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It is the time of the financial year in India that worries taxpayers the most - the tax season. Although it might be a cumbersome task, filing taxes accurately and on time is important to avoid any legal consequences in the future. As a taxpayer in India, there are certain Dos and Don'ts that you need to keep in mind while filing for Income Tax Returns (ITR). In this curated guide, we will provide you with all the information you need to file your taxes accurately and hassle-free.
Section 1: Understanding Income Tax in India
Before we dive into the Dos and Don'ts of filing taxes in India, let's first make sure you have a clear understanding of Income Tax in India.
➤ What is Income Tax?
Income Tax is levied by the government on the total income of an individual. This income includes the earned income (salary or business) and the unearned income (rent, interest, dividends, etc.). The rate of tax is decided by the government and is calculated based on the slab of income earned by the individual.
How is Income Tax Calculated?
The Income Tax is calculated based on the income slab that an individual falls under. In India, there are different income tax slabs based on the income you earn. The below table shows the tax slab rate for the assessment year 2022-23.
|Income Slab||Old Tax Regime||New Tax Regime
(until 31st March 2023)
|New Tax Regime
(until 1st April 2023)
|₹2,50,000 - ₹3,00,000||5%||5%||-|
|₹3,00,000 - ₹5,00,000||5%||5%||5%|
|₹5,00,000 - ₹6,00,000||20%||10%||5%|
|₹6,00,000 - ₹7,50,000||20%||10%||10%|
|₹7,50,000 - ₹9,00,000||20%||15%||10%|
|₹9,00,000 - ₹10,00,000||20%||15%||15%|
|₹10,00,000 - ₹12,00,000||30%||20%||15%|
|₹12,00,000 - ₹12,50,000||30%||20%||20%|
|₹12,50,000 - 15,00,000||30%||25%||20%|
Different types of Income Tax returns based on income categories
Individuals must file their taxes based on their income category. Here are the types of ITR Forms based on the category of income:
|Type of Income Category||ITR Form|
|Individuals with no business or profession and salary income||ITR 1 (Sahaj)|
|Individual earning income from business or profession||ITR 3|
|Individuals who are partners and earning income from a partnership firm||ITR 5|
|Individuals earning income from Rent||ITR 2|
|Individuals earning income from Capital Gains||ITR 2|
Basic Exemption Limits for various categories
Following are the basic exemption limits for various categories. It is the minimum amount below which your total taxable income is exempted from Income Tax:
|Income Category||Basic Exemption Limit|
|Senior Citizens (age 60 years or more but less than 80 years)||Rs. 3,00,000|
|Super Senior Citizens (age 80 years or more)||Rs. 5,00,000|
Section 2: Dos of Filing Taxes in India
Now that you know the basic concepts of Income Tax filing, let’s dive into the Dos of filing taxes in India.
Pay Your Taxes on Time
Paying your taxes on time is very important to avoid any interest or penalties. Usually, the last date for filing taxes is 31st July, after which late filing fees are applicable. Also, missing the deadline might come with legal consequences such as disallowances of certain deductions, interest, and penalties.
Keep track of all documents and receipts
Documents such as Form 16, Form 16A, and other investment-related documents are very important to mention your income and claims in your ITR form. Thus, it is important to keep them safe and secure for reference. It is also crucial to keep all the necessary receipts safe. It will help you claim various deductions and also help you with proper income disclosure.
File correct information
While filing your ITR, ensure that you fill in all the information as accurately as possible. Any incorrect info might lead to legal trouble. Hence, it's advisable to cross-check and verity all the information filled in before submitting the forms.
Disclose all your sources of income
Any income, except those exempts under the provisions of the Income Tax Act, must be disclosed properly. Failing to disclose the proper income sources may lead to serious trouble such as additional tax demands, interest, and imposition of penalties and fines.
Use Valid Tax-Saving Deductions
There are certain valid deductions available even for salaried employees which can help them save on their Income Tax liabilities. These deductions play a vital role for the taxpayers with annual income higher than the basic exemption limit. Such deductions include investment in certain avenues as per Income Tax Act such as PPF, ELSS, NSC, NPS, life insurance, or home loans, saving deposits, donations, and more. Thus, you should claim all the legitimate deductions to lower your tax liability and avoid any legal trouble for claiming without proper documentation.
Ensure Proper Filing and Verification
Avoid completely relying on a tax agent. Ensure that you go through the ITR Form before you sign and file it. Make sure that all the information is correct to avoid any tax dispute or issues with the Income Tax department. Finally, it’s important to verify your tax returns after filing within 30 days from date of filing, either online through digital mode through the e-filing portal or through physical mode by sending a signed copy of the ITR-V to Centralised Processing Centre (CPC), Bengaluru. Failing to do so, will result in an invalid tax return filing.
