Have you just become eligible to file your ITR but the mere thought of it is stressing you out? 

While this is a milestone in everyone’s life, the thought of filing your ITR or income tax returns can seem complicated which is why we have put together this quick beginner’s guide to help you get started.

Things to Keep in Mind Before Filing ITR

Before getting into the process of filing taxes, it is essential for you to understand certain basic terms that are associated with income taxes in general. Some of the salient ones include –

Assessment Year vs. Financial Year

You may have come across the terms FY 2020-21 or AY 2021-22 but here’s the difference between the two –

FY or Financial Year is the calendar year in which you receive your income. It begins on the 1st of April and ends on the 31st of March in the next year. Eg. FY 2020-21 refers to the income earned from 1 April 2020 to 31 March 2021.

AY or Assessment Year refers to the period in which you are taxed for the income earned during the previous financial year. This is where you ‘assess’ and file your returns for the income from the previous year. Therefore AY 2021-22 refers to the income received in FY 2020-21. 

Understanding Taxable Income 

Did you know that you may not have to pay taxes on your entire income? In order to understand your taxable income, it is essential to look at income from different sources as well as the deductions that you can avail. Your taxable income is –

Gross Income – Deductions = Taxable Income

Additionally, the tax slab that you are a part of will also play a role in determining your taxable income.

Income from different sources 

• Many people today earn income from multiple sources. This could be from their salaried job, rent from their property, income from capital gains, income from business, and income from other sources such as savings bank account etc.
• If you are a salaried individual, you can also gain an understanding of the TDS (tax deducted at source) applicable for you by taking a look at your salary slip.

Deductions

• There are a number of provisions available for individuals to save on their taxes by availing certain deductions. This could be through investing in ELSS (Equity-linked saving schemes) funds, insurance plans, tax-saving FDs, PPF, health insurance etc.
• These deductions will reduce your taxable income which in turn will reduce the amount paid as income tax.

In order to know more about saving on your taxes, check out our blog on the same.

Advance Tax, TDS, Self-Assessment Tax

There are different ways in which tax is collected and these include the following –

• Advance tax, as the name suggests is a type of tax that is paid in the financial year itself instead of assessment year. This is usually applicable for those who have sources of income apart from their salary (lottery wins, rent, FD, etc.) and their tax liability exceeds Rs. 10,000 in a financial year.
• TDS or tax deducted at source is a percentage of earned income that is paid on your behalf by the person/company paying the income or salary to you. Essentially, tax is collected directly from the source of income itself.
• In case your tax liability is greater than the sum of your TDS, advance tax, etc., you will have to pay a self-assessment tax which is usually calculated when you are filing your ITR.

Important Forms and Documents

While filing your tax returns, it is important for you to have all the relevant documents and forms necessary such as your salary slip, proof of investment, and other documents supporting the deductions that you have availed.

Additionally, you will also need to fill and submit certain forms such as the Form 16, Form 12 BB, Form 26 AS etc., whichever is applicable.

Where Can You File Your Taxes?

If you are paying taxes for the first time, there are multiple ways to go about this. The main avenues that you can use to file your taxes are –

• Through the official website of the Income Tax Department of India which allows you to e-file as well as e-verify your tax returns. 
  • Most banks also allow customers to file their ITR and pay the necessary tax amount through their net banking service. However, this service varies from bank to bank.
• The next option is to pay through online tax filing portals. There are a number of companies today that operate online portals wherein you can e-file your returns easily.
• If these two steps are not viable, you can always take the help of a Chartered Accountant or a Tax Consultant who will file your tax returns for you. All you will have to do is provide the necessary documents.

In Conclusion

Paying your taxes is not just mandatory but also beneficial. You will need your tax returns for a number of purposes such as easy loan approval and visa processing. Additionally, you will also have to pay a fine if you do not file your returns, especially if your income is above Rs.5 lakh per annum.

Note: The last date for filing your ITR for the previous financial year is 31st December, 2021.