All You Need to Know before e-Filing Income Tax Return for the First time

In the past few years, various transformational reforms have been taken by the Government of India to move progressively towards automation and digitization.

To bring in an era of greater tax compliance is the main objective of the government and that is why more focus is now directed towards transparency.

Income Tax Return (ITR) filing is an annual ritual through which the income earned in a particular year and the tax thereon are reported to the government. In order to broaden the tax base, the government has decided to overhaul the Income Tax filing forms and also introduce additional reporting requirements. Every Indian citizen having a taxable income that exceeds the exemption limit before claiming deductions under Chapter VI-A of the Income-tax Act, 1961 (Act) is bound to file the Income Tax Return.

If you are going to file ITR for the first time, you need to know a few things that people often confuse. Knowing them will make the process of your tax filing much easier.

Important Things for Income Tax Filing

The following are a few key points that you must consider at the time of income tax filing.

Difference between Financial Year and Assessment Year

Most people get confused about the difference between the assessment year (AY) and the financial year (FY). Tax is levied on one’s annual income earned during a financial year. In other words, the year in which the income is earned is known as the financial year and the following year in which the income is assessed to tax is known as the assessment year.

Reporting of Exempt Income

Income such as dividend mutual funds, dividend on listed shares, long-term capital gains on sale of listed equity shares or units of mutual funds, interest on Public Provident Fund accounts, etc. are considered non-taxable. Unfortunately, many people forget to report such income in the ITR. But, it is required to report your exempt income in the ITR to make the process of income tax e filing smoother and more convenient.

Reporting of Bank Accounts and Interest Income

Most people think that it is enough to report just one bank account in the Income Tax Return (ITR). But any incorrect reporting of bank account details including incorrect account number or incorrect IFSC may result in the non-delivery of the eligible tax refund. So, the details of all your current and savings bank accounts operational during the FY are to be mandatorily reported in the ITR.

Moreover, contrary to the misconception of many people, interest earned from fixed deposits, recurring deposits, savings bank accounts and NRO accounts are fully taxable. So, it is mandatory to report the interests earned from these sources in the ITR.

Rental Income from Deemed Let-out Property

Many people do not disclose the deemed income from their vacant house even after owning more than one house property. They only report the actual rental income from one house property. In such cases, under the provision of the Act, only one of the properties is considered self-occupied and the annual value of the property is considered zero. The other properties are deemed to be let out while the expected rent is considered as a gross annual income. However, properties which are under construction are not always required to report during income tax e filing because those are not considered as house property for tax purposes.

Verification with Annual Tax Statement (Form 26AS)

For the preparation of Income Tax Return, form 26AS can be considered a good starting point. In the form 26AS, we can see the various heads of income on which tax is levied as well as deducted at source by the payer of the income. It records both the income and the tax deducted at source on such income.

Therefore, Form 26AS must be checked before efiling income tax for the cross verification of the tax deducted details. Moreover, the document also shows the detailed information on any advance tax or self-assessment tax paid or any income tax refund received from the tax department during that particular Financial Year.

Besides these, Form 26AS contains the details mentioned in the SFT (Statement of Financial Transaction). Annual Information Return (AIR) is renamed as the Statement of Financial Transaction (STF) now. The SFT can be filed by different entities that state the details of specific transactions such as your credit card expenses, high value investments (if any), cash deposits and purchase or sale of immovable any property, and so on.

If any mismatch found between Form 26AS and ITR, it may lead to further inquiry from the Tax Department of India. Therefore, it is always important to check the details from Form 26AS before e filing Income Tax.

Apart from these, it is also necessary to do a few last-minute checks before efiling the ITR, for example your correspondence address, contact number and email ID so that the department knows where to send updates related to tax demand, refund, etc.

Now that we have cleared the major confusions that people frequently come across while e filing income tax, we are now going to give detailed step by step description on how you can easily e file taxes.

Online Tax Filing Process (e-Filing)

STEP 1: You need to Register Yourself Online to File ITR

First of all, go to the online tax filing site of the Income Tax Department- ( and register yourself there. For registration, you would be required to provide your name, date of birth and your Permanent Account Number (PAN). While your PAN will be used as your user ID, you will have to choose a password to keep your account secure.

STEP 2: Choose How You Want to file ITR

There are mainly two ways by which you can e file taxes- offline efiling and online e filing. If you prefer the offline mode, go to the download section on the website and select the form relevant to you. Download the form and save it on your computer. You can fill all the details offline according to your convenience. After the form is filled up, upload it back on the site. If you find this process time consuming, you can opt for the quick e-file option and fill the form online.

STEP 3: Select the Right Form to File ITR

In the third step, it is important to select the right form for the IT e filing. The following are the six income tax efiling forms that you need to know about.

ITR–1: If an individual’s income is earned from a salary or pension, or from property or any source other than lottery, he/she must efile tax through this form.
ITR- 2: This form is for those who are earning capital gains.

ITR 2A: This form is for those who own more than one house but earn no capital gains.

ITR 3, 4 and 4S: these forms are meant for professionals and business owners.

STEP 4: Keep All Important Documents Handy

The documents that you need to keep ready include- Form 16, your PAN, TDS Certificate, Interest statement, details of investment, home loans and insurance (if any). Form 26AS gives the detailed summary of the tax paid against your PAN. So, download the form and validate your tax return to check your tax liabilities.

NOTE: If your earning is above Rs.50 lakh, you will now have to fill an additional column entitled “Assets and Liabilities”. The value of all your assets and liabilities is to be disclosed and declared at cost while e filing income tax.

STEP 5: Fill Up and Upload the Form

The process of online tax filing is much easier and takes lesser time. But, if you opt for offline tax filing, you have to download the form and fill all the details. After that, click on “Generate XML”. Once the XML file is generated, go to the website and click on the “Upload XML” button. Now upload the XML file saved on your computer and then click on the “Submit” button.

STEP 6: Verification

As soon as you submit your ITR form, you receive an acknowledgement number. If the IT e filing was done using digital signature, you have to keep this this number for future use and verification. If a digital signature was not used while efiling income tax, an ITR-V will be generated and will be sent to your registered email address.

The income tax efiling process is incomplete without this final step. You need to verify your ITR V or it will remain invalid. After your income tax efile is complete, you will now have to send the ITR V to the processing center within 120 days of filing the return in order for the income tax efile process to start in the tax department. You can send it either electronically or just mail the signed ITR V to the processing center in Bengaluru.

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