3 Initial Steps In Preparation To File Your Income Tax Returns

We are a little over two months away from the deadline for filing income tax returns (ITR) for the financial year 2019-20. The initial steps of filing taxes are to collect information on sources of your income, collect information on taxes deducted against your income and accumulate proof of tax-saving investments.

Ascertaining TDS

TDS (tax deducted at source) is applicable to various sources of income including salary, rent, commission, interest, etc.

As per the Income Tax Act, those who make payments are required to deduct applicable taxes from such payments before crediting the amount to the receiver- also known as TDS. It is a way through which the government gathers taxes at the source of income generation, rather than later.

For the financial year 2019-20 that ended on 31 March 2020, the last date for deductors (like your bank, your employer) to issue TDS certificates ended on 15 August, which means these are now available.

Your employer would have issued Form 16 (TDS certificate with details on tax deducted in salary) which will also reflect any tax-saving investments that you may have declared to your employer during the year to avoid excess tax deduction, in part B of the form.

Your bank will issue Form 16A on interest income accrued or already paid to you on deposits (fixed/savings).

In case of income from house let-out to a tenant, if the rent exceeds Rs 50,000 per month, the tenant will have deducted tax on the rent paid to you and issued Form 16C.

You can also view and download your tax credit statement (known as Form 26AS) from the income tax department's website by logging into your account on www.incometaxindiaefiling.gov.in.

This credit statement is linked to your PAN. It is a summary of every time tax was deducted on your behalf by any deductor and should match the TDS certificates issued by them.

If there is a mismatch, say the TDS mentioned in Form 16 does not match against Form 26AS, there is a possibility that the employer may have not yet filed those taxes deducted or there could be an error. Either way, you can get it rectified from the employer.

Information on income from other sources

Apart from salary, you may be earning income from other sources like interest income on FD, from mutual funds, government bonds, etc. Make sure you recall all types of income as these are required to be reported for income tax purposes.

Other than the purpose of having to report the transactions to the authorities, it will also serve as a reminder to claim tax deductions for investments/insurance eligible for exemptions/deductions.

Proof of investments

Proof of investments like receipt of premium paid towards insurance, dividend credit from companies you are invested in, can prove helpful.

If you are taking the help of a professional tax consultant, you can submit these receipts and also the TDS certificates to file ITR.

Note that for the financial year 2019-20, the government had, due to inconvenience from the coronavirus pandemic, extended the tax-saving deadline to 31 July 2020 instead of the usual 31 March deadline.

As these investments will not be mentioned in tax credit statement of the year gone by, proof of investments will be helpful to claim deductions from the total taxable income of FY 2019-20.