The income tax return is the form in which assessee files information about his Income and tax thereon to the Income Tax Department. There are various forms of it which are known as ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, ITR 7.
According to the Income Tax, 1961 and the Income Tax rules, 1962, the citizens are obligated to file the income tax returns before the end of the financial year. These returns are required to be filed before the specified due date. Income tax return forms vary depending upon the category of the assessee and the source of the assessee.
Following are the people that are obligated by the law to file income tax returns every year before the end of the financial year:
- A person who possess a valid credit card.
- A person who has paid for foreign travel for himself or for some other person.
- Someone who is the member of a club where entrance fees charged is Rs. Twenty-five thousand or more.
- A person who is a registered owner of a vehicle
- Someone who is the registered owner of a part of immovable property.
- Use the correct ITR form
There are different ITR forms for different categories of assesse, and therefore it becomes important to use the correct ITR forms so that no legal consequence arises in the future. For example:
ITR-1 form (For individuals having)
- Salary income
- Income from other sources
- Income from only one house property
- Agriculture income less than Rs.5000
- Total income is up to Rs. 50 lakh
ITR-2 form (For individuals and Hindu Undivided Family having)
- Income that includes the items present in ITR-1, which is more than Rs. 50 lakh.
- Foreign national income
- Any income which is from capital gains
- Agriculture income which is more than Rs. 5000
- Income from profession or business under a Partnership firm
- Consequences of not filing an ITR
- Notice may be issued to the individual for non-filing of income tax returns
- Losses incurred if any during the year, shall not be allowed to carry forward
- Interest at the rate of 1% per month would be charged on the outstanding amount of tax
- Penalties will be levied for the non-payment of amounts.
- Return Filed in time or Belated ITR can be revised before the end of Relevant Assessment Year or completion of the assessment whichever is earlier.
- Furnishing of personal details
- It is essential to provide personal details accurately. Details related to PAN card, email ID, Bank account number, IFSC code and contact number should be provided correctly to avoid rejections of ITR filing in the future. Wrong information related to any of these can lead to a mismatch of the data and thus rejecting the application.
- Mentioning sources of Income
- It is always advisable to disclose every source of income. At times, you might not feel that it is essential to disclose the non-taxable income, but it’s advisable to mention both the taxable income and as well as the non-taxable income. When an individual does not mention all the information regarding the same, it might be called as “concealment of income”, and an income tax notice could be issued for the same.
- Claiming of deductions
- When an ITR form is filed, it is necessary to mention the correct deductions under the right sections. If a claim deduction is made under the wrong decisions, an individual can land up with more tax liabilities. Furthermore, if an investment has been made which enjoy tax benefits and fails to mention them when filing ITR, the individual becomes liable to pay a much higher tax.
- Form 16 and Form 26AS
- Form 26 AS gives details of TDS deducted by employer/bank, advance taxes paid and even self-assessment tax. A salaried employee can check income and tax details in Form 16 and Form 26AS for a mismatch. Not doing so could mean paying higher taxes or a lesser refund and in the worst-case scenario, a tax notice. It is highly recommended not to create a situation where legal notice is served to the taxpayer.
- Deduction of TDS (Tax deducted source)
- There are circumstances when TDS can be deducted more than once. This situation usually occurs when a person changes his/her jobs in the same financial year. For example, a scenario where the payer’s previous employer has deducted TDS and deposited taxes with the tax department depending on income earned. The second employer could also deduct TDS for the same financial year, not knowing about the earlier deduction in the first job. Therefore, it is essential to share accurate TDS details to avoid double deductions.
- Calculation of tax liability
- After all the sources of income are identified, the computation of tax liability is necessary. If wrong tax calculations are made, a notice from the IT department can be served to the taxpayer.
- Claiming of losses
- Any losses which have been incurred can be claimed. For example, a loss has been incurred on the sale of a property. Such loss can be claimed before the mentioned due date. Once the due date is missed, the losses cannot be carried forward.
- Information on certain specified investments:
- Providing information on certain specified investments:
- Cash deposits which are in excess of Rs 10 lakhs.
- Mutual Funds above Rs 2 Lakhs.
- Property bought or sold in excess of Rs 2 Lakh.
Filing of income tax returns should be done with utmost seriousness. Slightest mistakes in filing such returns can lead to paying higher taxes, and in the worst scenarios, legal consequences may arise, or a notice may be issued to the taxpayer by the income tax department. Therefore, such returns can be filed with the help of a legal person so that the chances of errors and mistakes in the future reduces and no higher amounts has to be paid by the payer.