First-time taxpayer's guide: Forms, filing, and avoiding common pitfalls

Filing income tax returns (ITR) for the first time can seem daunting, but with the right information and preparation, it can be a smooth process. Several tax experts break down what first-time filers should know, from selecting the right ITR form to avoiding common mistakes.

 

Choosing the right ITR form

 

The first step in filing your return is selecting the appropriate ITR form based on your income sources.

 

“Selecting the proper Income Tax Return (ITR) form is important for filers who are submitting it initially,” says Vishwanathan Iyer, senior associate professor, Great Lakes Institute of Management. For salaried individuals with income up to Rs 50 lakh from salary, one house property, and other sources like bank interest, ITR-1 (Sahaj) is usually sufficient.

 

However, “ITR-1 is not applicable if you have capital gains, foreign income, or if your agricultural income exceeds Rs 5,000,” cautions Sameer Mathur, managing director and founder of Roinet Solution.

 

According to CA Deepesh Chheda, partner at Dhruva Advisors LLP, ITR-2 is appropriate for individuals with income from more than one house property, capital gains, foreign assets/income, or investments in unlisted equity shares. ITR-3 is for those “who derive income that is chargeable under various heads, including from business or profession.” 

Step-by-step guide to filing ITR online

 

Mathur offers a simple step-by-step outline for salaried individuals:

 

1.    Register or log in to the Income Tax e-Filing portal using your PAN.

 

2.    Navigate to e-File > Income Tax Returns > File Income Tax Return.

 

3.    Select the assessment year, filing mode as "online", and your status as "individual".

 

4.    Choose the appropriate ITR form (usually ITR-1 for salaried individuals).

 

5.    Fill out the form with your personal details, income data from Form 16, deductions under sections like 80C or 80D, and bank account details.

 

6.    Use the preview option to verify entries and submit.

 

7.    Complete the process with e-verification through Aadhaar OTP, net banking, or an Electronic Verification Code (EVC).

 

Documents to keep ready

 

Before starting, collect and cross-verify the following:

 

·  PAN and Aadhaar card (linked)

 

·  Form 16 from your employer

 

·  Form 26AS and Annual Information Statement (AIS)

 

·  Investment proofs (for 80C, 80D, etc.)

 

·  Interest certificates from banks or post offices

 

·  Loan documents (education, home)

 

·  Bank account details for refund processing

 

“It is essential to keep key tax summary documents such as Form 26AS, the AIS and the TIS which provide a consolidated view of a taxpayer’s financial transactions,” notes Chheda. These forms ensure that third-party reported transactions match your own records.

 

Common mistakes first-time filers make

 

Several missteps can delay or invalidate your return:

 

·  Wrong ITR Form: “Selecting the incorrect form causes delays in processing,” warns Iyer.

 

·  Incomplete income disclosure: “Omitting income like interest or freelance earnings can trigger notices and penalties,” says Mathur.

 

·  Not reconciling with Form 26AS/AIS: “Discrepancies between these forms and your return can cause scrutiny,” Chheda adds.

 

·  Incorrect personal or bank details: Can delay refunds.

 

·  Failure to e-verify: “A common mistake by first-time filers is that they simply forget or are unaware of e-verification,” says Iyer.

 

In case any errors are discovered after submission, “a taxpayer has an option to revise the income tax return at any time before three months from the end of the relevant assessment year or before the completion of assessment, whichever is earlier,” he notes