Four things to keep in mind while filing income tax return this year
Every year, the income tax department introduces certain changes in the tax-filing process or the tax forms. It is important for a taxpayer to know these changes in order to file an error-free income tax return (ITR).
The tax department has notified the ITR forms for AY22 and extended the ITR filing deadline till 30 September. However, it will be better to prepare for tax filing now and file the ITR as soon as possible. It will not only help in faster processing of tax refunds but will also reduce the chances of errors on your part. However, before you start, here are a few things that you should keep in mind.
New vs old tax regime: The government had introduced a new optional tax regime in Budget 2020. From FY21 onwards, individual taxpayers have the option to choose between two tax regimes. The new regime offers to tax at a lower slab rate but the taxpayer will have to forgo various deductions and exemptions available under the old regime. The taxpayer is generally advised to choose the regime at the beginning of the year. However, if you are among the ones who were not able to make the planned investments or expenses against which you could claim the tax deduction under the old regime, you can switch to the new one if it is leading to lower tax liability for you.
This is more important for business owners. “Business owners should select the correct regime thoughtfully because once selected, it can be changed only once. However, salaried individuals with income from salary, house property and other income can change it every year. One should calculate tax under both regimes after considering applicable provisions and then decide,” said Abhishek Soni, co-founder and CEO, Tax2win.in, an income tax-filing portal.
Extension of dates, no tax relief: The last date for filing ITR has been extended till 30 September. However, it doesn’t provide any relief from the tax liability. If you have advance tax due, you may have to pay penal interest. Therefore, it is better to pay the tax and file the ITR as soon as possible.
“The CBDT has provided that relaxation with respect to interest under Section 234A only where the self-assessment tax liability (after providing for TDS, advance tax, etc.) does not exceed ₹1 lakh. Thus, except where the self-assessment tax liability exceeds ₹1 lakh, no relief with respect to Section 234A would be provided to the taxpayer assessee,” said Suresh Surana, founder, RSM India.
Under Section 234A, interest at the rate of 1% is charged monthly for any delay in filing the ITR. “Further, the taxpayer assessee may be subjected to interest under Section 234B and 234C irrespective of the extension of the due date,” he added.
Interest under Section 234B is applicable if the taxpayer has not deposited advance tax or if the advance tax deposited is less than 90% of the total tax liability.
Penal interest under Section 234C will be applicable if the taxpayer has not deposited advance tax as per the prescribed quarterly instalments.
Senior citizens who don’t have business income are exempted from paying advance tax.
Changes in tax forms: The tax department has to notify tax forms every year after incorporating any changes. It is imperative to know the changes in order to choose the right ITR form. This year, there are certain changes brought in the eligibility criteria of ITR 1, which is generally used by salaried taxpayers. This year, ITR 1 can’t be filed by a person whose tax deducted at source (TDS) has been deducted for cash withdrawal under Section 194N or those employees who have deferred tax on employee stock options (ESOPs) received from the employer. Therefore, choose the form keeping these changes in mind…Read more>>