The due date for filing ITR (Income Tax Return) is 31 July 2023, which is fast approaching. Thus, preparing and keeping things ready before filing your ITR is advisable to ease the filing process. Below are the preparations to do before filing your ITR.
For salaried employees
If you are a salaried employee, you must download Form 16, which contains particulars of your salary and tax deductions. By now, most salaried taxpayers would have received Form 16. After receiving your Form 16, it is essential to scrutinise the details mentioned to ensure that all exempt allowances are shown.
Exempt allowances include Leave Travel Assistance (LTA) and House Rent Allowance (HRA). You also should check if your employer has considered the various deductions and investments you declared, along with document proof under Chapter VIA while arriving at your taxable salary.
There may be some omissions or errors in considering your deductions or tax exemptions due to delay in submission of the relevant proof or oversight by the company finance department. These deductions relate to various items like health insurance premiums, life insurance premiums, interest on education loans, home loan repayment or school fees, etc.
If the deductions are not mentioned correctly in Form 16, you need to inform your employer or finance department about taking corrective action and claim them while filing your ITR. Also, verify if the gross salary amount mentioned in Form 16 is as per the salary slip received or the amount credited to your bank account after accounting for many deductions like professional tax, Provident Fund (PF), etc.
For business or profession income
If you are engaged in a profession or business, check if you can opt for a presumptive taxation scheme based on the turnover or gross receipts. If the turnover exceeds the prescribed limits, you should get your books of accounts audited and have to prepare audits. You should upload the audit report to the tax department website.
When your income/receipts are subject to Tax Deduction at Source (TDS), you should prepare a reconciliation statement of the number of invoices received and payments with TDS. You must download your Annual Information Statement (AIS) and Form 26AS from the income tax website and verify that the TDS amount as per your books of accounts is reflected in these statements. Get clarification from your customer or client when there is a variation between the two records.
The discrepancy may be due to non-receipt of the invoices, accounting of invoices in different accounting years or non-deposit of TDS to the government. When you are following the cash basis of accounting, you should identify the tax deductions you need to carry forward to the subsequent years in case you have not received the payment during the year.
When you have transacted in mutual funds and shares
When you have invested in mutual funds, you should get a detailed statement of the transactions done during the financial year. Some of these transactions, like Systematic Transfer Plan (STP) and switch within the same fund houses, will not reflect in your bank account and thus may be unreported. When investing in shares through brokers, you must get a detailed statement for all transactions during the year.
You need to verify if all the transactions appearing in the statement received by the broker are accounted properly in your income computation. You should be careful, especially when you have intra-day transactions where you might have bought some shares against shares sold on the same day, which may not be reflected in your bank statement.
When you have interest income
When you have derived interest income from bank fixed deposits, you should get the interest certificate from the bank for the entire financial year to ensure that all the interest income, including the accrued interest, is considered while filing ITR. When you have cumulative deposits, ensure that the interest accrued during the year is included in your income.
When you follow the cash basis of accounting, ensure that the entire interest concerning the fixed deposits matured during the financial year is included in your income even if you have renewed it.
Verify transactions with Form 26AS and AIS
You must download the latest Form 26AS and AIS to verify that all the interest shown is being offered for tax and that full tax credit for TDS as per your books is shown on these records. AIS has details of various financial transactions entered by you during the financial year. Ensure that the income regarding those transactions is considered in your ITR.
Make sure to do these preparations before filing your ITR within the due date of 31 July this year for smooth ITR filing.
For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@clear.in
I am an Advocate by profession. I interpret laws and put them in simple words. I love to explore and try new things in life.
