Income Tax laws mandate a person to report his/her incomes earned on an annual basis to the tax department. These incomes are required to be reported in the ‘Income tax forms’ notified in this regard.

Despite the fact that the government has taken amicable measures in which various information is pre-filled in the ITR form.

However, filing an ITR form still requires a careful reconciliation of various documents/information if the taxpayer earns money from multiple sources. 

It is important to know that in the event of a deviation in ITR Form from the information already available to the taxman, the individual may receive an intimation/notice from the tax department. As the deadline for filing ITRs for individuals (who are not subject to tax audit) approaches (July 31, 2022), here are some most basic dos and don’ts to help you avoid last-minute headaches.

Choose the correct ITR

An individual assessee must choose the appropriate ITR form to disclose his sources of income. For example, a salaried person must file ITR 1 (the simplest form), whereas ITR 2 is required when a person earns income from capital gains and his total income exceeds 50 lakhs.

Similarly, in the case of business income, ITR 3 Form (the most comprehensive Form for individuals) must be filed, and in the case of presumptive income, ITR 3 or ITR 4 can be filed. Hence, selecting the correct form is very critical; otherwise, your ITR may be invalidated.

Most important documents

Here is the list of most important documents which must be thoroughly reviewed and considered before filing an ITR.

•  Annual Information System (AIS) and Taxpayer Information Summary (TIS)
•  Form-16 Part A & B (for salaried person)
•  Form-16A (for non-salaried person)
•  Form 26AS (TDS Credit statement)
•  Interest certificates (for FDR’s and Savings)
•  Portfolio statements (for Capital Gains/ Losses)
•  Dividend Income
•  Chapter VI-A deduction (LIC, PF, Medical, etc.)
•  Interest paid on house property
•  Deemed rental income, if person owns more than two house properties
•  Threshold income for an individual to file an income tax return 

An individual is required to file a return only if his or her income exceeds the amount of Rs 2.5 lakhs. However, the income must be computed without taking into account any exemptions or deductions. That is, if a person’s income exceeds Rs 2.5 lakhs without claiming a deduction (LIC, PPF, medical claim, etc.), he must file an ITR. Further, even if his taxable income is less than the threshold limit, an individual must file a return if he-

• wishes to reclaim excess tax withheld in the form of TDS.
•  has incurred losses under any head of income (viz. business losses, short-term or long-term capital loss) and wants to carry those losses forward to be set off against subsequent years' income, then return of income must be filed on or before the due date of filing of return.
•  has spent more than Rs 2 lakh on travel to a foreign country.
•  has incurred expenses in excess of Rs 1 lakh for electricity bills. 

Disclosure of assets and liabilities

A person whose total income exceeds Rs 50 lakhs is required to disclose the details of his or her assets and liabilities, such as land and buildings, bank deposits, shares, securities, jewellery, car, and so on.

Notably, if a taxpayer is classified as a non-resident or resident but not ordinarily resident, only the details of assets and liabilities located in India must be disclosed.

Disclosure of foreign assets 

The schedule FA (Foreign assets) in the Income-tax return is required to be furnished separately by a resident individual who has income sourced from foreign countries or holds assets outside India.

Disclosure of all bank accounts

From AY 2015-16, taxpayers have been required to provide information on all bank accounts held by them in India or abroad, including those with joint names.

One must disclose the bank name, account number, type of account (savings or current), IFS code, number of bank accounts held, and names of bank joint holders.

Non-filing of returns attracts punishment

Non-filing of ITR and default in tax payments attract heavy interests, penalties and prosecution. Even, the prosecution can lead to rigorous imprisonment from 3 months to 2 years (and when the tax sought to be evaded exceeds 25 lakhs, then the punishment could be 6 months to 7 years).

Taxability of retirement benefits like PF and gratuity 

For Government employees, receipt of Gratuity and PF on retirement are completely exempt from tax. In the case of private employees, the amount of gratuity exemption is computed through a formula prescribed by the provision of the Income Tax Act. 

A standard deduction of Rs 50,000 not applicable to persons receiving a family pension is taxable under the head income from other sources and not under the head salary.

Accordingly, a standard deduction cannot be claimed as it is available only against salary income.

Additional benefits/exemptions to senior citizens

Certain additional benefits/exemptions are available for Senior/Super Senior citizens under the income tax law.

• They have been exempted from paying advance tax.
• Section 80TTB allows a higher deduction for an interest income of 50,000. 
• They are eligible for a higher deduction of up to Rs 50,000 for payment of premiums for medical insurance policies.
• Senior citizens over the age of 75 who have pension income and no other income except interest in the same bank account as the pension are exempt from filing an income tax return, subject to the provision of a declaration in a prescribed bank.

The author is a director (Corporate & International Tax) with CA firm AMRG & Associates.