked by the Income Tax Department in the applicable ITR form, the taxpayer should keep all the required documents handy in advance and be ready with up-to-date information. There are various essential things described below that taxpayers should keep in mind while filing an ITR.

1. New Vs. Old Tax Regime 

The government had introduced a new optional tax regime in Budget 2020. From FY 2020-2021 onwards, individual taxpayers have the option to choose between two tax regimes. Under the new regime the taxpayers can offer income to tax at a lower slab rate but the taxpayer will have to forgo various deductions and exemptions available under the old regime. The taxpayers are generally advised to choose the regime at the beginning of the year. However, if you are among the ones who were not able to make the 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 applicable slab rates under the old and new regime are given below:

Income (INR lakhs)	Tax Slab (Old Regime)	Tax Slab (New Regime)
0 - 2.50	NIL	NIL
2.50 – 5	5%	5%
5 – 7.50	20%	10%
7.50 – 10	20%	15%
10 – 12.50	30%	20%
12.50 – 15	30%	25%
>15	30%	30%

2. ITR Forms 

It is of utmost importance to select the appropriate ITR form for filing of Income Tax Returns. 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. In case a taxpayer has filed an incorrect return form, he is most likely to receive a defect notice from the department which must be rectified within the specified time limit. 

ITR 1 (SAHAJ)

For Resident Individuals and Hindu Undivided Family (HUF) having total income upto INR 50 lakh from Salaries, One House Property, Other Sources (Interest, Dividend etc.).

ITR 2 

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 

To be filed by ​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)

To be filed by 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 upto INR 50 lakhs; or

(d) Income from one house property (excluding cases where loss is brought forward from previous years); or

(e) Income from other sources (excluding winnings from lottery and income from race horses, dividend income in excess of Rs. 10 lakhs or unexplained Income, etc. as referred to in section 115BBE of the Income Tax Act, 1961)

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).

3. Documents - 

Every taxpayer should collate all income tax related documents for filing Income Tax Return. So, here is a gist of the documents required:

• Bank statements of all bank accounts (including details of Fixed Deposits);
• Documents related to purchase/ sale of shares, mutual funds or any other class of assets. 
• Form 16 (Salary Certificate issued by the employer);
• Form 16A / TDS certificate;
• Challan of Tax payment made like advance tax or self-assessment tax;
• Proof of Tax Saving Investments and Expenses like PPF, LIC, Mediclaim Policy etc;
• Home Loan Documents.

4. 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. 

5. 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. 

6. Other things to keep in mind – 

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.

Disclaimer:

The content of this article is for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that the Author / Treelife Consulting is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.