All you need to know about filing Income Tax Returns

All you need to know about filing Income Tax Returns

All you need to know about filing Income Tax Returns

Only around 4% of India’s population pays taxes and an even lesser percentage files their tax returns.

There are varied reasons that one hears for not filing a tax return including “all taxes are already paid, additional tax demand will be raised or audits are initiated if tax return is filed”.

This is not always the case. One also needs to check if the tax return was filed accurately. There are certain aspects which, if taken care of, can avoid or reduce instances of tax demands/ notices being issued.

 Form 26AS is a one-stop database for details of all taxes deducted at source on your income, taxes paid by you (either as advance tax or as self-assessment tax) etc. It would also contain details of income paid to you on which taxes have been deducted. In case there is a mismatch between the data in the Form 26AS and your Income tax return, there is every likelihood that a notice issued to you for the shortfall, if any.

 It is important that appropriate form is used for filing your tax return. ITR-1 is to be used only if you have income from salary, one house property and other sources. In case you have income from more than one house property or loss to be carried forward etc., ITR-2A may be used. Further, if there are capital gains, foreign assets to be reported or tax treaty relief to be claimed, ITR-2 may be used.

 An additional reporting requirement introduced in this year’s tax return forms is the mandatory disclosure of assets and liabilities held in India at the end of the financial year, if total income exceeds Rs 50 lakh. The following assets are required to be reported at cost in the tax return along with any liability (loan) incurred in relation to them:

 Land and building Cash in hand  Jewellery and bullions Vehicles, yachts, boats and aircrafts.

In case the asset was transferred to you by way of gift or inheritance, then the cost at which the previous owner acquired the asset would have to be reported.

 If foreign assets like bank accounts are held abroad, you are required to file your tax return to report details of the same, even if there were no transactions in that account. Also, if you have received shares from your employer’s foreign parent company, the same will also have to be reported.

 Since the last year, details of all savings and current bank accounts are required to be furnished, including ones closed during the year.

Previously, only one bank account was required to be reported for the tax refund to be credited. Also, do remember to report your savings bank account interest. A deduction of up to Rs 10,000 is available for the same.

 After e-filing, in case the return is not digitally signed, do verify your tax return within 120 days of e-filing by sending signed ITR-V to the Centralised Processing Centre of Income tax department or by online validation of an Electronic Verification Code.

Failing this, your tax return would not be processed and will be an invalid return.
While the list of dos and don’ts for tax return filing can be endless, the above are some key points that can help avoid errors and resultant tax notices.

(The author is Tax Director, People Advisory Services, EY. Ammu Sadanandhan, senior tax professional, EY, also contributed to the article)

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