Choosing right form to suitable tax regime, key points to know before filing income tax return

ITR e-filing: As the financial year 2023-2024 (FY24) is over, it is now time to file income tax return (ITR). It is important to understand that the Income Tax Department has simplified the process for filing ITR online.

It could be confusing for many taxpayers, especially those filing ITR for the first time in completing the process. Taxpayers must have a clear understanding of their taxable income, choosing between old and new tax regime and the right ITR forms.

It’s important to note that the new tax regime has become the default regime for income tax return filing from FY24. But, the taxpayers have the option to choose between old and new tax regimes.

The last day for filing an ITR 2024 is July 31 for the individual taxpayers, whose accounts don’t need tax audit.

To file a hassle-free ITR, one should keep the important documents ready. Here’s a look at a few key factors you should know before ITR e-filing.

Calculate your total taxable income

You must have a clear idea of your total taxable income. Your total taxable income is your gross earnings, including your salary and from other sources. The total taxable income can be computed after deduction of tax saving investments and other exemptions.

Choosing the right tax regime

Choosing the right tax regime is one of the most crucial parts. Understanding the difference between the old and new tax regime can help you save more money on your total income tax outgo.

While one can save taxes by claiming deductions and tax benefits in the old tax regime, the new tax regime offers lower tax rates.

The taxpayers with sizable tax saving investments may opt for the old tax regime to claim the maximum benefits of all deductions and exemptions like 80C savings, HRA and home loan repayment, among others.

Taxpayers should seek advice from an expert on which tax regime is best for them.

Right ITR Form

There are four main ITR forms for individual taxpayers and Hindu Undivided Families (HUFs). ITR-1 is for resident individuals who have income from salaries, one house property, and other sources, and have a total income of up to ₹50 lakh in a financial year.

ITR-2 is for individuals and HUFs not earning income from business or profession under any proprietorship.

ITR-3 is for individuals and HUFs having income from a proprietary business or profession and ITR-4 is for those individuals and HUFs who have presumptive income from business or profession.

It’s important to know that, selecting the wrong ITR Form may lead to rejection of your ITR filing.

Get your Form 16

Form 16 is a certificate of TDS (Tax Deducted at Source). It is provided by an employer for salaried individuals. Form 16 contains all the details on the salary and additional benefits like bonus or perks as well as tax deductions.

This helps to calculate the pending tax dues or refunds toward excess tax deductions by the employer, if any.

Form 26AS

Form 26AS is your annual tax statement and serves the purpose of a consolidated tax record. It carries details about tax deducted at source (TDS), tax collected at source (TCS), high value transactions and any tax refunds. Experts recommend cross-checking the details in Form 16 with those of Form 26AS for income and TDS information.

Documents for filing ITR

You must keep your all bank account details, your PAN card, your Aadhaar details, Form 16 (if you are a salaried person), investment proofs, home loan interest certificate (if you have availed home lean), insurance premium payment receipts handy before beginning the process of filing an ITR.

Annual Information Statement (AIS)

The AIS provides the summary of an individual's financial transactions for the year, such as interest, dividends, mutual fund transactions, securities transactions, foreign remittances, etc. There is a 'prefill' option on the ITR e-filing form. When an individual uses that option, details from the AIS are filled in the ITR form.

Verification of ITR

After e-filing ITR 2024, one must verify it. Taxpayers can verify returns filed by them through both offline and online modes. In the online mode, one can verify using Aadhaar OTP or through offline methods. For offline verification, the taxpayer needs to send a printout of the ITR to the Centralised Processing Centre (CPC), I-T Department, Bengaluru.

To sum up

If you miss the July 31 deadline to file ITR, you can do so later by paying late fee until December 31, 2024. Not filing the ITR, when your income falls under tax bracket, could lead to penalty and legal action by the I-T Department.

Moreover, filing an ITR is important as you may be required to show tax returns as proof when you apply for a loan, buy property, get certain insurance policies or travel abroad.