A checklist for filing IT returns

Select the correct ITR form; know the heads of income and the deductions available

It is that time of the year when taxpayers are busy searching for all the relevant documents to file their tax returns.

With tax laws changing every year, making sense of the incomes to be disclosed, and the allowances and deductions available, can be overwhelming for most people.

With the due date for filing income tax return (ITR) for FY2017-18 (AY2018-19) around the corner, we present a few key points to take note of so that you can file an error-free return.

Know your slab

Before filing the returns, you must be aware of the basic threshold and slabs.

For income of up to ₹2.5 lakh (₹3 lakh and ₹5 lakh for senior citizens and super senior citizens, respectively), there is no tax. For ₹2.5-5 lakh, the rate of tax is 5 per cent.

For more than ₹5 lakh and less than 10 lakh, the rate is 20 per cent. For income above ₹10 lakh, you will have to shell out 30 per cent. It is also important to select the correct ITR form based on the nature and source of your income.

Heads of income

Be clear about the five heads of income available in the ITR form under which you should disclose your income — income from salary, house property, capital gains, PGBP (profits or gains from business or profession) and income from other sources.

Under the salary-income head, you should disclose your gross salary with details such as taxable allowances and perquisites. Make sure the tax deducted from your salary as per Form 16 matches the amount mentioned in Form 26AS (available via net banking and the income tax e-filing website); report any discrepancy to your employer.

While showing income from house property, interest paid on housing loan and municipal taxes paid during the year can be claimed as deduction from the income amount.

Remember, from FY2017-18, the income that can be set off against losses under this head has been restricted to ₹2 lakh.

If you have any capital gains, first, ascertain if it is a long- or short-term capital gain based on the period of holding.

Capital gain is taxed differently depending on the nature of transaction.

Any income that doesn’t fit under the first four heads should be shown as income from other sources. Incomes such as interest on savings and commission income are included under this head.

While taxable incomes go under the above heads, you are obliged to disclose your exempt income, too, in the ITR form. That includes incomes such as capital gains on sale of long-term listed equity securities and dividend income. It is to be noted that the exemption available for long-term equity shares or funds have been removed for sale transactions entered into on or after April 1, 2018.

Make use of deductions

Adding all the incomes discussed above gives the gross total income from which deductions can be claimed. A few of them are listed below.

80C: Thetaxpayer can claim deduction under this section to the extent of ₹1.5 lakh. Deduction is allowed if the amount is invested in tax-saving avenues such as Public Provident Fund (PPF), Provident Fund contribution, Equity-Linked Saving Schemes (ELSS), National Pension System (NPS), five-year fixed deposits and National Saving Certificates (NSCs).

Apart from investments, expenses such as children’s tuition fee, life-insurance premium and principal repayment of home loan are also covered under this section. Budget 2015 introduced a new scheme under Section 80CCD (1B) that allows a taxpayer additional deduction of ₹50,000 towards contribution to NPS Tier, 1 over and above the ₹1.5 lakh under Section 80C.

80D: Under this section, one can claim tax deduction of up to ₹25,000 for the health insurance paid for the taxpayer or his/her family. An additional ₹25,000 can also be claimed if the insurance is taken for parents. Further, one can get an additional deduction of up to ₹5,000 if any of the insured are over 60 years.

80E: Section 80 E allows you to claim interest on loans taken for higher education as a deduction with no cap on the amount. This loan should have been taken for the taxpayer, spouse or children or for a student for whom the taxpayer is a legal guardian.

80TTA: A maximum of ₹10,000 can be claimed under this section against interest income from a savings bank account.

File before due date

Late filing will be frowned upon and penalised from now on.

A new section, 234 F, has been introduced under the Income Tax Act that imposes ₹5,000 for late filing beyond July 31, 2018, and ₹10,000 for filing after December 31.

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