Tips for a smooth income tax return filing experience
Taxpayers should keep in mind these tips to avoid penalties and ensure a smooth return filing process.
The due date for filing of personal income-tax returns for financial year (FY) 2018-19 has been extended from July 31, 2019 to August 31, 2019. All individuals whose total income exceed Rs 2.5 lakh (Rs 3 lakh for senior citizens) are mandatorily required to file income tax return on or before the aforementioned due date.
While the individuals are busy collating the necessary documents / information from their employers, banks and other sources to compile and file their tax returns, certain key aspects could be missed in haste. To ensure that tax return is filed appropriately, the following factors need to be considered.
It is necessary to determine the residential status accurately as a lot depends on the residential status like choosing the relevant ITR form, taxability of overseas income and reporting requirements.
Using the appropriate form for filing tax return is critical to the entire filing process as an error here could invalidate the tax return filed. The various forms and their relevance are as under:
- ITR 1 - For resident individuals having salary / pension income, one house property and income from other sources
- ITR 2 - For individuals and Hindu Undivided Families(HUF) having income more than Rs 50 lakh, income from more than one house property, capital gains, director of a company, holding investment in unlisted shares and / or having foreign income / assets
- ITR 3 - For individuals and HUFs having income from business or profession or partner in a firm
- ITR 4 - For HUFs, partnership firms (other than Limited Liability Partnership), and individuals who are Indian residents having income up to Rs 50 lakh, from a profession or business, and includes presumptive income.
Also Read: Which ITR form is applicable to you for FY 2018-19
The government has enabled pre-filled information in tax returns for ease of filing by the taxpayers. While this certainly makes life easier, one needs to take utmost care to ensure that the prefilled details match with the various supporting documents available with the taxpayer like Form 26AS (tax credit statement), Form 16 (salary certificate), Form 16A (tax withholding certificate) to avoid any instances of non-reporting / misreporting. Also, one should not forget to report exempt income like dividends, interest from Public Provident Fund, National Savings Certificates, etc.
One needs to verify that the bank account details are correct to ensure refunds are not missed. Also, if not already done, the linking of PAN-Aadhaar on the income-tax portal is a pre-requisite to file tax return.
Form 26AS should be downloaded and thoroughly checked to ensure no income has been missed reporting in the tax return.
The increasing focus of the tax authorities to detect non-compliance and tax avoidance is evident from the additional disclosure requirements introduced in the tax forms such as salary and perquisite break up, details of directorships, details of holding of unlisted shares, place of tax residency in the previous year, details of foreign assets held by a resident, etc. One needs to ensure that there is no omission or misreporting of these details.
After successfully filing the tax return on the income-tax portal, it is mandatory to verify the tax return with Aadhaar OTP or Net banking option. In case online verification is not feasible, then the signed acknowledgement (ITR-V) needs to be sent to the Central Processing Centre ('CPC') of the Income-tax department, within 120 days of filing the tax return.
Since last year, the income-tax department has introduced a levy of penalty of Rs 5,000 for delay up to December in filing of tax return. For further delays, the penalty is Rs 10,000. For smaller taxpayers having income less than Rs 5 lakh, the penalty is Rs 1,000.
Taxpayers should keep in mind the above-mentioned tips to avoid penalties and to ensure a smooth return filing process.
(Shalini Jain is , Tax Partner, People Advisory Services, EY India. Vijayalakshmi Pg, Senior Tax Professional, EY, also contributed to the article.)