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Non Life Insurance - Income Tax Return filing: 10 things to keep in mind while filing ITR for AY 2020-21
15-Dec-2020

With the extended due date for filing individual tax returns (individuals who do not have tax audit) around the corner – 31 December 2020, it would be advisable to file the tax returns for the financial year (FY) 2019-20 or AY 2020-21 as soon as possible, to avoid last-minute rush.

To make the return filing process simpler, here are a few things to be kept in mind:

1. Downloading your Form 26AS of FY 2019-20 and Last Year’s Tax Return (FY 2018-19)

Form 26AS reflects details of certain incomes and the corresponding taxes deducted at source thereon by payers of such income during FY 2019-20. It will also include details of the advance tax / self-assessment tax paid by the taxpayer for FY 2019-20. Form 26AS also contains details of specified financial transactions like purchase of investments over a prescribed limit, immovable property transactions, payments in excess of specified limits for credit cards etc. If there is a mismatch between the income or the tax reported in Form 26AS and the tax return, the tax authorities will seek an explanation, and hence, it is essential to verify the incomes offered to tax in the return with the Form 26AS.

Once you download the tax return for the prior year, it will be easy to summarise the documents that would be required, including bank statements, interest certificates etc. Further, if one has any brought forward losses, they can be used to offset the gains as per the tax provisions.

2. Determining your Residential Status

As per the tax laws in India, residential status determines which income would be taxable in the individual’s hand. Residential status, in turn, depends on the physical stay of the individual in India, and hence, needs to be determined every year. For most people who have largely been in the country with a few short trips abroad, they would typically qualify as a resident and ordinarily resident. If one qualifies to be resident and ordinarily resident, then global income would become taxable in India, subject to foreign tax credit, if any. However, if one qualifies to be non-resident or resident but not ordinarily resident, then the taxability is only of income(s) which are India sourced or received in India.

3. Select the Correct Tax Form

It is very important to select the correct ITR form. It depends on various factors, including heads of income, residential status of the individual, whether he owns any foreign assets, whether he is a partner in a firm, etc. A wrong ITR form could make the tax return filed as defective or even invalid.

4. Fill the Basic Details Accurately

Nowadays, the income-tax authorities communicate through email address / mobile number. Hence, not only the communication address, but email address and contact number also should be verified. It would be advisable to update the email address/ mobile number on one’s profile page on the income-tax portal as well.

5. Keep all Documents Ready

All documents including Form 16, rental agreements for houses let out, property tax receipts, interest certificates for home loans, bank statements, interest certificates, capital gains statements, proof for tax saving investments like mediclaim, insurance premium, donations, etc should be kept ready. It is essential to peruse the bank statements to check if any income/asset(s) is not missed being included in the tax return, including savings bank interest etc.

6. Disclose Exempt Income

Though exempt income does not create any tax liability, it becomes pertinent to report it in the tax return. Proper documentation should be kept for such exempt income, as the tax authorities tend to scrutinize the same, especially if the amount involved is big.

7. Pre-validation of Bank Account for Refund

Income-tax authorities issue refund only to pre-validated bank accounts. Hence, in case a refund is expected in the tax return, bank account should be pre-validated prior to filing the tax return.

8. Foreign Income and Assets

If one holds any foreign assets, including a bank account outside India, and qualifies to be resident and ordinarily resident, it is mandatory to offer income from foreign assets to tax, and report the foreign assets in the tax return.

9. Details of Assets and Liabilities

For individuals, whose income exceeds Rs 50 lakh, it becomes necessary to report assets and liabilities held as on the close of the FY. It includes not only immovable property, but also current assets such as bank balances, loans and advances, cash in hand, shares, and securities, etc.

10. E-verification

A return filed without verifying the same is an invalid return. Hence, once the tax return is filed electronically, it needs to be verified with Aadhaar/net banking option within 120 days. In case it is not possible, then the signed ITR-V acknowledgement needs to be sent to the income-tax authorities (CPC Bengaluru) within 120 days from the date of filing.

Tax filing can be easily done, by keeping the above in mind.

Source : Financial Express back