Filing out a tax return for the first time? Here are seven important tips
June, 17th 2019
There are many who find income tax calculation and filing to be a tough task. However, reading and learning about it can turn out to be a skill useful for a lifetime. Knowing this basic skill gives you the confidence to deal with your income and taxes. Here are a few important tips that are useful when filing income taxes, especially for first-time taxpayers.
Tips for first-time taxpayers Tax payment period and related terms
Tax is calculated based on the income earned during the period from April 1 of the current year to March 31 of the following year. This period is called the financial year (FY) and the year in which the income is assessed is called the assessment year (AY).
For example, the income accrued during the financial year 2018-19 is assessed in the assessment year 2019-20.
Income tax slabs Taxpayers must determine the income tax slab they fall under to determine their tax liability for a given financial year. The income tax slabs are designed based on the income range per annum.
Each category of income per annum will correspond to a certain percentage of tax. Additionally, a certain percentage of cess will also be applicable.
Individuals (residents and non-residents) need not pay taxes on income up to Rs 2.5 lakh. Beyond this limit, their income becomes taxable based on slab rates prescribed under the law. The basic exemption limit is increased to Rs 3 lakh for a senior citizen and to Rs 5 lakh for a super senior citizen.
Seven important tips for first-time taxpayers Income tax slab for salaried individuals aged below 60 years.
Form 16 is a TDS certificate provided by an employer for salaried individuals. This form includes all the salary details to be entered while filing income tax returns. The latest Form 16 is designed such that it can be directly used to report all the information to be entered in new ITR-1 form. It consists of information on the deductions you have claimed, the salary earned, and exemptions availed.
The employer should provide Form 16 by 15 June every year. Though, the due date for providing Form 16 has been extended to 10 July 2019.
Form 16A Form 16A is another crucial document the taxpayers must rely on for filing his income tax return if he has earned income other than salaries like interest, commission, rent and so on. Details of tax deducted on such incomes are available in Form 16A which is issued to the taxpayer by the party which has made those payments.
Form 26AS This is also very crucial document which must be relied on for filing tax returns. It captures details of all the income earned on which there has been a TDS. Moreover, it is advisable to cross check the details mentioned in Form 16/Form 16A with details appearing in Form 26AS as regards the income and TDS entries. You can view as well as download your Form 26AS by logging in to TRACES through your PAN. The details in this form get updated with every TDS return statement, the deductor uploads with the tax department.
Documents required Not just the first-time tax filers, it is better if every taxpayer plans the tax filing and stay prepared for the task. It is recommended to gather the following documents, so the tax filing process gets a lot easier. Bank account details
The nature of income, the amount and the category of the taxpayer are certain factors that help determine which return is applicable to a particular taxpayer.
Here is a quick look at the relevant ITRs and when they are applicable : ITR-1: For resident individuals having income from salaries, one house property, other sources (Interest etc.) and having total income up to Rs.50 lakh. ITR-2: For individuals and HUFs not carrying out business or profession under any proprietorship. ITR-3: For individuals and HUFs having income from a proprietary business or profession. ITR-4: For presumptive income from Business or Profession.
There are a few websites that automatically pick the relevant form based on the information provided and you don’t have to worry about choosing the right form. Using them can make your tax filing easy.
Not filing income tax returns can lead to a penalty of up to Rs 5,000 even if the taxes were paid. Also, it is important to show tax returns as proof if an individual is seeking a loan, planning to buy a property, going abroad, or purchasing a huge insurance cover. Knowing the basic concepts related to income tax declaration can help newbies comply easily.