Income Tax Return or ITR is a form which is to be filled and filed by each and every income tax assessee. The Income Tax Act of 1961 and Income Tax Rules of 1962 require citizens of India to compulsorily file their return with the Income Tax Department of India. This return must be filed at the end of every financial year. It’s our primary responsibility to file our return before the due date, as specified by the Government of India (which is July 31 this year for individual taxpayers). But filing is not easy my friends; we need to be really careful regarding every minute detail. Missing out on a single detail could lead to numerous consequences. Therefore, to make your way easy breezy, we are providing you beforehand with the list of challenges which may create hurdle in the filing of ITR. Continue reading to prepare well for the tax filing deadline.
The challenges faced by taxpayers include:
1. Confirm your Taxable income
Now question arises as to what taxable income actually is? Well, if you are a little bit confused about taxable income, then we would like to tell you that taxable income is the amount of income within a span of one financial year on which income tax of an individual must be calculated. Meanwhile, this is also called adjusted gross income or gross income. If you are calculating your taxable income, then you must include your wages, bonuses, salaries, tips, rent, interest income, dividends/ investment income, and gains from sale of shares, gold or house property. In case you are missing on a few, then make sure that you download form 26AS from the website of Income Tax department. This form will clearly reflect all the income received and amount of tax deducted. Additionally, it will let you know about the exempted income while you are filing your ITR. Other than this, it will provide you complete details regarding tax deducted at source, taxes collected from various sources, all the necessary information regarding advance tax, along with the details of refund, and high value transactions like sale of shares/ mutual funds. Forms like these will help you to reduce the possibility of getting a demand notice from the income tax department.
2. Which ITR Form to be Filled?
Well, Income Tax Department is responsible for issuing seven ITR forms. The selection of the form depends on your sources of income. Meanwhile, the number of forms issued by the tax department changes every year. For example, ITR1 must be filled by Resident Indian individuals and Hindu Undivided families (HUFs) if their income from salary/ pension, house property and other sources is less than Rs 50 lakhs, and there are no capital gains. Individuals and HUFs who have salary/ pension and income from house property/ other sources totaling more than Rs 50 lakhs, or income from capital gains, or foreign income, during the relevant financial year must file ITR2. Even non-resident individuals earning salary income abroad have to file ITR2. However, taxpayers having income from business or profession cannot use this form. That is why, before selecting the form, do ensure that you know all the conditions related to the filing of ITR.
3. Calculate Necessary Deductions
In case you wish to save tax, then as per the Income-tax Act, 1961, under Section 80C, you will have to invest around Rs1.5 lakh of your income during a financial year in life insurance premium, public provident fund (PPF), employee provident fund (EPF), Equity-linked saving schemes (ELSS), national pension scheme (NPS) or you can opt for national saving certificates (NSC) or tax saving mutual funds. You can also claim deduction for the tuition fee paid for up to two children to any school, college or university, for a full-time course. Other than this, repayment of the principal of a home loan is also eligible for tax deduction under 80C. Similarly, contributions made by an individual for medical insurance of up to Rs 25,000 for self, spouse and dependent children can be claimed as deduction under 80D. For parents aged above 60 years, an additional deduction of Rs 50,000 paid as insurance premium is allowed. Hence, make sure that you are claiming all your legitimate expenses as deductions, which are allowed as per the Income Tax rules.
4. Ensure that Correct TDS is Filed in ITR
So, when it comes to filing of ITR, another challenge you may come across is that of TDS. It must be filled correctly in your forms, as per the terms and conditions mentioned in 26A and form 16A or 16. An important point you must remember is that TDS (Tax Deducted at Source) is not only deducted from your salary but also from a host of other payments, such as interest income received on your fixed deposits, and even rent if it exceeds Rs 50,000 per month. This should reflect in your Form 26AS, which is like a tax credit statement. In case there is a certain mismatch from 26AS, then the filed return may be incorrect. This may lead to further consequences.
5. Filling Form 16S Multiple Times may Create Trouble
Another challenge that most of us face is that of switching jobs multiple times during a financial year. In this case, filling of form 16S multiple times may create a problem for you. The level of difficulty will enhance if, during that year, you keep on investing in other multiple tax-saving schemes. In order to resolve Form 16 related issues, you not only need to sort out the matter with your current employer but previous employer also needs to be taken into consideration. In case this year you are planning to file return then multiple filling of form 16S may create difficulty and could be a biggest distraction in filing up of your ITR.
