Filing your income tax return is not a big deal. If you have all the documents in place, it takes just 25-30 minutes. Like millions of other taxpayers, Aryan Sharma also believed this before he reached out to ET Wealth two years ago. The Bengaluru-based IT professional was paying a high tax because his salary structure was not very tax-friendly. His salary in a startup was a lump-sum amount with no HRA or other benefits. “I pay rent but don’t claim any exemption. Please suggest how I can reduce my tax outgo,” he wrote to us.

“The taxpayer was not aware that even if there was no HRA component in his salary, he could claim exemption for a rent of Rs.5,000 per month (Rs.60,000 in a year) under Section 80GG,” says Sudhir Kaushik, Founder and CEO of tax filing portal TaxSpanner.com. This, and the other tax planning advice offered by TaxSpanner, helped reduce Sharma’s tax by almost Rs.32,000 last year. The experience has changed his perspective. He now files his tax return with the assistance of an expert, paying him Rs.1,500 to ensure that no exemption and deduction is missed and his return is error-free.

If you plan to file your tax return on your own, be sure that you understand the nitty gritty of tax rules. You should also be aware of all the deductions and exemptions available to you. Many do-it-yourself tax filers end up making mistakes in their returns, leading to notices from the tax department. “Perhaps the most common mistake is the non-inclusion of interest income in a savings bank account. Many taxpayers who invest in stocks omit the dividend income in their ITRs,” says Archit Gupta, Founder and CEO of tax filing portal Clear.

Click here to know the most common mistakes that individuals tend to make in their tax returns.

It’s not only the inexperienced taxpayers who are committing these follies. “We have even come across cases of informed investors, who dabble in F&O but don’t set off their losses since filing for F&O is somewhat complicated,” says Gupta. As a result, these taxpayers miss out on the tax benefits they could have claimed.

Who must file tax return?

If any of these 10 conditions is fulfilled, one has to file the return.

• Your gross total income (before deductions and exemptions) is more than Rs.2.5 lakh (Rs.3 lakh for senior citizens and Rs.5 lakh for very senior citizens under the old tax regime).
• Your total sales, turnover, or gross receipts, in business has exceeded Rs.60 lakh.
• Your total gross receipts from profession has exceeded Rs.10 lakh.
• You have foreign assets, or income, or are a signing authority in a foreign bank account.
• You paid electricity bills of more than Rs.1 lakh during the year.
• You deposited Rs.50 lakh or more in a savings account, or Rs.1 crore or more, in a current account.
• You spent more than Rs.2 lakh on overseas travel.
• Your TDS or TCS was Rs.25,000 (Rs.50,000 for senior citizens) or more.
• You have to claim the refund of TDS or TCS paid.
• You want to carry forward losses to the next year

SEEK HELP FROM EXPERTS

It needn’t be like this, though. For a small price, you can get this done by a tax professional. Tax-filing portals also offer expert advice on how to file your return. After you fill-up the form, a tax professional will go through it to check for errors and omissions. The price tag for this assistance depends on the sources of income and the complexity of the individual’s finances. A simple salary slip, some interest income, and rent from one property will cost only Rs.1,500-2,000, but if you also have capital gains, the fees may rise to Rs.4,000-5,000. Those with foreign assets might have to pay Rs.7,000-10,000 (see graphic). Expert assistance is especially very useful for those with foreign assets.

The compliance requirements are quite complex, and not everybody will be able to fulfil these without making errors. One needs to give details of bank accounts, depository accounts and deposits held in foreign countries. “Foreign assets are required to be mandatorily reported without any limit. The consequences of omission can lead to proceedings under the Prevention of Money Laundering Act,” warns Amit Maheshwari, Partner, AKM Global. Investors in cryptos and virtual digital assets might also need help from experts in preparing their tax return.

How much does it cost?

