ITR Filing for AY 2023-24: Top things to keep in mind while filing income tax return by individual taxpayers

July 31 is the tax filing deadline for personal tax returns for Financial Year (FY) 2022-23 (AY 2023-24) and it is just a few days away. Every individual whose gross total income exceeds INR 2,50,000 in a given FY is obliged to file the tax return. There may be other conditions as well (e.g., having foreign assets for resident and ordinary residents etc.) where return filing may be mandatory irrespective of quantum of income.

The return preparation and filing process has been simplified and made tech-enabled over the years. Today, it can be done online through the income-tax portal if you have the requisite information and relevant documents handy. However, at times while preparing and filing the return, errors may happen which may lead to questioning post processing of the income-tax returns by the tax department.

A quick understanding of some of the key aspects (not an exhaustive list) that one should be mindful of will go a long way in making the income-tax return filing process easier:

* Choosing the correct return form – Selection of the correct return form is the first and foremost important thing to do while filing the tax return. The form type depends on numerous factors such as residential status, quantum, and sources of income during the year etc. Therefore, it is imperative that one goes through the detailed instructions for each form type to determine the form applicable to the individual for the relevant FY. The common myth that prevails is that ITR-1 is generally applicable which may not be the case always. As an example, if you even have very nominal capital gains income, you will not be able to file ITR-1.

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* Reporting of income from all sources – Individual taxpayers may have income from other sources as well, such as salary/ business/ profession, rental income, bank interest, capital gains, dividend etc. Individuals must pay attention to evaluate all their sources of income and report the same accurately under appropriate heads.

* Mapping of income with AIS/TIS – Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) are accessible to all taxpayers and have been introduced to enhance transparency in the tax return filing process and to streamline self-filing. These not only facilitate the filing of income-tax returns but also minimize the chances of errors. AIS and TIS contain details of majority of the incomes earned by taxpayers such as interest income from savings accounts, recurring and fixed deposits, dividend income, salary income, securities transactions etc. One should download these forms from the income-tax portal and reconcile their income reported therein with the income being declared in the income-tax return. Any mismatch may lead to questioning from the tax department upon processing of the tax return.

* Validating the TDS details with Form 26AS – Form 26 AS shows the actual tax that has been deducted and deposited into the government treasury. The amounts, TAN etc. from the Form 26AS should be verified while filling out the requisite details of TDS in the Income-tax return form.

* Claiming deductions – The tax saving deductions under 80C, 80D, 80G (for items such as insurance premiums, health insurance premiums, donations etc). should be accurately reported against each section under which the deduction is being claimed. Also, appropriate back-up documentation substantiating the deductions should be preserved as these may be requested by the tax office to be produced during a scrutiny or otherwise.

* Choosing the most beneficial tax regime – For the past few years individual taxpayers can opt either for the new tax regime (with reduced rates of taxes and foregoing specific tax exemptions/ deductions) or continue with the existing tax regime. A few popular exemptions/ deductions not allowed under the new tax regime are HRA, 80C (LIC, PPF etc.), housing loan interest on self-occupied property etc. Individuals with no business/ profession income can make this choice each year basis their facts and circumstances.

* Bank account details – All Indian bank accounts held during the year are required to be reported by all taxpayers. If a refund is being claimed in the income-tax return, one should ensure to mention correct bank details like the IFSC code, account number etc. to get the refund on time without facing any hassles.

* Disclosure requirements – There are various disclosure requirements that one should be aware of while filing the income-tax return. Few of them have been listed below:

a. An ordinarily resident (ROR) of India should also report the foreign income in the India tax return and evaluate benefits (if any) either under the domestic tax law or the relevant Double Tax Avoidance Agreements which India may have entered.

b. Such RORs should also report ownership of any foreign assets or beneficial interest held in any foreign assets in Schedule FA (irrespective of whether any income earned or not).

c. All individuals must report their assets and liabilities as on 31 March of the relevant FY in Schedule AL in case their total income exceeds INR 50 lakhs in the relevant FY.

d. Details of directorship in a company at any time during the FY should be appropriately reported.

e. Particulars of unlisted equity shares held in a company at any time during the FY is also required to be reported.

It is always prudent to start the process reasonably in advance to avoid last minute delays.

(The author is Partner and Head, Global Mobility Services, Tax, KPMG in India)