Time to File Income Tax Return

The Income Tax return filing process for FY 2023-24 (AY 2024-25) has begun for Individual tax payers and non-audit cases. Last date to file income tax return (ITR) for Individual tax payers including salaried class and non-audit cases is 31^st July, 2024. The Income tax return is a declaration of taxable income by tax payers and the taxes they owe or are eligible to receive as a refund.

The Income tax return serves as a means for tax payers to provide comprehensive information about their financial transactions, sources of income and expenses to the tax authorities. It helps determine the tax payer’s tax liability and enables the government to assess and collect taxes effectively. As such Tax payers are advised to file their ITR’s as early as possible and do not wait until due date of 31^st July, 2024.

Who is required to file Income Tax Return?

Filing of Income Tax return is mandatory for every person whose total income (before considering certain exemptions and deductions) exceeds the exemption limit (Rs 300,000/ as per New Regime) and such return has to be furnished within the defined due date.

It is also mandatory for every person to file return of income if during the previous year satisfies any of the following conditions;

• Has deposited an amount (or aggregate of amount) in excess of Rs 1 Crore in one or more current accounts maintained with a bank or cooperative bank.
• Has incurred aggregate expenditure in excess of Rs 2 Lakh for himself or any other person for travel to a foreign country.
• Has incurred aggregate expenditure in excess of Rs 1 Lakh towards payment of Electricity bill.
• Total sales, turnover or gross receipts of the business exceed Rs 60 Lakh.
• Total gross receipts of profession exceed Rs 10 Lakh.
• Total of TDS and TCS is Rs 25,000/ or more. The threshold limit shall be Rs 50,000/ in case of a resident individual of the age of 60 years or more.
• Aggregate deposit in one or more saving bank accounts is Rs 50 Lakhs or more.

When to File ITR:

In case of tax payers where there is no TDS applicability, no share transactions, no cash deposits in bank accounts, no property purchases/sale transactions and where the tax payer has only single source of income, limited deductions and no other complex financial transactions, filing early can be advantageous. With a relatively uncomplicated tax situation, there is less need for additional time to carry out tax planning or document reconciliation.

But preferably ITR should be filed from 2^nd week of June onwards, since most incomes like salary, interest and rent are now affected by TDS (Tax deducted at source). Data pertaining and reflected to your ITR is reported by others too. So, wait till June’s first week to reconcile your figures with TDS data reported on your PAN.

Even non-resident Indian (NRI’s) must also wait till the second week of June to file their returns. Since they have less control over their finances and incomes earned in India, it is best for them to wait & correlate their information with that appearing on the I-T portal.

Wait for Form 26AS and AIS:

TDS deducted by the deductor against the taxpayers PAN reflects in Form 26AS & AIS by 31^st May. The amount of TDS deducted will be claimed in ITR by the tax payer. If you file ITR before 31^st May, you may forget to claim TDS and in case the tax payer claims TDS but was not updated in Form 26AS, TDS might be disallowed, inviting a demand notice from the income tax department. Further any transaction not reported in ITR but reflected in Form 26AS & AIS also invites departmental communication for clarification.

Tax Regime:

From AY 2024-25, the new tax regime is the default regime; one has to opt for the old regime if you want to pay tax according to those provisions. It is important to note that one should specifically opt for the old tax regime if you want to avail the deductions and exemptions which are not available in new tax regime. The Income Tax Department has already released the requisite ITR forms such as ITR-1/ITR-2/ITR-3/ITR-4 and ITR filing has begun on the IT portal. The new ITR forms for AY 2024-25 seek additional information to improve transparency and align with amendments in the Finance Act, 2023. For instance ITR-1 is meant for taxpayers having total income upto Rs 50 Lacs from salaries, one house property, other sources and agriculture income upto Rs 5000/- whereas if your income is coming from profit and gains from business or profession, the tax payer is needed to opt for IT-3 or ITR-4. In ITR-1 , tax payer are required to select the tax regime, while in ITR-4, the submission of Form 10-IEA is necessary to opt out of the new tax regime.

Penalty & Interest: In case of delay in filing of income tax return for FY 2023-24, there will be a penalty of Rs 5000/ when the total income of the person exceeds INR 5 Lakhs while as in any other case, there will be penalty of Rs 1000/as per section 234F of the income tax act. Plus this penalty amount there will be Interest@1% per month or part of the month on the unpaid tax amount under section 234A of the act if you file your return after the due date.

Conclusion:

Although you still have ample time to file return of income at a later stage, this is high time for an Individual tax payer to at least begin the income tax filing as far as reconciliation of data is concerned. Filing your tax return early can speed up the processing of your refund if you are expecting one. But even such individuals should think twice about filing early if they have multiple sources of income or complicated financial transactions. In short, while filing your ITR before the due date (July 31) it is advisable to avoid last-minute rush and penalties, it’s equally crucial to wait until you have all the necessary documents, especially Form 16, to ensure accurate reporting of income and taxes.

By Ajaz Ahmad Dar is a Practicing Chartered Accountant