What is the difference between the Financial Year (FY) and the Assessment Year (AY)?

The Financial Year (FY) is the year in which you earn the income (April 1st to March 31st). The Assessment Year (AY) is the year following the FY, in which you file your income tax return for that income.

What is Form 16, and where do I get it?

Form 16 is a certificate provided by your employer that details the salary paid to you and the Tax Deducted at Source (TDS) from your salary. You will receive it from your employer.

Which ITR form should I use if I have income from salary, one house property, and interest from savings accounts?

You should likely use ITR-1 (Sahaj) if your total income does not exceed ₹50 lakh and you only have one house property (excluding cases where there's loss brought forward from previous years). However, always verify based on your specific circumstances and the latest guidelines.

What is Form 26AS, and why is it important to check it?

Form 26AS is a consolidated tax statement showing the tax deducted on your income and the taxes you have paid. It's important to verify it to ensure that the TDS details match your Form 16 and that all taxes deducted have been correctly deposited with the government.

What are some common deductions I can claim as a salaried employee to reduce my taxable income?

Some common deductions include investments under Section 80C (LIC, PPF, etc.), Mediclaim premiums under Section 80D, and contributions to the National Pension Scheme (NPS) under Section 80CCD(1B).

Handling Your Income Tax Return: A Salaried Employee's Guide

Understanding Income Tax for Salaried Employees

In fact, Income tax is a mandatory contribution levied by the government on the income earned by individuals and businesses within a jurisdiction. For salaried employees, this usually involves tax deducted at source (TDS) by the employer and subsequent filing of an income tax return (ITR) at the end of the financial year. This guide aims to demystify the process and equip you with the knowledge to file your ITR accurately and fast.

Key Concepts and Terminology

So, Before diving into the filing process, let's clarify some essential terms:

Assessment Year (AY): The year following the financial year in which the income was earned. Like, for income earned in FY 2023-24, the AY is 2024-25.
Financial Year (FY): The period from April 1st to March 31st.
Gross Total Income: The total income computed under different heads of income (Salary, House Property, Business & Profession, Capital Gains. Also, Other Sources) before deductions.
Taxable Income: The income on which tax is calculated, arrived at after deducting eligible deductions from the Gross Total Income.
TDS (Tax Deducted at Source): Tax deducted by the employer from the employee's salary and deposited with the government.
Form 16: A certificate issued by the employer detailing the salary paid to the employee and the TDS deducted.
Form 26AS: A consolidated tax statement showing the tax deducted on your income and the taxes you have paid.

Step-by-Step Guide to Filing Your ITR

Here's a breakdown of the steps involved in filing your income tax return:

Step 1: Gather Your Documents

Before you begin, collect all necessary documents. This includes:

Form 16: Received from your employer.
PAN Card: Your Permanent Account Number.
Aadhaar Card: For verification purposes.
Bank Statements: To verify interest income and other transactions.
Investment Proofs: Documents related to investments eligible for deductions under Section 80C, 80D, etc. (e.g., LIC premium receipts, PPF statements, NSC certificates, Mediclaim policies).
Home Loan Statement: If you have a home loan, gather the interest certificate and principal repayment details.
Rent Receipts: If you are paying rent and claiming HRA exemption.

Step 2: Choose the Correct ITR Form

So, Salaried employees usually file ITR-1 or ITR-2. Here's a simplified explanation:

ITR-1 (Sahaj): This form is for individuals having income from salary, one house property (excluding cases where there's loss brought forward from previous years), other sources (interest, dividends, etc.). Also, agricultural income up to ₹5,000. If your total income exceeds ₹50 lakh or you own more than one house property, you cannot use ITR-1.
ITR-2: This form is for individuals and Hindu Undivided Families (HUFs) not having income from business or profession. It's used if you have income from salary, more than one house property, capital gains, or foreign assets.

Note: Always verify the applicability of the form based on your specific income sources and circumstances. The Income Tax Department website provides detailed guidelines.

Step 3: Access the Income Tax Portal

Visit the official Income Tax Department website: https://www.incometax.gov.in/. Register or log in using your PAN as your user ID.

