A Checklist to Assist You in Tax Return Preparation

The last day to file Income Tax Returns (ITR) is approaching faster than we think – in 10 days, precisely. While everyone is hoping for an extension in the deadline, our advice is not to put it off till the last few days. Here’s a checklist to assist you in filing an error-free tax return and avoid the last-minute rush.

GET FORM 16 FOR SALARY BREAKUP 

Salaried taxpayers are required to give a detailed breakup of their salary income as salary, perquisites, profits in lieu of salary, exempt allowances and deductions. You can get all these figures from Form 16 issued by your employer. If you have not provided all the investment proofs to your employer, make sure to claim them separately while filing your income tax return. 

DOWNLOAD FORM 26AS AND VERIFY TDS/TCS DETAILS

If you had received a payment less than the invoice amount, TDS must have been deducted in such cases. Before filing the return, check whether all such amounts reflect in your Form 26AS. You can download your Form 26 AS either through the income tax portal or your Net banking account. The Form 26AS has details of the total amounts and the TDS on these payments. The form will also have tax collected at source (TCS) details. TCS is levied on certain transactions like the purchase of foreign currency or transfer of money abroad. You can adjust these TDS/TCS amounts against your final tax liability. 

However, if you find that some TDS or TCS that was deducted from the payment has not been credited to you, you will need to ask the deductor to rectify the TDS return. The mismatch could happen if your PAN is misquoted, the deductor has not deposited the TDS or TCS, deposited a wrong amount or maybe the statement has not been filed yet. 

VERIFY TDS AND TCS DETAILS IN FORM 26AS

The Form 26AS has details of all the payments made to you and the tax deducted(TDS/TCS) on these payments. It includes TDS on interests, dividends, etc. Tax Collected at Source (TCS) details will also appear in the Form. TCS is levied on certain transactions, including the transfer of money abroad or the purchase of foreign currency. Check whether all the TDS/TCS deducted on your behalf appears in the Form.

GET CAPITAL GAINS STATEMENTS FROM THE BROKER

If you have made profits from your investments in stocks and mutual funds, you will need to declare capital gains income. You may obtain a consolidated report on capital gains from your broker or through their platform. If you have held equity shares or mutual funds (equity oriented) for more than 12 months, they will be treated as long-term gains, which shall be taxed @10% if the gains are above Rs.1 lakh. Whereas the short-term gains are taxed at 15%.

You can use ClearTax to simplify your return filing, as all you will need to do is upload the capital gains statement. Everything else will be calculated automatically.

MATCH THE INCOME, TDS AND TCS DETAILS IN AIS

Match the income, TDS and TCS details with the details in the Annual Information Statement(AIS). AIS was launched last year, which is a comprehensive statement of all financial transactions undertaken by you during the financial year. All your income details from various sources like salary, professional receipts, investments, rent, dividend, interest, etc., are captured. If you notice any errors, you can rectify them by providing feedback on the income tax portal. Since it is still a work in progress, all the details might not be captured. You are advised to rely on Form 26AS and other transaction records.

REPORT INTEREST ON DEPOSITS AND BANK BALANCE

Most taxpayers overlook interest income and miss out on reporting them in their ITR. With the launch of AIS, it becomes extremely important to declare the interest income earned, whether from deposits or savings accounts.

Don’t forget to report tax-free interests from Sukanya Samriddhi Yojana and PPF as well. Though they are tax exempt, you will be able to explain the source of income if required by the income tax authorities.

REPORT INCOME FROM CRYPTO AND NFTs

A tax rate of 30% has been announced on the gains made from crypto trading, which came into effect from FY 22-23. Except for the purchase cost, no other expenses can be reduced from the sales value. Losses, if any, cannot be adjusted. However, there is no clarity for FY 21-22. The taxpayers may follow the same rules. The taxpayers must promptly report it in their return.

VERIFY DEDUCTIONS AND EXEMPTIONS

Once you have filled in all the income details, do not forget to check if all the deductions or exemptions are pre-filled. If not claimed, you must fill in the relevant schedules. 

FURNISHING DETAILS OF FOREIGN ASSETS

Many taxpayers may miss reporting foreign assets out of genuine oversight or inability to get information timely. Only a taxpayer who qualifies as a ‘Resident and Ordinarily Resident’(ROR) is required to report their foreign assets in the ITR. Other taxpayers whose total income exceeds Rs. 50 lakhs must declare all their assets and liabilities in Schedule AL. 

Foreign assets could include immovable property or capital assets held outside India, foreign bank accounts, insurance or annuity contracts, equity and debt interest in entities located outside India or any other income derived from a foreign source. Failing to declare or inaccurate declaration may result in additional taxes and penalties under the Black Money Act.

E-VERIFICATION OF RETURN

Uploading ITR alone is not sufficient. Verification of ITR is an important step in completing the return filing process. To verify your return, you can either opt for:

• Instant e-verification or
• Verification at a later date must be done within 120 days of filing ITR.

E-verification can be done through:

• DSC . i.e. Digital signature certificate
• Authenticating through a prevalidated bank or Demat account
• Electronic verification code (EVC)
• OTP sent to your Aadhaar registered mobile number or
• Netbanking

For any clarifications/feedback on the topic, please contact the writer at ektha.surana@clear.in