Personal Income Tax Return filing for FY 2023-24

In this article, we are exploring the various dimensions of income tax law in India. Income Tax is governed by the Income Tax Act, 1961, which is amended and updated through Finance Act every year. In recent years, there have been  lots of simplification of process and ease of managing income tax of individuals. But the administration is still managed by same bureaucracy and the common people still suffer from same apathy and disdain in the hands of bureaucratic machinery.  Even though at the top political and governmental levels, there are genuine efforts to mitigate the hardships and minimize the corruption through use of technology. But from user perspectives, things have not moved to the desired levels. Even for the small procedural mistakes, an assessee has to go to the higher appellate levels to seek justice. This entails cost, time and unpleasant experience.

Let us start with macro issues of the income tax return filing and response to notices.

1. Lack of awareness: In India, most people are not very much comfortable using technology. They do not regularly visit the income tax website and check any notice/updates. Even if a notice is issued, they do not turn up and respond on timely basis. Meanwhile, the time for reply expires and the department do assessment on their own. They issue notices after notices but the assessee is not aware thereof. Next comes the demand and recovery stage, when the department may go for attachment of bank and property. At this stage, the assessee becomes aware and by that time, it is already late and the time of appeal may also expire soon.

2. Self-handling Income Tax Return filing and reply to Notices: It is natural for educated persons to do everything intellectual works oneself. But you may be expert in your domain and earning lot of money. But the income tax is a specialist domain. It requires so many years of leaning and experience to master the subject. Taking help of professional is not costly at return filing stage, as the professional will charge only small fees. At later stage, even small mistake may cost you lakhs of rupees after notices are issued by the department. Besides, you may be tempted to reply to the notices yourself and thus save some fees. It may so happen that you may be disclosing something which will subsequently bring more trouble for you, even if you had good intentions. Even for a small discretion the law gives to the officer, he will apply that against you for getting some bribe or putting you in trouble. It becomes easily known to the officer that you are not CA/Lawyer, so he may adopt all sorts of tools to put pressure on you. Either you keep him happy through bribe or go for appeal. Both will cost you dearly in terms of money and time.

3. Hired Finance doctors,  not compounders: In case of purely salaried individuals, the income tax return filing is simple and can be done by anybody. The problem arises when you have business income or capital gains or income from house property or other cases. In such cases, the tax implications are comparatively complex and multi-dimensional. Engaging non-professionals for your income tax matters may cost you dearly at later stage. In course of professional works, I meet people who engage the consultants who are blatantly ignorant of tax provisions and ruin the whole case. These consultants just do tax filing for even one hundred rupees. Engaging them and then repenting later on due to the ignorance of such consultants is your fault only.

It is advisable to seek the support of professionals, who will charge small fees of Rs. 1000 to Rs. 10,000/-. This will save you from subsequent notices from income tax department.

Now, I would like to apprise you the precautions while filing Income Tax Returns for individuals:

Identify the correct ITR form

1. ITR-1 (SUGAM): For individuals with income up to Rs. 50 lakhs, owning only one house property, and agricultural income up to Rs. 5,000, ITR-1 (SUGAM) should be filed.

2. ITR-2: Individuals and HUF’s having income more than 50 Lakhs from  Capital gain; More than one house property; Foreign income; Individual director of a company; Holding unlisted equity shares needs to file ITR-2.

3. ITR-3: It is applicable to an individual or a Hindu Undivided Family who has any income chargeable to tax under the head business or profession.

4. ITR-4: Also known as SUGAM is applicable to individuals or Hindu Undivided Family or partnership firm who have opted for the presumptive taxation scheme of section 44AD/ 44ADA/44AE.​

Ensure all sources of  income are accounted for:

1. Ensure accurate reporting of all income sources in the ITR form to avoid under-reporting, which can lead to notices from the Tax Department.

2. Include income from salaries, investments, rental income, and all bank accounts to prevent overlooking interest income.

Verify TDS details to ensure consistency between Form 16/Form 16A and your ITR. Report the correct TAN number of the deductor to avoid receiving demand notices due to mismatches.

Claim Deductions and Exemptions: Be aware of eligible deductions and exemptions under the Income Tax Act. These may include:

1. Investments under Section 80C

2. Medical insurance premiums under Section 80D, etc. Claiming all eligible deductions can reduce your tax liability.

Check Form 26AS: It is important to reconcile the tax details mentioned in your ITR form with the tax details mentioned in your Form 26AS/ AIS/ TIS to avoid any discrepancies.

Compare tax liabilities: New regime offers lower rates but with fewer deductions. Evaluate which benefits you more before choosing.

In case you are planning for income tax return filing in FY 2023-2024 or reply and representation in income tax matters or need any support or have any query, you may like to connect with us.

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Abhiinarayan Mishra FCA, FCS, LL.B, IP, RV; Partner, KPAM & Associates, Chartered Accountants, New Delhi ; +91 9990013755; +91 9910744992; [email protected]; [email protected]