For many early jobbers, filing their income tax returns (ITRs) is a complicated task. However, a good understanding of your income, applicable taxes, deductions and proper tax planning can make ITR filing a smooth process. Here are a few pointers for first-time taxpayers to help their returns filing.
Understand Your Salary Structure
As a first time taxpayer, it is important to be aware of your salary components. This will also give you an idea if your income is in the taxable bracket. Usually, a standard salary slip consists of basic salary, special allowances, Home Rent Allowances (HRA), Provident Fund (PF) contributions, etc. Out of these, some salary components are fully taxable, some are partially taxable, and some are tax-exempt. So, it is crucial to understand your salary slip first.
Compute Your Taxable Income
Your taxable income is calculated after all the necessary deductions. You must take the time to understand what your applicable deductions are. For example, you may be repaying an education loan and therefore eligible for deductions under Section 80E for interest paid towards your loan. Your provident contribution, which is 12% of your income is tax exempted. If HRA is part of your salary component, it is tax-exempt if you live in a rented house, or is taxable if you live in a self-owned house. Tax saving holds importance here as it will help you make wise investment choices that can reduce your tax outgo and help you save money.
Understand The Applicable Tax Slabs
Your tax is calculated based on the income you earned during a financial year, which is the period from April 1 of the current calendar year to March 31st of the next calendar year. Once your taxable income is calculated, know your applicable tax slab. Do remember, you will also have to pay a certain percentage as cess over the applicable tax. The table given below contains income slabs, tax rates, and tax computations for resident and non-resident citizens under the age of 60 years.
Get Hold Of Your Form 16
This is the most important document that an employee needs to file their income tax returns. This is a Tax Deducted at Source (TDS) certificate which has all the information about your income and the taxes deducted by the employer. The Central Board of Direct Taxes (CBDT) has recently revised the Form 16 and has made it more detailed for transparency. Usually, companies issue Form 16 by June 15; however, this year the deadline has been extended to July 10 due to revision.
Access Form 26AS
This form can be easily downloaded from the income tax website. It is one of the most reliable documents needed while filing your income tax returns. Form 26AS helps in ascertaining if all the TDS deducted on your income earned and mentioned in Form 16 are correct. This also has details about your deductors and their Tax Deduction Account number (TAN). You can file your returns easily with this form in case you do not receive your Form 16 from your employer for some reason.
Keep Key Documents Handy
Besides Form 16 and Form 26AS, keep documents like your PAN card, bank account details, address proof, home loan interest certificates, insurance premium payments receipts, and other investment proofs handy. You’ll need to refer to them while filing your returns.
Choose The Correct Form
This is the most crucial task requiring precision. The government has notified changes in the ITR forms. It is important to make yourself aware of the changes to choose the correct form for yourself and to successfully file your tax returns. You can also take help from a professional or a tax-filing website to file your returns.
As a first-time taxpayer, you should start acquainting yourself with tax planning and tax saving. This will help you reduce your tax outgo and invest the saved money to grow your wealth. If your income is not taxable, you should still file your returns as it is a useful document needed during loan, credit card and visa applications. It would also not be a bad idea to consult a tax expert soon after you start working to avoid committing any financial mistake and remain tax-compliant.
The writer is CEO, BankBazaar.com