Things to Keep in Mind as a First Time Taxpayer
Did you know that in a country with a population of over 132 crore people, only about 82.7 million people pay personal income tax? This was revealed by the Income Tax Department of India. You might ask why you should pay taxes on your own hard-earned money. The fact is that taxes are used for infrastructural and other development projects in the nation by the government. If we diligently pay taxes, we are actually supporting the progress of our nation.
Of course, the other reason is that if you fail to file your income tax returns, you could be penalized. So, it’s best to file your returns each year to gain peace of mind. If you are a first-time taxpayer, the first step is to learn about the types of ITR, income tax slabs, what documents are needed and how to use an online income tax calculator for easy filing of returns.
So, take a look at this guide to everything you will need to know.
1. Keep Track of All Your Income Sources
To accurately file your income tax returns, you need to account for every avenue from which you might be earning. This could include stocks, property, fixed deposits, capital gains from other investments, and more. For many people, accounting for all income sources could change their tax slab, and therefore, the tax rate. You can use an income tax calculator to get a good idea of the actual amount you will need to pay.
2. Which Income Tax Slab Do Your Fall Under?
To give relief to Indian citizens and to establish a standard norm for the tax rate, the Indian government taxes different annual income amounts at different rates. Take a look at the table below:
|Income Slab||Tax Rate|
|Up to ₹5,00,000||Nil|
|₹5,00,001 to ₹7,50,000||10%|
|₹7,50,001 to ₹10,00,000||15%|
|₹10,00,001 to ₹12,50,000||20%|
|₹12,50,001 to ₹15,00,000||25%|
|₹15,00,001 and above||30%|
3. Make Sure All Your Documents are Organized
While filing your income tax return, there are various documents that you will need to submit to support your claim regarding the income amount and any tax deductions. The basic documents required include:
- Proof of Identity – Aadhar card
- Proof of Address – Aadhar card
- Bank account details – bank statements for the financial year
- Permanent Account Number (PAN) card, which should be attached with your Aadhar number
- Form 16 for salaried people. Your workplace will provide this form. It is your TDS certificate and acts as proof of the amount of tax already deducted from your income.
- Proof of investments. This could be life insurance and other investments that offer tax deduction under Section 80C or other sections of the Income Tax Act.
- Home loan interest certificate and owner’s details. You can claim tax deductions on your home loan repayment.
4. Keep Track of the Due Date
The window for filing your income tax may seem quite ample, more so for first-timers, but unexpected delays and putting it off for too long is also commonplace. Firstly, it takes time to get all the documents in place. For instance, you might need to chase your HR department for Form 16. Or you might upload all the documents and at the wrong instant, suddenly lose internet connectivity. So, you’ll have to start the entire process all over again. Therefore, don’t wait for the last day to put things together and file your returns. This way, you might be able to get some benefits for advance tax payment.
5. Practice Makes Perfect
If you’re going to do something for the first time, the golden rule is always to practice before doing it for real. For instance, if you’re a salaried person, take a thorough look at Form 16 and observe the various fields before filing it online. Always go through all sections and paperwork thoroughly, keeping a keen eye on what each section asks of you and whether you have the information readily available. Moreover, you can use an income tax calculator for the ‘Breakdown’ section to enter the correct values.
6. Don’t Forget Your Proof
When you’re done, it is crucial to receive proof of your filing. You never know when someone might try to swindle you by stating that you’ve not yet filed your taxes. Ensure that the email address you enter is the one you have access to and collect all your proofs in multiple domains to keep them secure.
And that’s all there is to it. Doesn’t seem very complicated now, does it? Keep in mind that this is the money that is going to contribute to the nation. Always remain honest in your response. Plan well ahead, and you could get good tax savings through the right investments too.