All you need to know before filing ITR

Sanjay Khurana

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As the deadline to file income tax return (ITR) for the financial year 2022-23 draws near, here is a guide to get all your documents ready, determine which ITR form is applicable and various deductions available, both under the old and the new tax regimes. ITR filing is mandatory if the gross total income of an individual taxpayer exceeds the basic exemption limit. Gross total income includes income from various sources such as salary, house property, interest income and capital gains, etc. The basic exemption limit depends on the tax regime opted by the taxpayer.

Old tax regime

There are more than 70 exemptions and deductions available, including house rent allowance (HRA) and leave travel allowance (LTA), which can reduce your taxable income. The most popular deductions are u/s 80C, which allow for a reduction of taxable income up to Rs 1.5 lakh.

New tax regime

It was introduced in Budget 2020 wherein the tax slabs were altered, and taxpayers were offered concessional rates. However, those who opt for the new regime cannot claim several exemptions and deductions, such as HRA, LTA, 80C and 80D.

FORMS APPLICABLE

ITR-1 (Sahaj): This form is applicable for a Resident individual having total income up to Rs 50 lakh from salary/pension, one house property, other sources (interest, family pension, dividend, etc) and agricultural income up to Rs 5,000.

ITR-2: It is applicable for an individual and Hindu Undivided Family (HUF) having income from salary and property but not under the head ‘profits and gains of business or profession’.

ITR-3: Applicable for an individual and HUF having income under the head ‘profits and gains of business or profession’.

ITR-4: This is applicable for an individual or HUF, who is a Resident other than Not Ordinarily Resident having total income up to Rs 50 lakh and having income from business or profession which is computed on a presumptive basis u/s 44AD/44ADA/44AE and income from salary/pension/one house property/other sources (interest income, family pension, dividend, etc) and agricultural income up to Rs 5,000.

Documents required

Form 16: It is a tax deducted at source (TDS) certificate providing details of the salary paid, taxes deducted and deposited during the financial year. Form 16 consists of two parts: Part A and Part B. Both must be downloaded from the TRACES portal of the Income Tax Department.

Form 16A, TDS certificates: Apart from Form 16, individuals must also collect other TDS certificates that are applicable. These include a certificate from the bank showing interest accrued on savings account, FDs/RDs and tax deducted thereon. Mutual funds and companies will issue Form 16A for the tax deducted on the dividends paid during the FY 2022-23.

Form 26AS: Download Form 26AS from the new income tax portal. It is like a passbook that contains details of the taxes deducted and deposited against your PAN.

Tax-saving investment proof: It is important to collect tax-savings investment and expenditure proof to claim deduction while filing the ITR. An individual can claim tax-saving investments and expenditure if he or she opts for the old tax regime at the time of filing ITR.

Bank account details: It is mandatory to provide details of the bank account(s) held during the previous year. Even if you have closed your account during the FY, you will have to report it. The account must be pre-validated to get the credit of tax refund.

Standard deduction

A standard deduction of Rs 50,000 is allowed under the old tax regime. However, it is not allowed in the new tax regime until FY 2022-23. But, as per Budget 2023 proposal, standard deduction of Rs 50,000 is allowed for salaried persons from FY 2023-24 (AY 2024-25) onwards in the new tax regime also.

Deductions under sections 80C to 80U

Usually, if you have mentioned these deductions to your employer to lower the tax deducted on salary, then information on these deductions will be available in your Form 16. Further, the I-T Department offers pre-filled information in the tax returns. However, it is advisable to cross-check the information available on the pre-filled ITR form to ensure that the correct information is sent to the tax department.

Section 80C

One of the most commonly availed deductions is u/s 80C. Along with this, one can claim deduction u/s 80CCC and 80CCD (1). The latter ones are available on the investments made in pension funds notified by the government such as National Pension System (NPS), Atal Pension Yojana (APY), etc. The maximum aggregate deduction that can be claimed under the three Sections is Rs 1.5 lakh.

Additional deduction of Rs 50,000 is available for investment in NPS u/s 80CCD (1B). This deduction is available over and above the rebate u/s 80C. Thus, an individual can claim a total deduction of Rs 2 lakh in a financial year. Additional deduction of 10 per cent of your basic salary can be claimed if your employer makes contribution to the NPS on your behalf. This deduction can be claimed u/s 80CCD (2).

Sections 80D, 80DD

Section 80D offers deduction on the premium paid on a health insurance policy for maximum up to Rs 25,000. An individual can claim deduction for preventive health check-ups of Rs 5,000. However, it comes within the overall limit allowed u/s 80D. The total amount paid on preventive health check-ups for self and parents cannot exceed Rs 5,000.

In case of your senior citizen parents, maximum deduction of Rs 50,000 is available for health insurance premium paid. However, if your senior citizen parents are not covered under any health insurance policy, then deduction can also be claimed for the medical expenditure incurred.

Expenses made for taking care of a disabled person can be claimed as deduction u/s 80DD. The dependent includes spouse, any child (son/daughter), parents (except for in-laws) and siblings (brother/sister).

Section 80E (Education loan)

Interest paid on education loan is eligible for deduction. As per tax laws, there is no limit on the maximum amount claimed as deduction. However, this deduction is available up to eight years starting from the year in which interest payment began or until interest is paid in full. Deduction can be claimed for education loan taken for higher education of self, spouse or children.

Rebate on home loan

Individuals who have paid home loan EMI during FY 2022-23 should collect repayment certificate from bank/financial institution to claim tax exemption and deductions. An individual can claim deduction u/s 24 for maximum up to Rs 2 lakh on the interest paid on home loan if the house is self-occupied. A rebate of maximum Rs 1.5 lakh is also available u/s 80C on the principal amount of home loan repaid during the financial year.

Deduction under section 80TTA

Individuals can claim deduction of Rs 10,000 u/s 80TTA for interest earned on savings account. Interest earned from fixed deposits, recurring deposits, RBI taxable bonds, etc, is fully taxable.

Section 80TTB

Senior citizens having interest income from deposits with bank and/or post office can claim deduction of up to Rs 50,000 u/s 80TTB.

Section 80U

If a disabled individual wants to claim the deduction, then such deduction can be claimed u/s 80U.

Section 80G

Donations made to specified funds and/or institutions notified by the Income Tax Department are eligible for deductions under Section 80G.