Step 4: Download Form 26AS and Verify TDS Details

Download Form 26AS from the portal. Verify that the TDS details mentioned in Form 26AS match the TDS details mentioned in your Form 16. If there're discrepancies, contact your employer to rectify them.

Step 5: Fill in the ITR Form

You can file your ITR online or offline. Online filing is most of the time preferred for its convenience. Here are the options:

Online Filing (e-Filing): You can fill the form directly on the Income Tax portal after logging in.
Offline Filing: You can download the ITR form, fill it offline. Also, then upload the XML file to the portal. This option is less common now.

When filling the ITR form, provide accurate information as per your documents. Key fields include:

Personal Information: PAN, Aadhaar, name, deal with, date of birth, email handle, and mobile number.
Salary Details: As per Form 16, including gross salary, allowances, perquisites. Also, deductions.
Income from House Property: If applicable, provide details of rental income or loss from self-occupied property.
Income from Other Sources: Interest income from savings accounts, fixed deposits, dividends, etc.
Deductions: Claim eligible deductions under different sections.

Step 6: Claim Deductions to Reduce Taxable Income

Deductions are vital for reducing your taxable income and, which means, your tax liability. Some common deductions available to salaried employees include:

Section 80C: Investments in LIC, PPF, EPF, NSC, ELSS, school tuition fees, etc. (up to ₹1.5 lakh).
Section 80D: Mediclaim premium paid for self, spouse, children. Also, parents.
Section 80CCD(1B): Contribution to National Pension Scheme (NPS) (up to ₹50,000).
Section 80G: Donations to eligible charitable institutions.
Section 80TTA/80TTB: Deduction for interest income from savings accounts (₹10,000 for individuals below 60 years under 80TTA, ₹50,000 for senior citizens under 80TTB).
Section 24(b): Interest paid on home loan for self-occupied property (up to ₹2 lakh).
HRA Exemption: If you receive House Rent Allowance (HRA) as part of your salary, you can claim exemption based on certain conditions. The exemption is the least of the following:
- Actual HRA received.
- Rent paid less 10% of salary.
- 50% of salary (if residing in Delhi, Mumbai, Kolkata, or Chennai) or 40% of salary (if residing in other cities).

Step 7: Calculate Your Tax Liability

After filling in all the details, the Income Tax portal will automatically calculate your tax liability based on the applicable tax slabs. Verify the calculation to make sure accuracy.

Step 8: Pay Taxes (If Applicable)

You see, If your tax liability exceeds the TDS already deducted, you need to pay the remaining tax amount. You can pay taxes online through the Income Tax portal using net banking, credit card, or debit card.

Step 9: Verify and Submit Your ITR

In fact, Once you have filled the form, verified all details. Also, paid taxes (if applicable), verify your ITR. E-verification is the easiest and most convenient method. You can e-verify using:

Aadhaar OTP
Net Banking
Electronic Verification Code (EVC)

You see, After successful verification, submit your ITR. You will receive an acknowledgment receipt (ITR-V) on your registered email handle.

Step 10: Download and Save Your ITR-V

You see, Download and save the ITR-V for your records. If you haven't e-verified, you need to sign the ITR-V and send it to the Centralised Processing Centre (CPC), Bengaluru, within 120 days of filing your return.

Important Considerations and Common Mistakes to Avoid

Deadline: The due date for filing ITR for salaried employees is usually July 31st of the assessment year. Filing after the due date may attract penalties.
Incorrect Information: Make sure all information provided is accurate and matches the details in your documents.
Missing Deductions: Don't forget to claim all eligible deductions to reduce your tax liability.
Choosing the Wrong ITR Form: Select the correct ITR form based on your income sources.
Verification: E-verify your ITR promptly to complete the filing process.

Conclusion

Filing your income tax return as a salaried employee is a manageable process when approached systematically. By gathering the necessary documents, understanding the key concepts, claiming eligible deductions. Also, following the steps outlined in this guide, you can make sure accurate and timely filing, avoiding potential penalties and maximizing your tax savings. Remember to stay updated with the latest tax laws and regulations to make informed decisions.