Filing ITR: Know 8 Steps for Computation of Income:

Filing ITR: Know 8 Steps for Computation of Income Tax filing season for Year 2024-25 is here and we have to file the Income Tax Return (ITR) by the due date. Here are the 8 crucial Steps for Computation of Income, you should know if you are filing the Tax Return. 1. Know the Residential Status of the taxpayer Many miss out on this, but one should be very crucial about the residential status of the taxpayer as per the Income tax. Residential Status as per Income Tax and Citizenship status are different things. One can be a Resident or Non-Resident as per Income Tax.  Resident can also be an ordinary or a Non-Ordinary Resident. Taxability changes with the change in the Residential Status of the taxpayer. 2. Classification of Income under the relevant Head One need to rightly classify Income under the relevant Heads of Income as per the Act. The 5 heads of Income are: Salary, Income under the head house property, Income from Business and Profession, Capital Gains and Income under the head other sources. Each head has it's own tax implication. Classifying income in the wrong tax head can have severe tax consequences. 3. Gross Total Income After adding all the income under the 5 heads and adjusting and setting off current year and past years' losses, we will get the Gross total Income. Exempt incomes are also reduced from the gross total income. 4. Reduce Chapter VI-A deductions Once all the Chapter VI-A deductions like Section 80C, 80D, 80G, 80E, 80 TTA/80TTB etc. are reduced from the Gross Total Income, you get the Total Income or Taxable Income. 5. Total Income Taxpayers should note that as per section 288A, total income computed in accordance with the provisions of the Income Tax Act shall be rounded off to the nearest multiple of ten. 6. Calculate Tax Liability Tax liability is calculated as per the Tax regimes (new or old) opted for by the taxpayer. 7. Deduct Prepaid Taxes One can take credit for prepaid taxes like Tax Deducted at Source (TDS), Tax Collected at Source (TCS), Advance Tax, etc. In case some tax is paid on foreign income, outside India, and the same is being taxed here, one can take credit for that as well by filing Form 67. 8. Final Tax Liability or Tax Refund As per section 288B, tax payable by the taxpayer or tax refundable to the taxpayer shall be rounded off to the nearest multiple of ten, following points should be kept in mind while rounding off the tax.