NEW DELHI: The last day for income tax return filing for individuals not subject to tax audit, is on July 31. So, those who have not yet filed their ITR, need to gear up and file them timely to avoid late penalties. Whether you have hired a tax expert or not, it’s always beneficial to know the basics of the process.
Firstly, one should know that there are four ITR forms applicable to an individual. For example, if one is a salaried individual or a pensioner with income from one house property and other sources like interest with income up to R50 lakh per annum, then ITR Form 1 is applicable.
However, if one’s income from salary, pension and other sources is more than R50 lakh per annum, then ITR Form 2 should be used. On the other hand, if a person is self-employed with business profits as his or her income source, then he/she can file returns using ITR Form 3. One who is a salaried individual and also has business income can go for the ITR3 form.
ITR 4 can be filed by those who are opting for presumptive taxation.
Form 16/A and 26AS
The first step is to have all the documents handy like the TDS certificate (Form 16/Form 16A), interest certificate (paid or received), home loan statement, bank statement, form 26AS, capital gains statement and Aadhaar card. With the help of these documents, you will be able to know your gross salary and how much TDS has been paid on it.
Form 16 is a TDS certificate issued by the employer which acts as proof of tax payment. It has details like gross salary including perquisites, house rent allowance, professional tax etc. According to tax experts, taxpayers should look at all the components of their salaries, such as basic salary, allowances, perquisites, bonuses, etc.
Meanwhile, Form 16A is also a TDS Certificate, which is applicable for TDS on ‘Income Other than Salary’. Form 16A is issued, when a bank deducts TDS on interest income from fixed deposits, for TDS deducted on insurance commission, for TDS deducted on rent receipts, etc.
“After subtracting applicable deductions such as house rent allowance (HRA), standard deduction, professional tax, etc, one will get taxable income,” said chartered accountant Atul Goel with Atul Goel & Associates. He added that income from other sources like interest income, dividends, or any other kind of income needs to be added to such income.
Form 26AS is accessible on the Income Tax Department website. Form 26AS is a consolidated statement of all the taxes deducted and deposited against the PAN (permanent account number) of the individual. The taxpayer should match the total salary and TDS reflected in form 16 with Form 26AS. These should also be matched with the annual information statement before proceeding further.
Other income
According to CA Chetan Daga, founder of AdvantEdge consulting, Form 26AS and Annual Information Statement (AIS) are good starting points, but they are not comprehensive documents. Any taxable income that is not appearing on Form 26AS and AIS, still needs to be reported on the tax return. Taxpayers should align their reported incomes with Form 26AS and GST returns, he said.
“For transactions in shares and securities, the Tax Department has issued guidance when such transactions are to be treated as business income and as capital gains,” Daga said. Business Income is taxable at applicable slab rates and short-term capital gains are taxable at 15%. Given the difference in tax rates, the classification is crucial.
“Where the frequency of transactions is high or borrowed funds (including broker’s margin) are used, chances are that the transaction will be treated as business income. There is no clear definition of what is “high frequency” and a decision needs to be taken after considering overall facts of the case,” he stated.
According to experts, professionals filing their tax returns under a presumptive taxation scheme should examine if their profession is eligible for presumptive tax in the first place. “Only a specific list of professionals is eligible for presumptive taxation. For instance, an accountant is eligible for presumptive taxation, but a person teaching accountancy is not eligible,” Daga said.
Also, it is to be noted that taxpayers opting for the new tax regime need to file their tax returns by 31 July 2023 (non-audit cases). If there is a delay in filing the tax return, the taxpayer loses the option of opting for the new tax regime for that year.
Also, the taxpayers should keep in mind that they lose the benefit of carrying forward losses to the next year if they file their returns after the due date.
Understanding tax filing
Taxpayers opting for the new tax regime need to file their tax returns by 31 July 2023
Business Income is taxable at applicable slab rates and short-term capital gains are taxable at 15%
Form 26AS is a consolidated statement of all the taxes deducted and deposited against the PAN
Form 16A is issued when a bank deducts TDS on interest income from fixed deposits
The ITR filing due date is July 31