Income Tax

Essentials points to note if you are filing ITR this Year

Usually, the due date to file income tax return (ITR) for a financial year is 31st July of the succeeding Financial Year. However, due to the COVID-19 pandemic and lockdowns, the government has extended the due date by two months until 30th September 2021 for Financial Year 20-21. It will help taxpayers to file their tax returns in time without violating the deadline and being subjected to late fees. In this article, we have discussed some essential points to note while filing ITR later this year.

What are the essentials to know if you are filing ITR this year?

Choose the right option

Budget 2020 had introduced a new tax regime that gave taxpayers the option to pay tax at lower rates. Taxpayers can opt to pay tax under the new tax regime if they do not claim any deductions or exemptions.

It is advisable that as a salaried person, you should plan your tax-saving investments, if any, at the start of the financial year. For next Financial Year 21-22, it is possible to do so now. However, for FY 20-21, in case you have missed making any tax-saving investments and don’t have any deductions to claim from the gross income, then the new tax regime can give you lower tax liability. You should calculate your taxes under both tax regimes, new and old, before you file your returns to choose which regime is more suitable for you.

Be aware of the changes in ITR form

At the start of every assessment year (AY), the IT department informs about the ITR forms once they are updated with the relevant new changes.

 For instance- In case of Form ITR-1^[1], which is used by individuals having income from salary, house property & income from other sources, with few exceptions. So, this ITR form can’t be filed by a person for whom TDS has been deducted for a cash withdrawal under Section 194N. Further, ITR-1 cannot be filed by employees whose tax has been deferred regarding their employee stock options allotted by an eligible startup. Therefore, one should be aware of these before choosing an ITR form.

Report deductions and verify data

Salaried employees should submit a declaration at the start of a Financial Year with all tax-saving investments and deductions that they decide to make during the FY. During the Financial Year, there is a cut-off date to submit these investment proofs. If you fail to submit the same, you can still claim the applicable deductions when filing your ITR. 

This year, taxpayers will also benefit from getting information such as interest earned, capital gains on mutual funds and shares, dividend received, etc., pre-filled in their ITR. Once need to carefully verify these details with the relevant documents. Therefore, one should collect and refer to their Form 16, Form 26AS and bank statements before filing ITR.

Timely payment

One of the primary ways to stay tax compliant is to file the income tax return within the due date. However, this is a non-negotiable compliance, and in case a taxpayer fails to file the income tax return within the due date, he gets subjected to penalties under the Income Tax Act.

 It is worth mentioning here that while the due date for tax filing has been extended, taxpayers with a self-assessment tax liability of more than 1 lakh rupees will be required to pay the same before 31st July 2021. In case the taxpayer fails to do, the taxpayer will be charged interest beyond 31st July until the date of payment under Section 234A, 234B and Section 234C.

LTC cash voucher scheme

For FY 20-21, as most Indians didn’t travel due to the pandemic, the government allowed salaried employees to claim deduction under Leave Travel Allowance (LTA) by spending money through the LTC cash voucher scheme.

The tax exemption could be claimed maximum of 36,000 rupees per person or one-third of the expenditure incurred, whichever is less. The money should have been spent to purchase certain goods, which attract 12% GST rate or higher. Such purchases should have been made between October 12th 2020, and March 31st 2021.

Conclusion

These points mentioned above must be adhered to if, as a taxpayer, you are filing ITR this year. As stated earlier, the government has extended the due date by two months to 30th September 2021 for Financial Year 20-21. This provides taxpayers some extra time to comply.

Read our article:Information concerning Defective Income Tax Return in ITR E-Filing 2.0