There are numerous documents that must be prepared before filing an ITR, including investment proofs, Form 16, TDS certificates, and so on. However, in their haste, taxpayers frequently overlook minor details that, if overlooked, can jeopardize the entire process. It’s often said that the only certainties in life are death and taxes. According to that adage, the importance of filing your returns is critical because it is a constant part of our corporate lives until we retire. Failure to file your income tax returns on time may land you in hot water, which may include monetary penalties in some cases.

As a result, in order for you to file your returns in a timely and efficient manner, Phoenixtax- Tax consultant in Chennai have compiled a list of the most important things you should keep in mind as you go about the task.

  • Select the appropriate ITR form.

For an accurate filing, it is critical to select the appropriate ITR form based on the taxpayer’s residential status and income earned from various sources. Form ITR-1, for example, can only be used by a resident individual with a total income of up to Rs 50 lakh from salary, one house property, and other sources. It cannot be used by a taxpayer who is a non-resident or who is not an ordinary resident, or who has capital gains for which form ITR-2 is required.

  • Choose between the new and old tax regimes, whichever is more advantageous.

In lieu of foregoing prescribed exemptions and deductions, the Finance Act of 2020 introduced a new optional tax regime for taxpayers with modified tax slabs and rates. When filing their tax returns, taxpayers will be able to choose between the old and new tax regimes. Salaried taxpayers can also change the regime that they previously declared to their employer when filing their ITR.

  • ITR forms that are pre-filled

This year, ITR forms will import pre-fill information such as the taxpayer’s personal information as well as details of salary income, dividend income, interest income, and capital gains from Form 26AS. This would make it easier for taxpayers to file ITRs because most of the necessary information would already be captured.

As a result, it will be necessary for individuals to verify this information and make any necessary additions of income not reported in the tax return. However, if the information is incorrect, you should contact your bank/income payer, etc. to correct the data in their quarterly TDS returns/other filings so that accurate information is reflected in your Form No. 26AS.

  • Form 26AS is used to verify prepaid taxes.

It is necessary for taxpayers to use Form 26AS to verify their prepaid taxes, including tax deducted at source, advance tax, and self-assessment tax. Any discrepancy should be reported to the employer (in the case of salary income), other payers (in the case of other incomes), or banks (for advance tax/self-assessment tax payments) for necessary rectification, which is required for the tax department to process the tax return in a timely manner.

  • Recognizing the old and new tax regimes

The number of tax slabs in the new regime, which was introduced in Budget 2020, is greater than in the previous regime. For example, under the old tax system, anyone earning more than ten lakh rupees per year was required to pay 30 percent tax on their earnings. This category has now been divided into two slabs under the new tax regime. Under the new regime, people earning between 10 and 12.50 lakh per year must pay 25% tax on their earnings, while those earning more than that must pay 30% tax.

The old tax regime, on the other hand, provided the option of exemptions and deductions, which could significantly reduce one’s tax liability. This benefit is not available to taxpayers under the new tax regime.

  • Various requirements for disclosure

The following asset and financial investment disclosures are required as part of an ITR:

  1. Detailed information on all Indian bank accounts
  2. Detailed information on unlisted equity shares
  3. Detailed information on directorships held in Indian or foreign companies
  4. Schedule Assets and Liabilities: If an individual’s total income exceeds Rs. 50 lakh, details of specified assets [such as land, building, movable assets, etc.], financial assets (bank deposits, shares & securities, cash in hand, etc.), and corresponding liabilities must be disclosed.
  5. Schedule Foreign Assets: Ordinarily Resident Individuals are required to provide details of assets held outside India (both as an owner and as a beneficiary) in accordance with specified disclosure guidelines.
  6. Exempt Income Reporting

Taxpayers must report exempt income under ‘Schedule EI,’ which includes agricultural income, exempt income of minor children, income not chargeable to tax under the Double Taxation Avoidance Agreement, and so on.

  • During the year, there was a change in employment.

If the taxpayer has provided the current employer with the necessary salary and income details earned from previous employer(s), the current employer can issue a consolidated Form 16 and 12BA on which an ITR can be filed. Otherwise, it may result in a TDS shortfall due to the duplication of slab benefits, deductions, and exemptions provided by all employers. In that case, any additional taxes owed on the return, as well as any applicable interest, should be paid before the tax return is filed.

  • Certain cases necessitate the submission of an ITR.

The Finance (No. 2) Act of 2019 required ITR filing for select individuals who met certain specified criteria during the relevant fiscal year, even if such individuals were not required to file an ITR due to having taxable income. They would be required to provide the same if they engaged in high-value transactions during the relevant fiscal year, as follows:

Payment of more than Rs 1 lakh in electricity bills; ii) Deposit of more than Rs 1 crore in aggregate in one or more current bank accounts; iii) Spending more than Rs 2 lakh in aggregate on overseas travel for self or anyone else.

  • Consequences of failing to file an ITR by the due date

The taxpayer may be unable to file the ITR by the due date for a variety of reasons, including a lack of relevant documents/information, a lack of time, personal obligations, and so on. Regardless of the reason, failure to meet the ITR filing deadline may result in a variety of consequences under the Act, including the imposition of a late filing fee, the payment of interest on the balance tax liability, ineligibility to carry forward certain losses, and so on.