Planning to file ITR? Know how to prepare yourself for Income Tax Return filing for AY 2021-2022

ITR Filing Tips for FY 2020-21 (AY 2021-2022): The deadline to file the income tax return for salaried or small business individuals has been further extended to 31st December 2021.

ITR Filing Tips for FY 2020-21 (AY 2021-2022): The deadline to file the income tax return for salaried or small business individuals has been further extended to 31st December 2021. After registration on the e-filing portal, the taxpayers must do preparatory work before filing the income tax return. Here is a guide on how to prepare for filing your income tax return.

Find out which ITR form is applicable

First of all, evaluate your income sources to find out which ITR Form is applicable. Selecting the proper ITR Forms is essential for the taxpayers. The taxpayer has to choose the form based on the type of income source and category.

The government has specified seven ITR forms for FY 2020-21. ITR forms ITR-1, ITR-2, ITR-3 and ITR-4 are applicable for individuals. If the ITR forms are not selected correctly, you may need to file ITR again on the notice from the income tax department. Various online ITR filing platforms automatically detect which ITR is suitable for you and it best to rely on them.

Collect and collate documents related to various income sources

The Income Tax Act categorises income sources into five heads: salary, house property, business and profession, capital gains, and other sources. To know all your sources of income, you should collect and collate data to consolidate all the sources of income. For instance, you can collect a bank account statement, interest certificates, capital gains reports from the broker, Form 26AS and Form 16/16A.

Form 16 is a TDS certificate issued by the employer to the employee every year. It contains a summary of the salary paid to the employee and TDS deducted from it. Similarly, Form 16A is issued by the deductors for TDS deducted on non-salary income. For example, TDS deducted on interest income, rent receipts, professional receipts, etc.

The taxpayers can see the consolidated view of TDS deducted by all the deductors in Form 26AS. The taxpayers can download Form 26AS from the income tax portal.

Avoid mistakes while reporting income or deductions in ITR

After collecting all the information, broadly summarise your financial information, such as professional receipts received, rent received, dividend, capital gain/loss, salary, savings interest, etc. Similarly, you can collect all the information about investments made during the year for tax saving purposes. With this practice, you can avoid underreporting of income and underclaiming of the deductions.

Carefully verify Form 26AS

The income tax department considers information as per Form 26AS. Along with details of TDS deducted by the deductor, income credited or paid are also mentioned in Form 26AS. You can find all the income details in Form 26AS for the relevant financial year on which TDS is deducted. For example, income from salary, interest from deposits in banks, dividend income, the value of the immovable property sold during the year, etc. For the taxpayers having business income and who file GST returns, the turnover declared in the GSTR-3B return is displayed in Form 26AS. Apart from the income on which TDS is deducted, Form 26AS also shows high-value transactions entered by you during the year.

Hence, the taxpayer should prudently include all the incomes in the income tax return. Also, verify the income details and the TDS amount in Form 26AS. If there is any mismatch in Form 16/16A and Form 26AS and you declare income below the income mentioned in Form 26AS in the income tax return, the income tax department may issue a notice for non-disclosure of income. One should also verify whether the entries in Form 26AS belong to them. Hence, it becomes imperative to reconcile your income as per Form 16/16A and Form 26AS.

At the time of filing your return there is an option of pre-filing certain incomes such as salary, dividends, capital gains, and other data from Form 26AS. However, one must verify the information and add data not captured in the income tax return.

Compute income tax liability as per the new or old tax regime

From FY 2020-21 onwards, the individuals and HUF can choose between the new and old tax regimes. The new tax regime offers concessional tax rates. Whereas in the existing tax regime, the taxpayer can benefit from various exemptions and deductions. Individuals opting for a new tax regime for the FY 2020-21 should not forget to file Form 10IE. Form 10IE is a declaration to be filed by the taxpayer to opt in or opt out of the new tax regime. The taxpayers can submit the said form electronically through the income tax e-filing portal. It has to be furnished before filing the income tax return of the relevant assessment year.

Determine the income tax liability based on the tax regime (old or new) that is beneficial to you.

Pay income tax dues before filing the income tax return

After computing the income tax liability, the taxpayer should deduct prepaid taxes from the total income tax liability to calculate the net tax liability. One should pay the income tax dues before filing the income tax return. It is important to note that if the self-assessment tax liability is more than Rs 1 lakh for FY 2020-21, the due date to pay tax was 31st July 2021, even if the return filing due date is extended to 31st December 2021. Hence, any taxpayer who does not pay self assessment tax (where liability more than Rs 1 lakh) before 31st July 2021, has to pay interest at 1% per month or part of the month calculated from the next day of 31st July 2021 to the actual date of payment of tax.

This is all required to file the income tax return. Once you have done with all the above basic requirements, you just need to report all the information in the income tax return and submit it to the income tax department.