As an Indian citizen with one or more sources of income exceeding 2.5 Lakhs per annum, filing your Income Tax Returns is a legal obligation. Your Income Tax Returns serve as a statement declaring that any dues owed by you to the state are cleared. And in the event that you qualify for tax refunds owed to you by the state, filing your ITR allows you to lay claim to this amount and receive it from the government.
Here are a few things that are helpful to keep in mind when filing your Income Tax Returns:
The parameters of your tax-liability are subject to revision.
Staying up to date on the tax-slabs and sources of income recognised by the Income Tax Act will allow you to calculate your tax liability with precision, identify the exemptions that you qualify for, as well as organize all the necessary documentation, including the Forms and Statements from your bank and broker, prior to beginning the actual process of filing your returns.
The government has simplified the process of filing returns with an online e-filing portal.
You can log on to the government’s e-filing portal to greatly simplify the process of filing your Income Tax Returns. Access a number of digital methods by which you can calculate and file your income tax returns, including the use of a Java-based application to calculate and clear your tax liability. The online portal has also significantly eased the process of verifying your ITR. First-time online ITR filers can register on: www.incometaxindiaefiling.gov.in .
Take advantage of deductions and exemptions.
The government offers a number of deductions and tax exemptions aimed at encouraging the practice of financial planning among its citizens. Many people fail to take advantage of these and save significant amounts on their tax liability, purely out of ignorance. Go over the tax exemptions permitted by the Income Tax Act before filing your returns and identify those relevant to you. Include these details and the appropriate documentation when filing your returns to avail their benefits.
Know the difference between FY and AY.
Entering the incorrect year when filing your Income Tax Returns can considerably delay and complicate the process. To avoid this, it is crucial to be clear on the terminology before beginning to file your returns. When filing your returns you do so for the previous year, or the Financial Year. However, you do this in the Assessment Year. In other words, if you file your income tax returns next year, before the due date, then you’re filing it for the Financial Year, or FY, 2019-20; and you are filing it in the Assessment year, or AY, of 2020-21.
Verify your Income Tax Return.
It is mandatory to have your ITR verified and processed by the Central Processing Centre (CPC) of the IT Department. The governments e-filing portal has simplified this process by offering digital alternatives to the conventional method of sending a copy of the ITR-V form to the CPC in Bengaluru. Now you can verify your ITR through a number of ways including Aadhar-based OTPs, Digital Signatures, and Electronic Verification Codes.
Provide complete and correct information for KYC.
Ensuring that your KYC details such as your email ID and phone number are accurately filled ascertains that you will receive the Electronic Verification Code that is essential to complete the verification process digitally. The communication of any important details also relies on the provision of accurate contact information by you.
Work with a financial planner.
Get in touch with a financial planner to simplify the process of getting all the necessary statements and documentation and recognizing the liabilities and exemptions that are applicable to you as per tax law. This will help you avoid paying more than required, while also giving you the guidance necessary to create a tax-friendly investment portfolio. You can use this legal obligation as an incentive to bring stability to your finances and initiate some smart financial practices.