The income tax return filing season is at its peak with just a month left for the deadline on July 31, 2024. As per the Income Tax Act, every individual and entity is required to file their income tax returns, if their earning income is above a certain threshold.
Filing income tax returns (ITRs) can be a daunting task if one is doing it for the time. The first-time taxpayers must be aware of the basic tax laws, deductions and exemptions, so that they can follow the filing procedure.
Form 16
For salaried individuals, the first step to file ITRs is to get hold of their Form-16 from employers. This document is important as it is an essential TDS Certificate provided by employers to employees that documents the TDS (Tax Deducted at Source) from salary and other components.
Companies deduct TDS (Tax Deducted at Source) from employees’ salaries every month and deposit it to the government. This process occurs once the salary is transferred to the employees’ accounts. Form 16 is a comprehensive document that includes all the necessary information needed for filing income tax returns. Employers are obligated to provide this form to their employees at the end of each financial year. Typically, employers issue Form 16 to employees either by late May or before mid-June annually.
There are two parts of the Form 16. Form 16-A summarises an employee’s tax deductions made by the employer and sent to the I-T department. It represents the employee’s tax situation but should not be mistaken for Form 16. Both Form 16 and Form 16-A serve different purposes.
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Tax Regimes
One should note that there are two types of tax regimes — Old Tax Regime and New Tax Regime. The tax slab rates are different for both.
Old Tax Regime
The old tax regime, which has been in place for years, provides several tax exemptions and deductions for individuals. Some of the frequently claimed exemptions and deductions include house rent allowance (HRA), leave travel allowance (LTA), deductions under Sections 80C, 80D, 80CCD(1b), 80CCD(2), and others.
New Tax regime
The NDA government under PM Narendra Modi introduced a new tax regime as an optional alternative to the existing tax system, from April 1, 2020, for the financial year 2020-21. In the Union Budget proceedings of 2023, Finance Minister Nirmala Sitharaman announced that the new tax structure would now serve as the default regime.
The New Tax Regime features revised tax slabs and concessional tax rates and applies uniformly to all categories of taxpayers, including individuals, Hindu Undivided Families (HUFs), and Association Of Persons (AOPs). As per the current regulations, if taxpayers fail to declare their preference with their employer, deductions will be calculated based on the New Tax Regime. It is essential to note that the new tax system comes with limitations. Exemption claims for deductions such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), Sections 80C, 80D, among others, will not be applicable under this regime, as these benefits were designed for the Old Tax Regime.
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Total taxable income
First-timer tax filers should know that there is standard deduction in place. To reach their taxable income, tax deductions and exemptions should be subtracted from the gross earnings.
Tax deductions refer to expenses that you can subtract from your total income, thus lowering the amount of income that is subject to taxation. Some common deductions in India include expenses related to health insurance, home loans, education loans, and donations to charitable organizations.
Tax exemptions are specific amounts that can be excluded from your total income, ultimately reducing your taxable income. In India, certain allowances like house rent allowance (HRA), travel allowance, and leave travel allowance (LTA) are examples of tax exemptions and are not subject to taxes up to a specific limit.
Form 26AS
Form 26AS serves as your yearly tax statement encompassing vital details such as tax deduction/collection specifics and income sources. This document provides an in-depth overview of various revenue streams, including salary earnings, business profits, professional receipts, and interest accrued from bank investments.
The information within Form 26AS is extracted from the tax returns submitted by entities responsible for deducting or collecting tax, like employers, deductors, collectors, and financial institutions. These details are reported to the Income Tax Department on a quarterly basis. Moreover, Form 26AS also captures data related to tax deductions associated with real estate transactions and virtual assets transactions.
Annual Income Statement
The Annual Information Statement (AIS) is a comprehensive summary of a taxpayer’s financial details, as presented in Form 26AS. It includes information on Tax Deducted at Source (TDS), Tax Collected at Source (TCS), interest, dividends, stock market activities, and mutual fund transactions. The AIS extends the information available in Form 26AS, offering a detailed overview of tax deductions, payments, and financial activities.
Taxpayers can access Form 26AS and the AIS on the Income Tax portal (incometax.gov.in) by registering with their PAN as the user ID before initiating the download process.
Documents you need to file ITR
1. PAN and Aadhaar
2. Form-16
3. Interest certificates
4. Annual Information Statement
5. Form 26AS
6. Capital gains details
7. Tax saving investment and expenditure proofs
> Premium paid towards Life Insurance Policies
> Amount invested in Equity Linked Savings Schemes (ELSS)
> Employee Provident Fund (EPF)
> Public Provident Fund (PPF)
> National Pension System (NPS)
8. Home Loan Statement issued by the lender
