An easy-to-use guide to filing your income tax returns
October, 23rd 2020
The due date for filing income tax returns for the financial year 2019-20 is just about a month away now. By now, you know which income-tax returns (ITR) form you need to pick and choose. You can either choose to file your returns through the income tax department’s official e-filing portal or through one of the several private websites that have come up over the years.
While private portals offer a relatively more user-friendly interface, the I-T department’s proprietary e-filing process is not as tedious as it is made out to be.
Here’s a do-it-yourself guide – and tips – for completing the process through the official website.
This is a basic, but crucial task that will ensure a smooth experience. Get all your financial documents – Form-16, Form 26AS (tax credit statement), bank interest certificates, capital gain statements and housing loan interest certificates, among others – in order. These apart, you might have to make some additional disclosures. “If, for example, you have any foreign assets, own any unlisted shares (of an Indian or a foreign company), are a director with a company, or earn more than Rs 50 lakh, then you have to fill up certain additional schedules in the ITR form,” says chartered accountant Vaibhav Sankla, Principal, Billion BaseCamp Family Office.
Register on the e-filing portal, get started
Now, it is time to start the actual tax return filing exercise. Log on to the official e-filing portal and register if you are a first-timer and haven’t already done so. Your PAN will act as your User ID. “Next, determine your residential status accurately, as taxability could vary based on residential status (resident/ Resident (but) not ordinarily resident/non-resident),” says Daphne Anand, CTO, Indiafilings.com.
Once you register and log in, you have to select the assessment year (the year in which you are filing your tax returns; 2020-21) and the correct Income-Tax return form.
Choose the right mode, enter the details sought
ITR-1 – the simplest form – can be completed and filed entirely online on the e-filing portal. You will find it under the ‘e-file’ tab. Go to Income Tax Return < Assessment year (2020-21) < Form ITR-1. Choose ‘Prepare and Submit Online’ in submission mode.
“If you use ITR 1 online mode, all your details (income and tax deducted, for example) are pre-populated. Further, if there is any tax payable, then it auto-fills the tax challan. This helps taxpayers to avoid mistakes, and complete the process very quickly. However, it is best to recheck the details,” advises Sankla. Go through your Form 16 to ensure that all your tax benefits such as house rent allowance, leave travel allowance, tax-saver investment under section 80C, and housing loan interest are accurate. “Since assessment year 2019-20, the government has brought in a feature which pre-fills tax return forms. However, taxpayers should verify that the pre-filled information matches with other supporting documents like Form 16 and Form 26 AS,” suggests Anand.
If you find any detail missing after the comparison, enter the information in your online form. "If there is any balance tax that is due from the taxpayer’s end, that self-assessment tax is to be paid,” adds Anand.
But if you are eligible for a refund, make sure that your bank account number mentioned in the form is correct so that you receive the refund amount without any hassles.
Alternatively, you can also choose the offline mode, download the excel or Java utility, furnish all the information asked for, click on calculate tax, pay self-assessment tax, if any, validate, generate XML file and upload it using the ‘Submit’ tab. Your ITR-V (verification) or acknowledgement form will be sent to your email address.
Pay close attention to ITR-2 requirements
If the form applicable is ITR-2, the process will not be as simple as that for ITR-1. Reporting of capital gains – on the sale of financial and immovable assets – is one of the key reasons for the complexity. You might have to fill up schedule AL (for details of assets and liabilities if your taxable income exceeds Rs 50 lakh) and 112A (for reporting long-term capital gains on equity assets).
From financial year 2019-20 (assessment year 2020-21), scrip-wise reporting of long-term capital gains (LTCG) on sale of listed equity shares and equity-oriented mutual funds purchased on or before January 31, 2018 is mandatory in schedule 112A. These details are key to computing the actual LTCG chargeable to tax after factoring in the grandfathering clause. “Keep the market value as on January 31, 2018 of the listed shares and equity funds handy. While obtaining the market value of equity mutual funds as on January 31, 2018, ensure that you obtain the NAV of the correct plan of the scheme. Taxpayers, and even tax professionals tend to overlook the scheme plan and option types such as growth/dividend option, and direct/regular plan,” cautions Sankla. You can get your mutual funds’ capital gains statement from any of the registrar and transfer agents of mutual funds. Once the details are entered, the submission process is similar to that of the offline mode in ITR-1.
Verify your income tax returns after you filed
Now, a substantial part of your return filing process is over. Yet, it won’t be considered complete until you verify the returns – something that many tend to forget. Remember, it is mandatory for verify the returns within 120 days of having filed the returns online. Again, you can choose the physical as well as the electronic mode to do so. The latter is the traditional method that involves downloading, printing and signing the hard copy and sending it to Income Tax CPC, Bengaluru by post. However, a more efficient alternative is e-verification. You can use Aadhaar-OTP, or your internet banking account, your pre-validated bank account or demat account to generate an electronic verification code (EVC) to complete the process.