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Prepping up to file your Income Tax Return for the last financial year? This year’s ITR filings may have been postponed a bit, but it has not reduced the complexity of it. However, if you know your way around the key factors, you may have a good time filing your returns.
Here is a list of five key factors for you to tread cautiously about while filing your income tax returns this year:
Know Your ITR Form
First thing is to start with the correct ITR form applicable to you. Following ITR forms apply to individual taxpayers under different circumstances:
1. ITR-1 or Sahaj
ITR-1 is the most commonly used ITR form, and here’s when you should use this form:
2. ITR-2 Form
You need to use ITR-2 form in case you do not fall under the category of ITR-1, but you also do not have an income from business and profession. So, in short as an individual or HUF taxpayer, use ITR-2 form if you meet any of the following criteria:
You should also use this form in case you have an income of another person being taxed in your hands; i.e. clubbed income. In case you have income from business and profession in the PY you will need to use a different form.
3. ITR-3 Form
We have seen that the previous two forms have not included the income from business and profession. ITR-3 form is for the individual and HUF taxpayers who have income from business and profession.
In this case, the total income should be more than Rs. 50 lakhs in the PY or the turnover of business should be more than Rs. 2 crores. You should use this form if you also meet any of the following conditions:
4. ITR-4 or Sugam
You need to use ITR-4 if your income includes income from business and profession and meet the following criteria:
As an individual or HUF taxpayer, these are the dedicated ITR forms for you. If you need to file returns as an LLP of any other taxpayer entity, you need to use other ITR forms.
Have you included all the incomes?
So, you have seen how different types of incomes will affect your choice of the ITR form. Thus, it is extremely important for you to know which all types of incomes you had earned in the previous year.
Here are the five heads of incomes as per the Income Tax Act and examples of such incomes:
Capital Gains will include the following gains from:
Sale and purchase of these assets should not be your business. In that case, we move to the next income head:
Income from Other Sources:
If you have multiple bank accounts, you will need to check the interest income from all and add in your ITR.
Keep the Documents for Future Reference
While we enjoy filling up the deductions for the FY to reduce our tax liability, we should also take care of the records. You should keep all the documents for your tax-saving investments in the previous year at one place. These documents will include:
Check Form 26AS
You can download and view on TRACES portal of income tax filing website of the Government of India. This form gives you a summary of total TDS deduction by your employers, banks, mutual funds and other investment or business clients.
You can also ask for a TDS certificate from every source of income which deducts TDS on your income. This will help you tally the details on form 26AS and add any missing TDS details.
TDS credit available on the Form 26AS will automatically apply to your tax liability calculated in the end.
Do it Before the Due Date.
Remember that it’s not enough to file your ITR on time. You also need to ensure that 90% of your tax liability for the previous year has been deposited to the IT department within the financial year.
This can be done in four installments throughout the financial year. However, if you end up missing the deadlines you may have to pay interest on the remaining tax liability for the previous year.
How to Avoid Mistakes?
There is more than one way of avoiding all the mistakes on your ITR. If your income includes more than three sources of income, you can easily handle filing ITR for the following three heads of income:
If you have taxable incomes from other heads, it’s better to get assistance from professionals. If you are using ITR form other than ITR-1 you will need to calculate your income tax offline. Thus, you will be better off using professional services to navigate the complex tax calculations.
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