Maintaining records of your income and expenses is crucial for accurate tax filing and ensuring compliance with tax regulations. Here's why record-keeping is important for first-time tax filers.
- Keeping records of your income sources helps you accurately report your earnings. Preserve documents such as salary slips, Form 16 (provided by your employer), bank statements reflecting interest income, rental agreements, and any other relevant documents pertaining to your income sources.
- To claim deductions and exemptions, it is important to have supporting documents. Keep records of receipts, certificates, or statements for investments made in schemes like the Public Provident Fund (PPF), National Savings Certificate (NSC), life insurance premiums, education loan interest payments, and medical insurance premiums. These documents serve as evidence while claiming deductions and reducing your taxable income.
- Maintaining records of your expenses can help you claim eligible deductions. For instance, if you are claiming House Rent Allowance (HRA) exemption, keep rent receipts and other rental-related documents. Similarly, retain medical bills and health insurance premium receipts to support deductions under Section 80D.
- Maintaining records ensures accuracy while filing your tax return and facilitates compliance with tax laws. By having organized records, you reduce the chances of errors or omissions in reporting your income and claiming deductions, minimizing the risk of penalties or scrutiny from the tax authorities.
- Preserving records provides a reference for future tax filings and audit purposes. The Income Tax Department may conduct audits or seek clarifications regarding your income and deductions. Having complete records safeguards you against any disputes or discrepancies that may arise during such processes.
In simple words, by organizing and preserving relevant documents, you can navigate the tax filing process smoothly, reduce the risk of errors, and be prepared for any future inquiries or audits.
Look up more articles here for a smooth first time tax-filing process. All the best!
