Filing an Income Tax Return (ITR) is straightforward for taxpayers with a single source of income. For example, if your income is solely from a salary, you can easily file returns yourself using the e-filing portal of the Income Tax Department or through various private tax filing platforms.
However, many individuals have income from multiple sources such as salary, house property, business, equity investments, crypto, lottery, etc. It is not easy for them to handle ITR filing on their own, especially if they are not familiar with taxation terminologies and various rules.
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As the time to file ITR for Assessment Year 2024-25 approaches, we explore some easy strategies that taxpayers with multiple income sources can follow to simplify the process.
Gather Necessary Documents
If you have income from multiple sources, the first step before ITR filing is to gather all important documents relevant for tax filing in one place. These documents may include Form 16, Form 26AS, AIS, TIS, bank statements, investment documents, capital gains statements, home loan statements, etc. Reviewing these documents will give you a clear understanding of all your sources of income and the taxes you have already paid in FY 2023-24.
Choose the Right ITR Form
Selecting the correct ITR form is probably the most basic but important step for individuals with income from multiple sources, including freelancers and moonlighters (individuals with multiple concurrent jobs, often involving an additional job outside regular working hours). Selecting the wrong ITR form can lead to complications. There are seven types of ITR forms to choose from, depending on the sources of your income. For example, if you have capital gains in addition to your salary income, choose ITR-2. If you also have business income, opt for ITR-3.
Verify Form 26AS
Form 26AS provides details related to various TDS and TCS paid in FY 2023-24. It is important to verify and ensure that any income on which TDS has been deducted is not missed in your income tax return. You can download Form 26AS from the TRACES website.
Verify TIS and AIS
The Taxpayer Information Summary (TIS) is a summary of your Annual Information Statement (AIS). If you find any discrepancies in your TIS, the AIS will provide in-depth, transaction-wise data. The AIS gives a comprehensive overview of all transactions linked to your PAN number, including salary received, interest on your savings bank account or fixed deposit, sale and purchase of shares and mutual funds, or any other kind of capital asset, taxes paid, and demand/refund issued. If you find any discrepancies in the AIS data, you should provide feedback through the AIS portal to get it rectified.
Select ITR-4 if You are a Freelancer/Consultant
If you are a freelancer or consultant, ITR-4 is the most suitable form for you. This ITR allows a person to take a 50% deduction on their income if their gross annual receipts are below Rs 50 lakh (Rs 75 lakh w.e.f. 01.04.24). You can also take advantage of Chapter VI-A deductions on your income after the 50% deduction. Ensure that GST registration and corresponding statutory obligations are followed if your income exceeds Rs 20 lakh.
Seek Assistance
Taxpayers must ensure that their returns are filed correctly, as incorrect filing can lead to tax troubles in the future. Having multiple sources of income often leaves room for doubts and confusion. In such cases, it is advisable to seek help from a trusted tax expert, preferably a Chartered Accountant, to file returns correctly.
Start the Return Filing Process Early
Lastly, it is advisable to start preparing for return filing early, especially for taxpayers with multiple streams of income. This allows enough time to address any confusion or doubts while enabling early filing. Taxpayers whose accounts don’t need to be audited are required to file their returns for income earned in FY 2023-24 by 31st July 2024, failing which they will incur a late filing penalty. Early filing also leads to the early processing of Income Tax Refunds.
Raghav Gupta is Co-Founder of 1% Club, and CA Sagar Dave is a Financial Planner in Wealth Management at 1% Club.