Filing tax returns is an important responsibility for individuals and businesses in India and proper preparation before filing can help ensure compliance with tax laws, optimize deductions, and streamline the process.
In this blog post, we will discuss the key steps you should take to prepare effectively before filing your tax returns in India.
List to Prepare Before Filing Income Tax Returns
Gather Required Documents
Collect all the necessary documents and records to support your income, deductions, and tax calculations. Important documents include:
- Form 16: Provided by your employer, it summarizes your salary, taxes deducted, and other allowances.
- Form 26AS: This document reflects the tax credits you have received, including TDS (Tax Deducted at Source) details.
- Bank Statements: Gather statements from all your bank accounts to track interest income, dividends, and other financial transactions.
- Investment Documents: Compile statements and proofs of investments in fixed deposits, mutual funds, shares, bonds, and other financial instruments.
- Property Documents: If you own property, gather details of rental income, home loan interest, and property taxes paid.
- Deduction Proofs: Collect supporting documents for deductions under various sections of the Income Tax Act, such as medical bills, insurance premium receipts, tuition fee receipts, and donations.
Must read: 10 Easy Ways to Save Income Tax On Salary
Understand the Changes in Tax Laws
Stay updated on any changes in tax laws, rules, and regulations that may impact your filing. The Indian tax system is subject to amendments, and being aware of these changes can help you make accurate and compliant tax calculations.
Verify Form 26AS
Carefully review your Form 26AS, available on the Income Tax Department’s website or through your e-filing account. Verify that the TDS details, advance tax payments, and self-assessment tax payments mentioned in Form 26AS match your records. Any discrepancies should be resolved before filing your tax return.
What is Form 26AS?
Form 26AS is a consolidated tax credit statement that provides a summary of a taxpayer’s tax-related information. It includes details of tax credits, such as TDS, TCS, advance tax, and self-assessment tax payments. Form 26AS helps taxpayers verify their tax liabilities, refunds, and high-value financial transactions reported to the Income Tax Department. It can be accessed online and serves as a crucial document during the income tax return filing process.
Optimize Deductions and Exemptions
Understand the deductions and exemptions available under the Income Tax Act and assess which ones you are eligible for. This includes deductions for investments in schemes such as Public Provident Fund (PPF), National Pension Scheme (NPS), medical insurance premiums, and contributions to the Employee Provident Fund (EPF).
Maintain Separate Accounts for Business Income
If you have business income, maintain separate accounts for business-related expenses, invoices, receipts, and sales records. This will facilitate accurate reporting and ensure compliance with tax laws.
Consult a Tax Professional
Consider seeking guidance from a qualified tax professional or chartered accountant, especially if you have complex financial situations or need assistance with tax planning. They can help you navigate the intricacies of the tax system and ensure accurate filing.
Verify Pre-filled Information
If you choose to file your tax return online, the income tax portal may pre-fill certain details based on the information received from employers, banks, and other financial institutions. Verify the pre-filled information for accuracy and update any incorrect or missing details.
Utilize Digital Tools
Explore online tax filing platforms and tax return preparation software approved by the Income Tax Department. These tools can assist you in accurate calculations, form filling, and e-filing of your tax return.
E-File Your Tax Return
Consider e-filing your tax return as it offers convenience, faster processing, and a digital record of submission. Ensure you have a valid digital signature certificate (DSC) or Aadhaar-based OTP (One-Time Password) for e-verification.
Keep Copies of Filed Returns
Maintain copies of the filed tax returns, acknowledgement receipts, and supporting documents for future reference. These records are essential for future tax planning, loan applications, and potential tax assessments or audits.
Preparing before filing your tax returns in India is crucial to ensure accurate reporting, maximize deductions, and comply with tax laws. By organizing your documents, staying informed about tax law changes, and leveraging digital tools and professional guidance, you can streamline the filing process and meet your tax obligations effectively. Remember to keep your records updated, maintain accurate financial records, and file your tax return on time to avoid penalties or interest charges.