Filing Income Tax Return (ITR) for the first time in India can seem like a daunting task, but with the right guidance, it becomes a smooth and hassle-free process. Whether you are an individual earning income or a business owner, this blog will provide you with five essential points to keep in mind when filing your ITR for the first time.
By following these tips, you can ensure compliance with tax regulations and maximise your tax benefits. Let’s get started!
1.Determine your Applicable ITR Form:
The first step is to identify the correct Income Tax Return (ITR) form that corresponds to your income source and category. There are various ITR forms available, such as ITR-1, ITR-2, ITR-3, and so on, each catering to different types of taxpayers. Carefully assess your income and choose the appropriate form to avoid any errors or discrepancies during the filing process.
Types of ITR Forms for Income Tax Return Filing
- ITR 1: This form is applicable for individuals residing in India with a total income of up to Rs 50 lakh. It covers individuals who earn income from a job, a house property, or other sources. Notably, Non-Resident Indians (NRIs) cannot file ITR-1. Salaried taxpayers can file ITR-1 using Form 16.
- ITR 2: Individuals and Hindu Undivided Families (HUFs) who have income from sources other than their business or profession can use ITR-2. This form is suitable for individuals and NRIs earning income from a job, a house property, capital gains, or other sources. Salaried individuals who have gains or losses from stock trading can also file ITR-2.
- ITR 3: Individuals who need to disclose income from a business or profession should use ITR-3. Salaried individuals earning income from intraday stock trading or futures and options trading should also choose this form. ITR-3 covers income from employment, house property, capital gains, business or profession (including presumptive income), and other sources.
- ITR 4: ITR-4 is suitable for individuals, HUFs, and partnership firms opting for the presumptive taxation system. It is used to report income from a business with a turnover of up to Rs 2 crore, subject to section 44AD taxation. Additionally, ITR-4 is applicable for income from a profession with a turnover of up to Rs 50 lakh, subject to section 44ADA taxation. Freelancers working in notified professions can also file ITR-4.
- ITR 5: LLPs (Limited Liability Partnerships), AOPs (Association of Persons), and BOIs (Body of Individuals) should file ITR-5 to disclose income from their businesses, professions, and other sources.
- ITR 6: ITR-6 is designed for companies to report income from their business or profession, along with other sources of income.
- ITR 7: ITR-7 is specifically for companies, partnerships, and trusts that are exempt from paying income tax.
Each ITR form caters to different categories of taxpayers and covers specific sources of income. It’s important to choose the correct form that aligns with your income sources and filing requirements to ensure accurate and compliant income tax return filing.
2. Gather All Relevant Documents and Information:
To file your ITR accurately, gather all the necessary documents and information beforehand. This includes your PAN card, Aadhaar card, bank statements, salary slips, Form 16 (if applicable), investment proofs, and other supporting documents. Having these ready will help you provide accurate and complete information while filing your ITR.
3. Understand Income Heads and Deductions:
Familiarize yourself with different income heads, such as salary income, business income, capital gains, and others. Determine the applicable income heads relevant to your income sources and understand the deductions available under various sections of the Income Tax Act, such as Section 80C, Section 80D, and more. This knowledge will help you claim eligible deductions and reduce your taxable income effectively.
4. Keep Track of Important Deadlines:
It is crucial to be aware of the deadlines for filing ITR to avoid penalties or interest charges. The due date for filing ITR in India is typically July 31st of the assessment year (AY). However, the deadline may vary depending on specific cases, such as taxpayers covered under tax audit provisions or residents with foreign assets. Stay updated with the latest deadlines and ensure timely filing to avoid any unnecessary complications.
5. Verify and E-File your ITR:
Once you have filled in all the required details, carefully review your ITR form for any errors or omissions. Cross-check the information provided, including income figures, deductions, and personal details, to ensure accuracy. After verification, electronically file your ITR through the official income tax e-filing portal or authorized intermediaries. Remember to keep a copy of the filed return and the acknowledgment receipt for future reference.
Conclusion
Filing your ITR for the first time in India may seem overwhelming, but with the right information and preparation, it becomes a manageable process. By keeping these five key points in mind – determining the applicable ITR form, gathering necessary documents, understanding income heads and deductions, staying updated with deadlines, and verifying and e-filing your return – you can navigate the process smoothly and fulfill your tax obligations effectively. Remember, seeking professional advice or consulting a tax expert can provide further guidance tailored to your specific circumstances. Embrace the opportunity to file your ITR accurately and begin your journey towards financial compliance and tax efficiency.
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch/hear on YouTube: Investing with legends series
Start investing through a platform that brings goal planning and investing to your fingertips. Visit kuvera.in to discover Direct Plans and Fixed Deposits and start investing today.
