Filing income tax for the first time is exciting. At the same time, it can be a confusing and frustrating exercise amid various rules governing exemptions, tax rates, deductions and deadlines.

You are required to file an income tax return if your income is over Rs 2.5 lakh. Your total income would include income from salary, house property, capital gains, business and profession, and any other source.In case, you don't file your returns, it can invite some penalties from the IT department. When your income does not cross 2.5 lakhs per annum, there is no tax. However, it is good to file income tax returns anyway as the documents come handy in any financial transactions.

You can file you returns online(e-filing) or physically by July 31. Filing returns through online is easy and can be done by all the taxpayers. However, if your income is Rs. 5 lakh and above, it is mandatory for you to file the returns online. Individual owning assets outside India and whose income needs to undergo an audit are also required to file returns online. Being safe and secure, e-filing wins over physical filing as returns can be filed from anywhereand anytime using the internet.

The process of e-filing is simple and you can do it yourself by registering on the income tax department website ( or can seek professional help to file returns.

Let us take a look at a few aspects that a first-time income tax payer needs to know to make it a smooth experience.

Income tax slabs and corresponding tax rates

Not everyone who earns an income needs to pay taxes. There is no tax on annual income up to Rs. 2.5 lakhs. Here are the tax rates for various income levels.

Income slab for an individual

Income Tax rate

Up to Rs. 2.5 lakhs per annum


2.5 lakhs to 5 lakhs per annum

10% of the amount exceeding 2.5 lakhs

5 lakhs to 10 lakhs per annum

20% of the amount exceeding 5 lakhs

More than 10 lakhs per annum

30% of the amount exceeding 10 lakhs

(It is important to note here that tax rate is 10% (income slab 2.5 lakhs to 5 lakhs per annum) for those who are filing returns for FY16-17. The government has revised the tax rate to 5% for returns filing in FY17-18.)

Here is how you can find out the income tax that you have to pay. If your income is 12 lakhs per annum, then the tax liability will be as follows, assuming there is no tax saving investment or applicable exemptions.

10% of 2.5 lakhs = 25,000

20% of 5 lakhs = 1,00,000

30% of 2 lakhs = 60,000

So your tax liability is 1.85 lakhs. A cess of 3% is applicable on this tax liability.

Exemptions allowed under various sections and categories

Government has allowed a few exemptions to encourage taxpayers to invest in certain assets that are tax-deductible. The major tax benefits that you could avail is under Section80C, where you can invest up to Rs. 1.5 lakhs in tax saving assets. There are other categories that provide tax benefitssuch as home loan repayment, NPS, Health insurance, etc.

In case you are making full use of the Section 80C deduction limits, you can deduct Rs. 1.5 lakhs from your taxable income and pay tax on the balance. In the previous example, your taxable income would go down to Rs. 10.5 lakhs, and your tax liability would reduce to Rs. 1.4 lakhs (10% of 2.5 lakhs + 20% of 5 lakhs + 30% of 50,000) plus cess.

Documents needed to file income taxreturns and claim exemptions

You must have a Permanent Account Number (PAN) card to file your income tax returns. At the same time, you have to provide address proof and identity proof. The PAN card works as identity proof too. Your bank account details should also be provided irrespective of whether you expect a refund or not. The Government has recently made it a mandatory requirement to attach your PAN card with the Aadhaar number from 1st July 2017 for filing your tax returns. Apart from these documents, salaried people need to provide form 16. The form 16 is your TDS certificate which is a proof of how much tax is deducted from your income.

If you want to claim tax deduction under any scheme such as 80C, you need to provide the proof for the investments.

If you want to claim deduction under home loan repayment scheme, submit the address proof of home, home loan interest certificate provided by the lender or bank, and owner’s details.

If you invest in fixed deposits, Gold, properties, Mutual Funds, or equities and have made profits, you must file it in your tax declaration. It is important to know the tax rate on long-term and short-term capital gains. Both have different rates. Moreover, the definition of short term varies for stocks, mutual funds, Gold, and real estate. Knowing these details will help you file correct tax returns and avoid any complications in future.

Lastly, take help in case of multiple sources of income

Filing tax returns can be complex or simple depending on your sources of income. Each source adds to the complexity of income tax filing. Hence, it is advisable to take help of a competent Chartered Accountant (CA) if you have any other source of income apart from a regular job.

(The writer is CEO,