Another financial year has recently come to an end. That means it is time for us start planning the process of filing our taxes for the year. The deadline to file taxes for a given financial year in India is July 31st. And therefore, these last couple of months leading upto the tax filing deadline usually end up being a hectic affair, which see us trying to ensure that all our documentation and other details required to file our taxes are in place. Add to that the fact that some of us may go through with the process of filing our taxes very close to the deadline, and the exercise is likely to become that much more stressful.
Most obviously, it would be a prudent practice to ensure that we file our taxes for the year by the first week of July at the latest. But over and above this, a little planning and organisation around the exercise of filing our taxes would take most of the stress out of the equation. And such an exercise does not require any great effort of note. So today I am going to focus on some ideal practices with regard to process of filing our taxes every year. I will also talk about some of the common mistakes we make and some practices we must avoid while filling our taxes.
The first thing to take care of when we file our taxes is to ensure that we appropriately specify whether we want to be taxed under the old tax regime or the new tax regime which was brought into force from 01-04-2020 onwards. For income earned during Financial Year 2022-23 (April 2022 - March 2023), the old tax regime would continue to be the default tax regime, with slab rates being higher and deductions under Section 80C being available. So anyone wishing to be taxed under the new regime where slab rates would be lower but section 80C deductions would not be available, has to specify the same when filing their taxes.
The revised slab rates introduced by the recently announced Union Budget for 2023 under the new tax regime would only be effective for income earned from 1st April 2023 onwards. Slab rates under the new tax regime for income earned during Financial Year 2022-23 are given in the graphic that follows.
The process of filing our taxes is centered around documentation. Therefore it is important for us to keep certain important personal documents such as Form 16, salary slips, bank statements, and investment proof, organized and readily available. It is also important for us to correctly declare all our sources of income including salary, rental income, business income, interest, capital gains and residual income from any other sources so as to avoid penalties while filling our taxes. Those of us choose to be taxed under the old tax regime must also specify the list of tax deductions we wish to claim including expenses like medical bills, home loan interest, and charitable donations.
While it is important to ensure that our taxes are filed as early as possible, it is also important to ensure to take our time while filing our taxes to double check the information we mention in our returns including our personal details, income, and deductions so as to ensure the accuracy of everything we share in our returns. We must also make sure to verify the tax returns that we file every year. This can be done electronically or by sending a signed copy of the relevant ITR forms to the Income Tax Department. The list of ITR forms for Financial Year 2022-23 are given in the graphic that follows.
Some important mistakes to avoid when filing our taxes include not quoting our PAN and/or Aadhaar numbers correctly in our tax returns, filing the incorrect ITR forms, not declaring interest income from bank deposits and/or understating the same, not linking our PAN and/or Aadhaar Cards to our bank accounts, not making full use of the deductions available to us if we choose to be taxed under the old tax regime and not reconciling our tax returns with our annual Form 26 AS statement. All of these errors may seem trivial but they all have a significant impact on our ultimate tax bill and our overall experience during the process of filing our taxes.
While the entire tax filing process has today been streamlined to allow individuals to file their taxes independently and online, it is important to remember that filing taxes in India can be easy with the right knowledge. Therefore, it is always better to seek professional help and get our taxes filed with help from a qualified Chartered Accountant so as to ensure availability of the right expertise and insight when filing our taxes. Doing this would ensure that we enjoy the best possible experience through the process of filing our taxes which is thought to be tedious and complicated, but doesn't have to be.