10 things to be known by taxpayers in income tax filing in 2021

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1.         Select the proper ITR form

Form ITR-1, for example, may only be utilized by a resident individual with a total income of up to Rs 50 lakh from wages, one residential property, and other sources. Choose between the new and old taxation policies, whichever is more advantageous.

2.         Choose between the new and old tax regimes, whichever is more advantageous.

When completing their tax returns, taxpayers will be able to select between the existing and new tax systems.

3.         ITR forms that have been pre-filled

This year, ITR forms will import pre-fill information such as the taxpayer’s personal information as well as data of salary income, dividend income, interest income, and capital gains from Form 26AS. This would make it easier for taxpayers to file ITRs because most of the necessary information would already be recorded.

4.         Form 26AS is used to validate prepaid taxes

Any difference should be reported to the employer (salary income), other payers (other earnings), or banks (for advance tax/self-assessment tax payments) for necessary rectification, which is required for the tax department to complete the tax return on time.

5.         Tax balances must be paid

Any taxes owed on the tax return after claiming credit for prepaid taxes must be paid, together with any applicable interest, before the tax return may be filed. It is worth noting that if such self-assessment tax exceeds Rs 1 lakh, it must be paid before July 31, 2021, to avoid additional interest liability, even if the tax return filing date has been extended to September 30, 2021.

6.         The following disclosures of different assets and financial interests are required as part of an ITR:

a)         Details of all Indian bank accounts & unlisted equity shares.

b)         Information about directorships held in Indian or international corporations.

c)         Schedule Assets and Liabilities

d)         Foreign Assets Schedule

7.         Reporting Exempt Income – 

Taxpayers are obliged to declare exempt income under ‘Schedule EI,’ which includes agricultural income, the exempt income of minor children, income not payable to tax under the Double Taxation Avoidance Agreement, and so on.

8.         Change of employment throughout the year – 

If the taxpayer has given the required salary and income information earned from prior employer(s) to the present employer, the current employer can issue a consolidated Form 16 and 12BA based on which an ITR can be submitted.

9.         Mandatory filing of an ITR in some instances – 

The Finance (No. 2) Act, 2019 requires the submission of an ITR for select people who meet certain specified requirements during the relevant fiscal year, even though such individuals are not required to submit an ITR due to having taxable income.

10.       Implications of failing to file an ITR by the due date –

 Failure to file an ITR by the due date may result in a variety of consequences under the Act, including the imposition of a late filing fee, the payment of interest on the balance tax liability, ineligibility to carry forward certain losses, and so on.

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