Section 3: Don'ts of Filing Taxes in India
Here are some of the important “Don’ts” that you need to keep in mind while filing your taxes:
Do not hide any income
Hiding any income source will not only cause tax avoidance but can also lead to financial and legal trouble. Many people try to avoid the tax amounts, but it may lead to serious trouble if caught. Instead, one should declare all sources of income to avoid unnecessary issues in the future.
Do not file a false return
Filing false returns by reporting incorrect information either of your income or deductions is a legal offense in India, which at times can lead to prosecution. It can result in huge penalties and even imprisonment.
Do not miss the deadline for filing returns
Failing to file your taxes on time may result in a penalty fee, along with the rejection of certain benefits or deductions. This further results in legal consequences such as increased extra interest and penalties for every additional day of delay.
Do not ignore any tax notices
One should not neglect any tax notices sent by the Income Tax department. This involves any notices or summons sent for reassessment, scrutiny or verification or any other such proceedings. Ignoring such notices or not responding to them adequately can lead to severe consequences.
Section 4: How to File Taxes in India
Knowing how to file taxes accurately is as important as understanding the basic concepts of Income Tax. India's tax department, the Central Board of Direct Taxes (CBDT) gives taxpayers the facility of filing ITR online or offline. In the next section, we’ll provide a step-by-step guide to help you file your taxes.
Types of Tax forms Depending on Categories
As discussed earlier, there are different tax forms you need to fill out depending on your income category. Ensure that you keep the correct form handy and fill it out accordingly.
Filing Tax Returns Online: Step by Step
Here are the steps to filing taxes online in India.
1. Log in to the e-filing website of the Income Tax department (https://www.incometax.gov.in/)
2. Select the appropriate ITR form based on your income category
3. Download Form 26AS and AIS/TIS that shows the details of tax paid, TDS credit, refund granted, Special Financial Transaction, If any, and other related details
4. Fill out the necessary details in the respective columns such as PAN, Aadhar Card number, bank account details, employment details, and other financial details.
5. Calculate your tax liability and pay taxes online via the Income Tax Department website.
6. Verify the return through the Aadhar-based OTP or the digital signature or other available modes.
Filing Tax Returns Offline: Step by Step
Here are the steps to filing taxes offline in India.
1. Collect the necessary ITR form for your income category from the Income Tax department or download it from the Income Tax website.
2. Fill the ITR form as per the instructions
3. Attach supporting documents, as mentioned in the instructions, along with the ITR form
4. Submit the ITR Form to the nearby Income Tax department.
Section 5: Common Mistakes to Avoid while Filing Taxes in India
Even though one may be cautious while filing taxes, sometimes they can still make mistakes. Here are some common mistakes to avoid when filing taxes:
Not Including All Sources of Income
All sources of income must be reported correctly to avoid penalties and other legal procedures. Failing to report all sources of income can lead to scrutiny, and it raises the chances of an income tax notice.
Ignoring Tax-Saving Deductions
As mentioned earlier, Tax-saving deductions are a great way to reduce your tax liabilities legally. Ignoring them might lead to paying higher taxes than required. Therefore, it is important to understand and claim all the rightful deductions available under the law.
Entering Incorrect Information
Entering incorrect information in the forms can lead to financial and legal trouble. It is important to verify all the information before submitting the forms to avoid any issues in the future.
Missing the tax filing deadlines is one of the biggest mistakes you can make while filing for your ITR. It results in paying a late filing fee of Rs 5,000 to Rs 10,000 and additional taxes and penalties as per regulatory provisions. To avoid this problem, make sure you file taxes well ahead of the deadline.
Not verifying the return filed by you
Verifying your return filing is extremely important within 30 days of filing as it assures that all the information provided in the forms is accurate and helps you avoid any legal troubles in the future. Failing to verify is basically equivalent to not filing your taxes.
Selection of Wrong ITR Form
The selection of wrong ITR form can lead to non-filing or incomplete filing of returns, and might even lead to penalties.
Filing taxes accurately and on time is important to avoid any legal implications in the future. By practicing the Dos and Don’ts outlined in this curated guide, you can ensure that you file your taxes correctly, hassle-free and avoid legal complications. Keep yourself updated with the latest laws and regulations related to income tax filing in India. Make sure to declare all the sources of income, claim all the legitimate deductions, pay taxes on time, and verify your return filing. A little diligence and preparation can go a long way in avoiding any complications while filing taxes in India.