HOW TO DO IT YOURSELF

Of course, if your finances are not very complicated, and you are well versed with the tax rules, you can file your return on your own. The tax forms now get pre-filled with your information, so it has become very easy. Organising the documents does take some time, but you don’t need a professional to do that. You can do it free of cost through the official website of the Income tax Department. Tax filing portals charge a small fee of Rs.200-300 for filing the return. If doing it yourself, make sure you verify and reconcile the information in your Form 26AS and the Annual Information Statement (AIS). These can be checked by logging into the account of the individual on the income-tax portal. The Form 26AS is your tax credit statement that has details of all payments made to you and the TDS deducted from these payments. This includes TDS on interest earned on deposits, as well as bonds and dividend income. It will also have details of tax collected at source (TCS) on foreign currency transactions.

After you check the TDS and TCS details in your Form 26AS, match them with the details in the AIS. The AIS is a comprehensive statement of all financial transactions conducted by an individual during the year. It has details of all incomes received by the individual, including salary, profession, rent, interest, etc., from various sources. It also has details of where and how much the individual invested and spent during the year. However, don’t rely on the AIS alone because some information may not have been updated or captured in the AIS. For instance, though the AIS will have information on interest on bank deposits, capital gains from stocks and mutual funds, and TCS paid, it may not include interest earned on small savings schemes. “The onus of including all incomes, whether or not these appear in the AIS or Form 26AS, is on the taxpayer,” says Gupta of Clear. “If one fails to include interest earned on small savings and post-office schemes, there are penal consequences,” he adds.

DON’T MISS THIS LAST STEP

The tax filing process does not end with the submission of the ITR. A crucial step still remains. After you submit your return, you need to verify it. Till last year, taxpayers could verify the ITR within 120 days, but now this time frame has been shortened to 30 days. If not verified within this period, the return becomes invalid and you could be penalised for non-filing.
There are six ways to verify your income tax return:
Aadhaar-based OTP: For this, your mobile number and PAN must be linked to your Aadhaar.
Net banking: Verify the return by logging in to the tax-filing portal through your Net banking account.
Bank account: Generate Electronic Verification Code (EVC) through your bank account. For this, you must have a pre-validated bank account.
Demat account: The process is the same as bank account to generate an EVC.
Bank ATM: Your ATM card can generate an EVC, but this facility is restricted to a few banks.
Signed ITR-V: Send a signed copy of the ITR-V to the tax department at CPC, Post Box No - 1, Electronic City Post Office, Bengaluru - 560100, Karnataka.

Income below basic exemption? File a nil ITR

Even if it is not mandatory, filing your tax return has several other benefits.
If your gross total income during the financial year was less than the basic exemption limit, it is not mandatory for you to file your tax return. Under the old tax regime, the basic exemption is Rs.2.5 lakh for up to 60 years, Rs.3 lakh for senior citizens, and Rs.5 lakh for very senior citizens. Under the new tax regime, it is Rs.2.5 lakh for all taxpayers. Tax experts say that even if it is not mandatory for you to file your tax return, it’s a good idea to do it anyway. The tax returns in which there is no tax liability for the taxpayer are termed as nil returns. Here are some of the benefits of filing such returns.
RECORD OF INCOME: The ITR serves as a proof of income and comes in handy when seeking a scholarship, getting your passport made or applying for a visa. It also helps in getting a loan or subsidies.
CONTINUITY OF FILING: In some cases, where a taxpayer takes sabbatical or goes for higher studies, the income may decline compared to previous years. Filing a nil return helps in maintaining the continuity of tax records.
EXPLAINS CASH GIFTS: Filing a nil return is especially useful if one has received a significant amount as gifts during the year. If there is a scrutiny by the tax department, the nil return will clear the air.
CLAIM REFUND OR CARRY FORWARD LOSS: Nil returns are also necessary if you want to claim refund of TDS or TCS, or want to carry forward losses. The TDS or TCS will come back only if returns are filed. Losses too can be carried forward only by filing returns.