For those who are unfamiliar with the process, filing an income tax return (ITR) can be a daunting task. Because this is a complicated and technical procedure, there is a great risk of making mistakes if you provide wrong or incomplete information.
Especially if you are filing your income tax return on the last day, the chances of making mistakes increase manifolds. To take your worries off your shoulder, we have compiled a list of 6 essential things that you need to keep in mind while filing your IT return. Have a look!
Prepare for Filing ITR
When you are ready to file your ITR, make sure you have all the information available with you. Make sure you have your PAN card, Aadhaar card, mobile phone to get OTP, and your login credentials.
Documents to Keep Ready
Having all of the necessary documents on hand when filing your ITR will expedite the process and make everything go more smoothly. Although you don’t need to submit each and every document on the portal, it is advisable to keep them handy in case you need them. The most important document that you need is Form 16 and Form 26 AS. The other documents that you might need include bank statements, capital gain statements, etc. Ensure that you have all of these so that you can avoid hasty data consolidation at the last moment.
Avoid Common Mistakes
Mistakes like not reporting income from rental properties, not validating the bank account, forgetting to claim certain deductions, etc., are very common. As you will be filing at the last moment, you may end up making these mistakes. It is wise to file it carefully to avoid hassles later.
Report your Income Properly for Max Tax Savings
Another important thing that taxpayers should pay attention to is to report the income properly. It is common to forget to report income from different sources and savings or spendings while filing tax returns at the last moment. Make sure you report everything correctly to ensure maximum refunds.
Old Regime vs New Regime
In lieu of foregoing specified exclusions and deductions, the Finance Act of 2020 proposed a new optional tax regime for taxpayers with modified tax slabs and rates. When completing a tax return, taxpayers will have the option of choosing between the existing and new tax regimes. Salaried taxpayers can also change the tax regime they declared to their employer when they filed their ITR.
Changes in Tax Forms
This year, the eligibility conditions for ITR 1, which is commonly used by salaried taxpayers, have been updated. This year, ITR 1 cannot be filed by anyone who has had tax deducted at source (TDS) deducted for a cash withdrawal under Section 194N, or by employees who have deferred tax on ESOPs received from their company. So when you file your ITR, select the right form keeping these changes in mind.
Apart from being an important contribution to nation-building, ITR filing also benefits individuals in a variety of ways, such as loan processing, loss carryover, and visa and credit card applications. While filing may appear to be a time-consuming task, having all of the necessary documentation and information on hand can make the process go more smoothly.