Taxpayers need to be more careful than ever when filing their income tax returns (ITRs) because the tax authorities, thanks to their 360 degree profiling, capture most financial transactions.
But they don’t keep you in the dark. These details are made available for your review. It is wise to verify and accurately calculate income and offer applicable taxes.
In this context, here is a set of general guidelines presented to individual taxpayers for filing their tax returns for the 2021-22 fiscal year:
Read also | Everything you need to know about income tax e-notices
To start the process, download bank statements from 1.4.2021 to 31.3.2022 and analyze all deposits/credits in the account. Filter entries like income and be sure to offer them all for taxes.
Second, if you have a home loan, obtain a certificate of interest from the institution and enter the correct amount in the ITR form.
Third, the trigger point for IT notices is transactions on the demat account! As I have seen, most taxpayers ignore capital gains reporting and F&O profit/loss transactions. To avoid notices, generate the tax income statement from your demat account and report them.
Are there loan transactions with your friends or family members? If so, it is advisable to have an official receipt, with a PAN number and address, signed by both parties. Although this document is not required when filing the declaration, it will be useful if you receive a notice of examination at a later date. Likewise, documenting donations is very essential. Receipts from payments for insurance, tuition, or education loan interest certificate, etc., to be collected if they qualify for tax deductions u/s 80C, 80D, or 80E.
I have observed that people don’t offer interest on tax savings bank accounts or there are certain investments like perpetual bonds where the TDS is not cut when disbursing interest. All must be offered for tax, whether or not these transactions appear on the Form 26AS.
Once you have all the information and documents ready with you, upload Form 26AS and the Annual Information Statement (AIS). Reconcile transactions reported in Form 26AS with income compiled by you. Similarly, analyze the transactions declared in the AIS. If there are discrepancies, you must verify and correct or respond to them before filing the return. In addition, there are two other compelling reasons for taxpayers to be vigilant starting this year. If the individual taxpayer has TDS and TCS deductions of Rs 50,000 or more in the previous financial year and has not filed the IT return on time, then some specified deductors like banks, mutual funds , etc., must deduct TDS or TCS at a higher rate. The rate is double the regular rates or 5%, whichever is greater. For example, in the case of bank interest, the banker will deduct the TDS at 20%, instead of 10%.
Another point to note concerns taxation under the alternative tax system. For those who have opted for the new tax regime, if the ITR is not filed on time, they will have to pay taxes according to the old tax regime. This will improve the tax result.
It is therefore essential to file the return on time and offer all income for taxes. The deadline for filing the declaration of individual taxpayers not targeted by the tax audit is July 31, 2022. Should the declaration be filed immediately? My suggestion is to wait until the e-TDS declaration is filed for the fourth quarter of the previous year. Usually around June 15, you can find all entries in Form 26AS.
This is the right time to file your returns.
(The author is a Chartered Accountant and Chartered Appraiser at Balakrishna & Co)
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