5 Rules To Remember While Filing Tax Returns
Tax season tends to be a dreaded time for most people, viewed as an annual burden associated with the tedium and complexity of filing tax returns. Mistakes are not uncommon in this process, with some taxpayers inadvertently or deliberately neglecting to account for their entire income or failing to adhere to tax regulations. Evading taxes is not advisable, as incorrect returns can lead to serious consequences. Therefore, it is crucial to file accurate income tax returns and meet tax obligations before the due date.
Here are some essential guidelines to keep in mind when filing tax returns:
- Include All Sources of Income: Many individuals may not realize that interest earned from fixed deposits is taxable and should be reported as income in their Income Tax Return (ITR). Even if Tax Deducted at Source (TDS) is deducted, it should still be documented under the respective PAN. Income from dividends, freelance work, stock market trading, and any other sources must also be declared in the ITR. When switching jobs, salaried individuals should consider the Form 16 from their previous employer to calculate taxes based on their consolidated income. If you possess foreign assets or income, it is essential to disclose them in your ITR, as failure to do so can lead to complications with the Income Tax office.
- Be Aware of Tax Benefits: Understanding various tax benefits, exemptions, and relief measures is essential to prevent overpaying taxes. Take note of the following possibilities:
- Standard deduction of Rs. 40,000
- Leave Travel Allowance (LTA) claims
- Tax rebates up to Rs. 12,500
- Special concessions for senior citizens on interest income and health insurance premium payments
Ensure that you consider any applicable rebates, exemptions, deductions, and benefits while filing your ITR.
- Choose the Correct ITR Form: It's not always as simple as using the same ITR form as the previous year, as tax forms may change, and your financial situation may evolve. You may have acquired additional property or started a business, which can impact the form you should use. Since there are several ITR forms available, determining the appropriate one can be challenging. To learn more about the correct form for your situation, refer to our guide on "Choosing the Right Income Tax Form for Filing Returns in 2018-19."
Filing returns using an inappropriate form can result in an Income Tax notice.
- Verify Your Return: Mere submission of the ITR form does not complete the filing process; you must also verify it. You have a 120-day window to verify your returns using methods such as Aadhaar, net banking, or a bank account. Keep in mind that if your tax return is not e-verified within 120 days, it will not be considered valid, even if you've paid your taxes.
- Verify Your Residential Status: If you frequently travel abroad or work overseas, it's essential to check your residential status. Different ITR forms are available for residents and non-residents, and using the wrong form is a violation. Consult a tax expert or financial advisor to confirm the appropriate form for your status.
- Know When to File: Not everyone is obligated to file tax returns. Individuals with a gross income less than Rs. 2,50,000, senior citizens earning less than Rs. 3,00,000, and super senior citizens with income below Rs. 5,00,000 are exempt from filing returns. However, even if you don't fall into these categories, it's advisable to file returns, even if you don't owe any tax. Consistent compliance with tax obligations can improve your credit score and facilitate loan approvals and other financial transactions.
In conclusion, filing tax returns need not be an overwhelming experience if you follow these golden rules. By ensuring accurate reporting, understanding available tax benefits, using the correct ITR form, verifying your return, confirming your residential status, and adhering to filing requirements, you can navigate the tax season with confidence."
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