Avoid The Rush: Why You Should File Income Tax Returns Before July 31

The deadline for filing your income tax return (ITR) for FY 2022-23 (AY 2023-24) July 31, is swiftly approaching. Even if you think you have time, postponing the filing any further might increase the chances of missing the deadline. You will still be able to file a belated tax return till December 31, 2023, but not without paying a late filing fee and that's not it. There are several other reasons why you shouldn't wait until the last week to file ITR.

Why?

According to chartered accountant Prateek Bhardwaj, one should file their ITRs timely to avoid paying fines, additional interest on the payable tax and other penalties. According to section 234F, individuals who file their income tax return (ITR) after the due date may be subject to a fee of up to Rs 5,000.

The second major reason is that the losses (on any income) are carried forward only if the tax returns are filed within the original due date. Elaborating on this, Bhardwaj said, "We pay tax on our income but in case one faces any loss in a given year, mainly related to business, we accrue the loss for next year. This means that on next year's income, one won't be required to pay taxes before setting off the losses of the previous year. On failing to file the returns timely, the loss incurred in this financial year won't be carried forward and get lapsed."

Additionally, those who are entitled to refunds should try to file returns as soon as possible, so as to receive the refund as early as possible. Citing technical glitches as the reason for filing early returns, CA Anju Agarwal said, "Since there is an increased rush as the deadline nears, the official site may take time to open, leading to delay. To avoid missing any income report in the forms, one should file the ITR at least one week before the last date."

ITR Filing: What Are The Important Documents Required? 

Income tax returns can be filed both online and offline. According to chartered accountant Sandeep Jain, the process of filing returns is from ITR-1 to ITR-7, depending on the individual, firm, company, trust, society and so on. Different forms are required to be filled out based on the source of the income.

As for salaried individuals, Jain said that Form 16, which is provided by the employer is required for ITR filing along with other documents such as Form 16A(for TDS on income other than salary), bank details and certificates, salary slips, Aadhaar card, and PAN card, among others. "If the individual has shares, then the documents related to the profit and loss account, the rental income details, if any, long-term capital gain, short-term capital gain related documents should also be ready before filing because everything is being checked very minutely," Jain added.

Adding to the list of documents required for salaried taxpayers, Bhardwaj said that the salary slip should be that of the last month i.e. March and should be verified with Form 26AS. Form 26AS includes tax-related information of a taxpayer, including details of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). "People often forget to consider the bank statement which has the record of interest, savings, along with investment proofs while filing," he added.

Agarwal suggests that any investments made from the deductions point of view including insurance, housing loan repayment, donation etc. should also be duly noted. As for non-salaried taxpayers, she added, "For business income, one should check if they are liable to get an audit of their financial statements. Other than business income, non-salaried taxpayers can have interest income, capital gains, house property etc. For example, in case of a house sale, its registry papers, bank receipts, passbook, bank certificate (in case a house loan has been taken), rental income receipts should be taken care of in advance."

On the set of documents required by non-salaried or business taxpayers, Bhardwaj added that bank statements, financial statements and books of accounts are required for filing. Books of accounts include ledgers, vouchers, and financial statements including profit and loss accounts, balance sheets and cash flow statements.

Common Mistakes While Filing ITR

Despite years of experience in filing returns, mistakes are bound to happen during the course of multiple steps. To avoid making any irreversible mistakes, Jain suggests checking that no income has been left unreported in Form 26AS. "The Annual Information System (AIS) and Taxpayer Information Summary (TIS) statements should also be checked thoroughly to ensure all the transactions have been incorporated as missing these details could lead to a penalty later."

"It is better to download the AIS and TIS form as it contains income information, which taxpayers might not know about such as any bank interest or interest related to fixed deposit returns. Since AIS contains the entire summary of the income, it should be used to verify the information entered while filing returns," Agarwal said.

Another mistake on the part of taxpayers, according to Bhardwaj, includes the nonreporting or misreporting of information related to shares. "Since the last couple of years, every transaction related to shares, even if somebody buys a single share of something is reported to the income tax department, people believe that nobody will find out and face multiple notices from the government later." He further advised non-salaried (business) taxpayers to estimate their income at the start of the financial year, pay advance tax in time and avoid any suspicious transactions. "Advance taxes are paid quarterly. On failure of timely payment, heavy interests are levied on the taxpayer."

Filing income tax returns can appear intimidating, particularly for first-time taxpayers. Agarwal advises seeking guidance from someone knowledgeable about the process to enhance savings, reduce errors, and make better tax planning decisions.

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