Income Tax Return Filing: Essential Guidelines and Tips

With the July 31st deadline for filing income tax returns fast approaching, it is imperative for individual taxpayers to file their ITRs in advance to avoid any last-minute scramble. Filing income tax returns (ITRs) is essential for several reasons. It ensures compliance with the law and helps you avoid penalties for late filing.

Filing on time allows you to claim refunds for all taxes due while also filing important financial documents for loans and other transactions.

Additionally, filing regularly builds a solid financial history that can be beneficial in the long run.

Please note that under the new tax regime, individuals with a net taxable income of up to R700 000 are entitled to a tax refund under section 87A. For those who chose to pay tax under the old regime, the refund limit remains at R500 000.

Importance of ITR

Filing If an individual has no taxable income or if his/her total income is below the tax threshold set by the government, he/she is required to file a zero return. It is important to file such a return to fulfill the legal requirement of filing ITR and keep a record with the tax authorities even if no tax is paid. Filing a zero return ensures tax compliance and helps in documenting the financial position for the particular financial year.

“It’s preferable to file as IT returns also work as a document of history of a person’s income and it can help in obtaining a loan,” said Pritam Mahure, Partner with CA Pritam Mahure and Associates.

The new tax regime was applied as the standard regime from the 2023-24 and 2024-25 tax years. However, taxpayers can choose the most favourable tax system (old or new).

The Ministry of Finance has clarified that there is no possibility of deviation from the new tax system until the tax return for the financial year 2024-25 is filed. Eligible individuals who do not have business income can opt for the system in any tax year. Thus, they can opt for the new tax system in one tax year and the old tax system in another tax year.

To file ITR, you usually need Form 16 (TDS certificate from your employer), details of other sources of income (interest on fixed deposits, rental income, etc.), and your PAN card. If you have a high income, it may be useful to seek the help of a tax accountant to minimize mistakes and optimize your tax planning. However, if you want to file your tax returns yourself, it is important to cross-reference your income details with TDS forms (such as Form 26AS) and bank statements to ensure their accuracy.

“If your salary is running in millions then it is preferable that support of a tax professional is taken, as it could help in mitigating basic errors and optimising tax,” said Mahure.

Manmeet Kaul, partner, Karanjawala & Co., says it is important to file your tax returns within the deadline set by the authorities for individuals and register for the Income Tax e-filing portal if you haven’t already.

“Calculate your total income from all sources such as rental income, capital returns etc. Also, gather all necessary documents such as bank and credit card statements including investments and deductions under sections 80C, 80D, 80E, 80TTA, etc. Further, collect relevant TDS certificates (Form 16, Form 16A, and Form 26AS). You should have bank account details for refund processing, if any.”

After considering all the aspects, determine your tax liability and select the appropriate ITR form and fill the ITR form online or use tax filing software. You should once again verify the information pre-filled in the ITR form.

“After verifying the particulars mentioned in your return (via Aadhaar OTP, net banking, etc.) submit your ITR,” Kaur added.

Further, an examination is mandatory by law for individual professionals earning more than R50 million per annum. Individual professionals falling under this category will have to be audited by an auditor after considering all the above factors. She explained that tax returns can be submitted along with the audit report.

Late returns

The deadline for filing the Income Tax Return (ITR) for the 2023-24 tax year (2024-25 tax year) is 31 July 2024. If this deadline is missed, individuals can file a late return up to 31 December 2024. Late returns may incur interest at 1% per month on the unpaid tax amount under section 234A.

In addition, under section 234F, a late fee of R5 000 is levied, but this is reduced to R1 000 if the total income is less than R500 000.

In addition, individuals can carry forward losses from the stock market, mutual funds, property, companies etc. to offset future income tax liabilities if the ITR is filed on time.