Should you e-file your income tax returns?

E-filing of income tax returns was enabled by the Income Tax Department a couple of years back. Using the e-filing process is simple and easy for all. Plus you have so many options available to you to prepare your Income Tax Returns.

E-filing of income tax returns was enabled by the Income Tax Department a couple of years back. Using e-filing is simple and easy for everyone, plus it offers you many options to file Income ax Returns – they can be filed online or you can take a print out and submit the returns offline.

• You can do-it-yourself, by registering for a online Tax Preparation Service such as ET Portfolio Wizard, TaxSmile, TaxShax.com, myITReturns.com etc. (We will soon post reviews of some popular e-filing and tax returns preparing services offered by various entities, so that you can take a better informed decision to choose your service provider.)
• You can select appropriate type of ITR Form and download relevant Return Preparation Software  for selected Return Form.
• You can seek help from a Tax Return Preparer

However, personally I would advise you all to do-it-yourself and prepare your Income Tax Returns. If you feel too intimidated by the thought of preparing your Income Tax Returns yourself, there are online tools and services available for you to choose. They offer simple question-answer forms that take relevant details from you to prepare your income tax returns. By doing your own taxes will actually help you gain more confidence to manage your finances better!

What is e-filing of income tax returns (ITR)?

The process of electronically filing your Income Tax Returns is called e-filing. It is compulsory for companies to file tax returns electronically; however for individuals it is currently optional.

E-filing is gaining popularity amongst individuals as well according to the e-filing statistics for assessment year 2008-09 published by the Income Tax Department.

Filing of Income Tax returns is a legal obligation of every Individual/HUF whose total income for the previous year has exceeded the maximum amount that is not chargeable for income tax under the provisions of the I.T Act, 1961. The last date of filing your income tax returns is July 31^st.

Which Income Tax Return (ITR) Form is Applicable to you?

Traditionally, people used to file their Income Tax Returns by filling up the Saral 2D ITR form. Since 2007, the Saral form is no longer saral (easy) to fill. Income tax department has now introduced different types of Income Tax Return ITR forms depending upon the sources of income that you have.

This means, if you only have income from salary and interest income, you need to fill ITR1. If you have a rental income from one of your properties, or have income from other sources apart from interest income or have transacted in capital assets such as trading in stocks, mutual funds, etc and have made any capital gains/loss then ITR 2 is the form applicable to you.

Advantages of e-filing your income tax returns (ITR)?

Electronically submitting your tax return to the Income Tax Department is faster, more convenient, and more secure than paper filing. There are many advantages of e-filing income tax returns as listed below :

• Any-time Any-where filing : This is the most important benefit,you don’t have to stand in the queue at the counter to submit your income tax returns.
• Faster processing of Refunds : Another plus for people opting for e-filing is that refunds are received sooner.
• Chances of Error minimized : Your tax data goes directly to Income Tax Departments computers, there is no chance of human error or document scanning errors which exists in case of paper filing.
• Immediate Acknowledgement : As soon as you submit the Income Tax Returns, an acknowledgement slip immediately issued to you. If you have filed digitally signed return, no further action is required. If not, then you need to sign the acknowledgement slip and send it to the Income Tax Department.
• Safe and Secure : e-filing is more secure than paper filing.

Common concerns regarding e-filing income tax returns (ITR)

There are some myths that people have formed in their minds about e-filing. Some of the common concerns are analyzed below so that you can evaluate them and decide to go in for e-filing or paper filing this year.

Myth : I don’t want to give my data in digital format to the Income Tax Authorities.

Reality : Your data is already available with the income tax authorities even if you choose to file your returns offline. Providing your PAN card details for availing various financial services and investments is mandatory. You can not trade in stocks, buy Mutual funds, deposit/withdraw large sums of money in/from banks without providing your PAN Number. All these details are collated by the Income Tax Authority in form of Annual Information Returns (AIR) filed by your Depository Participant, Asset Management Company, Credit Card Issuer or Banks, etc. Even your employer provides your income and tax deduction particulars in digital format to the Income Tax authorities.

Myth : Returns filed electronically are more prone to scrutiny.

Reality : This is purely a fictitious assumption. Every year income tax department pull out random list of people to scrutinize. Whether the person has filed income tax returns electronically or through traditional paper filing method have no bearing on this list. In fact, digital filing can help in automatically tallying Returns Particulars filed by you and that filed by your Employer, Banks and other Financial Institutions.  

Myth : e-filing is unsafe

Reality : Again a generic concern with any thing related to internet. In fact e-filing is safer than paper filing as your return is going directly into Tax Authorities’ Computers without involvement of any third party, if you download the Return Preparation Software from Income Tax site. Your concerns are valid if you are availing services of any third-party tax preparation websites. To ally these fears check if the site is a secured site (https instead of http). Also, check the trust worthiness of the site you choose to prepare your income tax return. We will soon post reviews of some popular e-filing and tax returns preparing services offered by various entities, so that you can take a better informed decision to choose your service provider.

In case you have any other concerns regarding e-filing your Income Tax Returns please feel free to leave a comment on this article and we will try to evaluate it and provide more information to you.

Conclusion

Using the e-filing process you can file your tax returns easily with a few clicks and following a simple process, any time of the day and without any hassles. Using this technology all you have to do is fill the form and submit it, online or offline.