6. Proper Tax Proofs must be Submitted to Employer
The moment your tax declaration is submitted to your employer, make sure that all your tax-saving schemes and investment related savings documents are disclosed. In case you are willing to enjoy the exemptions and allowances from your salary income, then don’t miss out to showcase all the necessary proofs to your employer. Also, this year, the format of Form 16 to be issued by the employer has changed. Check that your name, address and PAN is correctly mentioned, and take care to cross-verify tax deductions in Form 16 with your Form 26AS. This will help you to claim your tax deductions without a hitch, especially at the time of e-filing. In case you have not submitted proper documents to your employer, then do ensure in future that their timely submission is done.
7. Finding Difficulty in Getting HRA Tax Exemptions
In case you are unaware of HRA (House Rent Allowances), then before e-filing do ensure that you calculate your HRA exemptions properly. Internet and technology have really made such calculations easy and comfortable for each one of us. Interestingly, ‘n’ numbers of HRA calculators are available online. Moreover, HRA calculations help us to confirm how much exemption we can get on the rent paid by us. If you are really planning to avail House Rent Allowances (HRA), then timely submission of documents at your workplace is a must. In case you are residing in a rented house, then make sure that the receipt of rent, along with rent agreement must be there in the drawer of your employer, that too of your landlord. These documents are mandatory if you are willing to enjoy HRA benefits. Moreover, PAN (Permanent Account Number) of the landlord is also meant to be submitted if rent exceeds Rs 1,00,000. So, before joining make sure that all the necessary documents and information related to HRA is shared with the Human Resource Manager of your company. In case you miss out on a single document, then getting exemption might become problematic for you.
Even if you don’t get HRA as part of your salary structure, you can still claim deduction for payment of rent for your accommodation under section 80 GG of the Income Tax Act, 1961, provided you take into account all the rules.
8. Forgot Password? Here you will face difficulty
Well, this is something really important. In this era, where internet is the source to remember everything, be it mobile numbers, social networking passwords or any other information of vital importance, forgetting passwords is really common to each one of us. What we are pointing out towards is that your User ID and password must be on your tips. Another challenge which arises in the course of e-filing is that of account details that we usually forget, because it is used just once. Even if you avail the services of a C.A, do ensure that you always remember your IDs and passwords of the e-filing. You must try accessing your account at least twice a year. Moreover, the answers to the secretive questions asked while logging in must be written as a record for future use.
9. Advance Tax to be Paid on Time
Okay, advance tax is something which must be paid by you to the Income Tax department, if your liability during a financial year is Rs 10,000 or more (after taking TDS into account). This rule also applies to NRIs. In case of advance tax, you can pay your tax on quarterly basis instead of giving lump sum payment at the year end. This tax is also known as “pay as you earn tax”. This liability could be shed off from your shoulders with easy installments on the dates assigned by IT department. Meanwhile, advance tax is to be paid by all, whether you are a freelancer, salaried, or running a business. Only senior citizens who are 60 or up, and do not have earnings from business or profession, are exempted from paying this tax.
As per the rules and regulations of income-tax department, you will have to pay 15% on quarterly basis. This amount needs to be submitted by June 15. Another installment of 45% (subtract already paid advance tax) needs to be cleared off on or before September 15. Third installment needs to be completed by December 15, which is 75% (once again already paid advance tax needs to be deducted). The last installment of this cycle will finally be over on or before March 15. At the end, 100% clearance of advance tax will be done, as all the already paid liability will be deducted from it. The late submission of these taxes may lead to payment of penal interest, so in order to overcome this challenge, make sure that the advance tax is submitted by the dates assigned by the government of India.
10. Last Minute Check before Final Submission of ITR
Filing ITR is really an important task. Before final submission of ITR, make sure that you crosscheck the minute details several times that you have filled. Mistakes can lead to delayed processing and filing of form once again. Meanwhile, this might lead to the payment of late fees as applicable by the income tax department.
We know very well that you are busy, but we respect your time and money. So, to make things easier for you, we are providing you with the list of obstacles that must be in your mind before filing your ITR by July 31.