The deadline to file Income Tax Returns (ITR) is approaching (July 31) and if you are a salaried professional, you would have received Form 16 from your employer by now. If you haven’t, you should ask them for it immediately.
While the process has been fairly simplified over the years with various e-filing platforms, this time of the year brings a lot of confusion each time: Am I eligible to file returns? How and where do I file them? Do I even need to file returns? How do I understand what the Form 16 entails? Will I get any money back? How do I get maximum tax rebate?
Any individual whose annual income is more than Rs 2.5 lakh has to mandatorily file income tax returns, even if you may not have tax liability. If you do not file your taxes, you could attract a penalty of Rs 10,000 under section 234F, and Rs 1000 if your annual income is not more than Rs 5 lakh.
Moreover, filing is important and useful since your ITR receipts are the most authentic documents as proof of your income and are required by most banks when you apply for loans. Even embassies of various countries, especially the US, UK, Australia and Canada, ask for your ITR receipts to process visa applications.
So, given the prime importance of filing your ITR, here is a comprehensive low-down on everything you need to know to file your taxes.
Document checklist
For starters, ensure you have all the required documents before you start. You will need your PAN card, bank statement, and Form 16. You will also need Form 26AS, which includes details on all the taxes that has been deposited to your PAN. The form is available for download from the TRACES website.
To claim tax rebate, you will require interest certificates from banks or post offices. And if you have any form of investment, insurance policy, LIC policy or loas, then you will need proof, which is usually in the form of premium certificates, loan statements, stock trading statement, dof mutual fund statement, etc.
These usually are filled under section 80C, 80D and 80E while filing taxes.
Where to file
You can file your returns online on the government’s e-filing website. You can also log into your bank’s netbanking website where you will find the option to file ITR. This will redirect you directly to the e-filing website. You can also file returns on websites such as cleartax.com, which offer assisted services and also help make the process simpler.
Know which is the right ITR form for you
Based on your income sources and the type of taxpayer you are, there are different ITR forms that apply to you. These can be downloaded from the Income Tax Department website.
Currently, there are seven forms available from ITR-1 to ITR-7. The income tax website lists out what each of them means. ITR-1 and ITR-2 are the most common ones and apply to most salaried individuals. While ITR-1 applies to those who are resident taxpayers with a total income of up to Rs 50 lakh, ITR-2 applies to those who don’t earn an income from a business or profession.
ITR-1 is used to fill in the details of salary, one house property, income from other sources, and agricultural income. ITR-2 can be filed by those having income from more than one house property, earning income from capital gains, holding directorship in any company, or unlisted equity shares.
ITR-3 and 4 are for those who earn from a business or profession - for instance, if you're a consultant with an organisation or a freelancer, these are the two forms that apply to you. ITR-4 follows a simpler process - it assumes 50% of your income is the cost incurred by you for running your business or profession, and doesn't require bills. For ITR-3, you need to provide specific bills for all costs. You can't file ITR-4 if your income exceeds Rs 50 lakh.
Gist of the process for e-filing
If you are filing for the first time, you can register and login to the income-tax e-filing portal using details such as PAN, password and date of birth. Go to e-File and click on ‘Prepare and Submit ITR Online’. Then, select the relevant ITR form and the Assessment Year (in this case 2019-20). Fill in the details and click the ‘Submit’ button.
Websites such as Cleartax give you instructions through the entire process and have options for paying for assistance from a professional Chartered Accountant (CA).
Changes in e-filing this year
In the budget in 2018, the government introduced taxation on long-term capital gains above Rs 1 lakh arising from the sale of listed equity shares or an equity-oriented mutual fund unit. Therefore, from this year, an individual will have to report LTCG that comes from transfer of equity shares.
You also need to disclose investments in unlisted equity shares with the name of the company, opening number of shares, its cost, details of shares acquired and sold during the year and closing number of shares and its cost.
If you hold the post of a director in any company, you will need to disclose the company’s name, its PAN and your director’s identification number (DIN).
In FY 2018-19 (April 2018 to March 2019), if you have sold a property (called immovable property), you will have to disclose all the details of the buyer as well. This would include details like address of the property, name and PAN of the buyer. If there is more than one buyer, then the share of each of the buyers will also have to be disclosed.
You will also need to disclose your residential status. In forms ITR-1 and 2, you will have to state the number of days for which you were physically present in India. This is because your taxability depends on your physical presence and residential status and varies depending on whether you are a resident, a resident but not ordinarily resident, or a non-resident.
If you are a resident but not ordinarily resident in India, you must specify whether you have been non-resident in India in nine of the last 10 years, or whether you have been in India for less than 729 days during the last seven years.