Filing of the income tax return (ITR) is the process by which a taxpayer can report the total income earned during a fiscal year. The taxpayer can claim the refund of excess tax paid / deducted during the fiscal year by filing it for that fiscal year.
For fiscal year 2020-2021, taxpayers can file their ITRs before September 30, 2021, without any late fees.
Here are the main preparations to make before filing an ITR:
Choose the right RTI form
According to Rakesh Nangia, Former Chairman, Indo-Canadian Chamber of Commerce and Founder and Chairman, Nangia Andersen India Pvt. Ltd, it is essential to choose the correct ITR form first, which depends on residence status and income sources.
Using the wrong tax return form can result in a faulty return notice from the tax department. For example, RTI 1 only applies to taxpayers with income from wages, real estate and other sources. This form cannot be used when the individual taxpayer has capital gains income.
Choose the tax system
Second, taxpayers should choose the tax regime to which they wish to be subject.
“Relevantly, the new tax regime offers lower tax brackets, instead of giving up multiple exemptions / deductions,” Nangia said.
Collect all relevant documents
According to Sandeep Sehgal, Tax and Regulatory Director, AKM Global, a tax and consultancy firm, before filing the RTI, a taxpayer must collect all the relevant information and documents required and reconcile all sources of income with the data shown in the pre – completed RTI form. This will ensure the transparent processing of tax returns.
“The taxpayer must have all the necessary documents like Form 16, 26AS, bank statements, rent receipts, investment proofs, donation receipts, etc. To claim certain u / s 80C, 80D deductions, etc. ., the taxpayer must have documents proving the payment like insurance premium receipts, mortgage interest certificate, Mediclaim, etc., ”Sehgal said.
Match income and taxes paid with Form 26AS
It is also important for taxpayers to match their income and taxes paid with Form 26AS. The complete form contains all taxpayer tax information and facilitates the filing of returns.
According to Nangia, any anomalies found should be reported to payers for corrective action.
“Individuals must disclose income from all sources, including exempt income, declare all Indian bank accounts, provide details of the investment and determine residency status according to law,” he added.
Calculation of taxable income
It is essential for all taxpayers, whether legal or natural persons, to calculate their taxable income and the related tax, in accordance with the provisions of the Income Tax Act.
According to Nangia, taxpayers must ensure true and correct disclosure of taxable income and related expenses to avoid any criminal consequences.