If you are filing I-T return for the first time, then take steps to avoid making any mistake.
Tax matters are complicated and there is no best time to start planning for your taxation. The earlier you start doing it in your career, the better. And for this, due diligence is required in all tax matters to be sorted financially. However, first-time taxpayers often get confused about their taxation needs and this may land them in some trouble later on.
In this article, we discuss a few crucial points that can help first-time taxpayers avoid errors while filing their income tax returns (ITRs).
Why Tax Filing Is Important?
First-time taxpayer has this misconception that since the employer has already deducted tax from the salary, so they don’t need to file the ITR. However, it is important to note that if your income falls in the tax bracket, then it is compulsory to file an ITR.
Filing the ITR is also important because it helps you other important financial transactions like seeking a loan etc. Suppose you want to take a Home Loan, then banks will check ITRs to see income and liability for ascertaining the repayment capacity.
Tax Saving Must Not Be Ignored
With the help of tax planning, a new taxpayer can save unnecessary tax outgo and use the saved money to invest. An individual can save tax in the range of 5%, 20% or 30%, depending on which tax slab rate he/she falls. For example, if an individual falls in the tax bracket of 30%, then by investing u/s 80 (C), he/she can avail tax deduction benefit up to Rs 1.5 lakh and cut the tax liability up to Rs 45K (Rs 1.5 lakh x 30%). A taxpayer must use the tax saving tools in sync with short and long-term financial objectives.
Importance Of Key Income Tax Related Documents
A first-time taxpayer must be aware of types of documents which are required during ITR filing. You may fail to arrange all essential papers and documents in the last minute rush and commit a mistake. Consulting a tax expert immediately after joining the job and keeping a record of required I-T related documents safely would be a wise thing to do. For example, documents like Savings bank account statement, Form 16, Form 26 AS, PAN card, Aadhar Card, bills of expenses which are eligible for reimbursement, salary slip, rent agreement of home, rent receipt, investment related documents etc., should be available while filing the ITR to avoid discrepancies.
Timely Filing The ITR
A new taxpayer must not delay the tax filing process. Tax should be filed well before the deadline to avoid the last-minute rush. Filing the ITR timely ensures that the taxpayer gets the TDS refund (if any) on time. From FY 2018-19, late ITR filing will be subjected to penalty as per applicable I-T rules.
Avoid Mistake In ITR
While filing the ITR for the first time, there is a great chance of making mistakes, especially if you are doing it by yourself and not taking the support of an expert. You must recheck the figures before submitting it. Even if you have made any mistake in the ITR, then you get another chance to rectify it by revising the return before the end of the applicable assessment year.
Notice From I-T dept
A notice from the I-T department doesn’t always mean that you have committed some mistake or committed a crime. I-T department may pick your file to ask you to file the return within a specified time period if you have delayed ITR filing or to explain if there is a mismatch in TDS figure in 26 AS and figure mentioned by you in the ITR. In a situation when you get a notice from I-T department, you must respond to such notice within specified timelines and if you are not sure about it, then do not hesitate to take the help of a tax expert.
If Failed To File ITR
If you failed to file the ITR within the deadline, then you get another chance by filing a belated return. However, delayed filing can invite a penalty up to Rs 5000. While filing the belated ITR, you must ensure that you do not commit mistake it.
The timely filing of ITR and managing the tax obligation efficiently is the first step towards financial discipline.