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As a first-time taxpayer, you likely have many questions about filing your Income Tax Returns (ITR). It may feel stressful, but don’t worry, we're here to help!
Filing your ITR isn't as difficult as it seems. You just need to understand the process, tax provisions, benefits, and gather essential documents. Not knowing how to classify income or calculate tax can be daunting, even with online filing.
Filing ITR has become fast and convenient, done easily from home. It's a series of quick steps to follow.
So, let's discuss 10 tips for first-time taxpayers to keep in mind while filing their Income Tax Returns (ITR).
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Know your total taxable income after deductions
An individual's taxable income is the portion of their income that is liable to be taxed, calculated after deducting allowable expenses and tax-saving deductions from their gross income.
Always subtract your tax-saving deductions from your gross income, which includes earnings from both salary and other sources, to determine your taxable income.
Under various sections like 80C and 80D, individuals can benefit from deductions. For instance, under Section 80C, investments such as life insurance premiums, Public Provident Fund (PPF), National Savings Certificates (NSC), Post Office Time Deposit Scheme, Senior Citizens Saving Scheme, and repayment of the principal component of a housing loan qualify for deductions. Similarly, under Section 80D, medical insurance premiums are eligible for deductions.
You can claim tax benefits of up to Rs 1.5 lakh on life insurance premiums under Section 80C. Additionally, health insurance premiums of up to Rs 75,000 are tax-exempt under Section 80D. Furthermore, donations made to specific institutions can also qualify for tax exemption under Section 80G of the Income Tax Act, 1961.
Old tax regime/ new tax regime
It's crucial to determine your tax slab as it directly impacts your income tax liability. Starting April 1st, 2023, the new tax regime is default; however, you have the option to choose the old tax regime if preferred. The tax slab structure for various age groups and fiscal years is outlined below:
The slab structure is as follows:-
| Slabs |
Old Tax Regime |
New Tax Regime |
| <60 years & NRIs |
>60 to <80 years |
> 80 years |
FY 2022-23 |
FY 2023-24 |
| ₹0 - ₹2,50,000 |
NIL |
NIL |
NIL |
NIL |
NIL |
| ₹2,50,000 - ₹3,00,000 |
5% |
NIL |
NIL |
5% |
NIL |
| ₹3,00,000 - ₹5,00,000 |
5% |
5% (tax rebate u/s 87A is available) |
NIL |
5% |
5% |
| ₹5,00,000 - ₹6,00,000 |
20% |
20% |
20% |
10% |
5% |
| ₹6,00,000 - ₹7,50,000 |
20% |
20% |
20% |
10% |
10% |
| ₹7,50,000 - ₹9,00,000 |
20% |
20% |
20% |
15% |
10% |
| ₹9,00,000 - ₹10,00,000 |
20% |
20% |
20% |
15% |
15% |
| ₹10,00,000 - ₹12,00,000 |
30% |
30% |
30% |
20% |
15% |
| ₹12,00,000 - ₹12,50,000 |
30% |
30% |
30% |
20% |
20% |
| ₹12,50,000 - ₹15,00,000 |
30% |
30% |
30% |
25% |
20% |
| >₹15,00,000 |
30% |
30% |
30% |
30% |
30% |
Form 16
Form 16 and Form 16A serve as certificates for Tax Deducted at Source (TDS). Form 16 specifically pertains to salary income and comprises two parts - Part A and Part B. Conversely, Form 16A applies to TDS on income sources other than salary. Employers furnish Form 16 annually to employees earning salaries, encompassing information about their income, tax-saving investments, deductions, and any TDS for the respective financial year. This document is vital for filing income tax returns. Form 16 comprises Part A, detailing TDS deductions, and Part B, providing a breakdown of the total tax paid. Employers are mandated by the IT department to issue Form 16 to employees with an annual income exceeding ₹2.5 lakh.
Remember the due date of filing ITR
It's essential to stay updated on the ITR filing date. For individuals and Hindu Undivided Families (HUFs) not requiring audit, the deadline for filing ITR is July 31st of the assessment year.
Verify your Form 26AS for deposited tax
Form 26AS is a crucial document that summarizes any amount deducted as TDS or TCS from different income sources of a taxpayer. It also includes details of advance tax or self-assessment tax paid, along with high-value transactions undertaken by the taxpayer. This consolidated annual statement, maintained by the Income Tax Department, provides tax credit information linked to the taxpayer's PAN.
Documents required
Before logging in to the Income Tax portal, ensure you have these documents handy:
Bank account details
PAN Card
Aadhaar Details
Form 16 (for salaried taxpayers)
Proofs of investments made
Home loan interest certificate
Insurance premium payment receipts
Annual Information Statement
The Annual Information Statement (AIS) is a document that includes details like interest income, dividend income, securities transactions, mutual fund transactions, foreign remittance information, and more. When a taxpayer opts for the "prefill" option, the AIS information is automatically populated into the income tax return form, saving time and ensuring accurate income reporting.
Which ITR form to file
Not all taxpayers need to fill the same ITR form. Your choice depends on factors like your annual income and the source of your income.
ITR-1: Ideal for resident individuals with salary income, income from one house property, and other sources like interest, as long as the total income doesn't exceed Rs 50 lakhs.
ITR-2: Meant for individuals and Hindu Undivided Families (HUFs) without any business or profession under proprietorship.
ITR-3: Appropriate for individuals and HUFs earning income from a proprietary business or profession.
ITR-4: Designed for taxpayers with presumptive income from business or profession.
Verification
After filing your ITR, the final step is verification, which can be done online or offline. For online verification, you can use the Aadhaar One Time Password (OTP) to access and verify your return. The income tax department will send an e-verification mail to confirm the process electronically. Offline verification requires sending a signed printout of the ITR to the Centralized Processing Center (CPC) in Bengaluru.
The deadline for filing income tax returns falls on July 31 of each financial year. Failure to file returns can result in a penalty of up to Rs 5,000, even if the taxes have been paid. Additionally, tax returns serve as proof in various situations, such as applying for a loan, purchasing property, traveling abroad, or obtaining significant insurance coverage.
Penalty for not filing returns
Individuals with an annual income not exceeding Rs. 2.5 lakhs are generally not required to file an Income Tax Return (ITR), except in specific cases. If your total income is below Rs. 2.5 lakhs and you do not fall under any exceptions, you won't face consequences for non-filing.
However, if you were required to file an ITR or if not required but the tax department requests it under section 142(1), failing to do so can lead to various repercussions:
Penalty and Interest: If you have any unpaid tax liability for the respective year and file a belated return, interest at the rate of 1% under section 234A may be levied.
Penalty under Section 271F: A penalty of Rs. 5000 may be imposed under section 271F if you fail to file your ITR timely.
The penalty provisions are as follows
● If your total income is up to Rs. 5 lakhs, the maximum penalty will be Rs. 1,000.
● For incomes exceeding Rs. 5 lakhs, a penalty of Rs. 5,000 may be charged if you were required to file an ITR but failed to do so by the due date (July 31st or September 30th). This penalty applies if you file your return by December 31st.
Conclusion
With the above considerations in mind, filing your Income Tax Return (ITR) alone should no longer feel overwhelming. Ensure to verify all the details you submit while filing your ITR for accuracy. Always file the applicable ITR forms and pay your taxes on time to avoid facing heavy penalties imposed by the Government of India. With careful attention to these aspects, you can navigate the ITR filing process smoothly and fulfill your tax obligations effectively.
