First time income taxpayers: When you start making money, one of the new things you’ll have to do is file taxes.
This can seem scary and confusing if it’s your first time. But learning the basics can make tax season much easier.
This guide will explain everything you need to know as a first time income taxpayers. Everyone who makes money throughout the year needs to file income tax reports.
This is a rule, just like needing a driver’s license to drive. Whether you just graduated and got your first job, or you started working for yourself on freelance projects, it’s important to know about taxes.
What is Income Tax?
Income tax is a direct tax imposed on the earnings of individuals and entities within a jurisdiction.
It is typically calculated as a percentage of one’s taxable income, with rates varying based on income levels and tax laws.
Importance of Filing Income Tax
Filing income tax serves several purposes. It ensures that the government receives the necessary funds to provide public services and infrastructure.
Additionally, filing taxes accurately helps prevent penalties and legal repercussions.
Do I Need to File?
Not everyone needs to file a return. Generally, if your income falls below a certain threshold (which can vary depending on your filing status), you’re exempt.
However, even if filing isn’t mandatory, it might be beneficial. For instance, filing can help you get tax refunds or establish a credit history.
Tisps for first time income taxpayers
These days, the process of e file ITR has become easy and quick, and can be done from the comfort of your home.
Here are few important things that first time income taxpayers should know before filing their ITR
- Your Taxable income is your gross income (received from your salary and other sources) minus the tax saving deductions.
- Choosing between the new tax regime can likely be the most crucial decision for new taxpayers.
- There are a certain set of documents that are required to be submitter: PAN Card, Aadhaar Card Details, Bank account details, Form 16, investment proofs.
- The Income Tax Department offers different types of ITR forms. Choose the one that best shuits you.
- Taxpayers are required to check the official site of the incmoe tax department for more details
Gather Your Documents
The key to a smooth filing process is organization. Here are some essential documents you’ll likely need:
- Permanent Account Number (PAN): This unique ID is crucial for tax purposes.
- Form 16 (For Salaried Individuals): This form provided by your employer details your income and deducted taxes.
- Form 26AS: This tax credit statement shows all taxes deposited in your name.
- Investment Proofs (if applicable): If you invest in stocks, mutual funds, etc., keep records for potential deductions.
Understanding Tax Forms
There are different Income Tax Return (ITR) forms for various taxpayer categories.
The ITR form you choose depends on your income sources and deductions claimed. Research the different ITR forms to identify the one applicable to you.
Filing Methods
You have two main options for filing your return:
- E-filing: This convenient online method is generally faster and preferred by tax authorities.
- Paper Filing: While still an option, paper filing can be more time-consuming and prone to errors.
Explore Deductions and Exemptions
The government allows deductions for expenses like rent, medical bills, and charitable donations. These can reduce your taxable income. There are also tax exemptions for specific income sources or individuals.
Choose the Right ITR Form:
The Income Tax Return (ITR) form you need depends on your income sources and filing status. There are different forms for salaried individuals, freelancers, etc.
Some Tips for First time Taxpayers
Don’t Miss the Deadline!: The due date for filing ITRs typically falls in July. Missing it can attract penalties.
Consider E-filing: E-filing your return electronically is convenient, secure, and often comes with faster processing.
Seek Help if Needed: Don’t be afraid to consult a tax advisor or use government resources for assistance, especially if your tax situation is complex.
Keep Records Organized: Maintain good records of income sources, deductions, and tax payments for future reference.
Review and Double-check: Carefully review your return before submitting it to avoid errors that could delay processing.
Stay Informed: Tax rules and regulations can change, so stay updated to ensure you’re filing correctly each year.
Conclusion
Feeling scared about doing your taxes for the first time? Don’t worry! These tips will help you do it easily. Just be organized and file by the deadline, and everything will go smoothly.
FAQs
Do I need to file income tax returns if I’m a first-time earner?
Yes, if your income exceeds the basic exemption limit, you must file income tax returns.
What is the basic exemption limit for first-time taxpayers?
For individuals below 60 years, it’s ₹2.5 lakh; for senior citizens (60-80 years), it’s ₹3 lakh; and for super senior citizens (above 80 years), it’s ₹5 lakh.
What documents do I need to file my taxes for the first time?
Gather documents like PAN card, Aadhaar card, Form 16 (if employed), bank statements, and investment proofs.
How do I calculate my taxable income as a first-time taxpayer?
Subtract deductions under Section 80C to 80U from your total income to arrive at taxable income.
Can I claim deductions if I’m a first-time taxpayer?
Yes, you can claim deductions under various sections like 80C (for investments), 80D (for health insurance), and 80TTA (for savings account interest).
How do I file my income tax returns for the first time?
You can file online via the Income Tax Department’s website (https://www.incometax.gov.in/iec/foportal/) or through authorized e-filing intermediaries.
What if I miss the deadline for filing my taxes as a first-time taxpayer?
You can still file a belated return before the end of the assessment year, but you may be liable to pay a penalty or interest.
Do I need to pay advance tax if I’m a first-time taxpayer?
If your tax liability exceeds ₹10,000 in a financial year, you must pay advance tax in quarterly installments.
How do I know if I’m eligible for tax refunds as a first-time taxpayer?
If excess tax has been deducted from your income, you’re eligible for a refund, which can be claimed by filing your tax return.
What are the consequences of not filing income tax returns as a first-time taxpayer?
You may face penalties, interest charges, and legal consequences such as scrutiny or prosecution by the Income Tax Department.