What is an assessment of taxation, and why is it important?
Every assessee who earns income in a Financial Year (FY) that is more than the basic exemption level is required to submit a statement that contains the specifics of their income, exclusions, and other information pertinent to their situation. This document is referred to as the Income Tax Return (ITR). The Department of Income Tax will handle the processing of your tax returns after you have submitted them as a taxpayer. There are times when the return of an assessee is identified for an assessment. This happens when the Central Board of Direct Taxes (CBDT) uses predetermined factors to choose returns for audits.
Let us learn more about the assessment of taxation and see why it is important.
The amount of income tax that must be paid is decided by the person being assessed. The department of taxes has made accessible a variety of forms for taxpayers to use when completing their income tax returns. The assessee adds up all of the income they received during the year from its different sources and then compares that total to any losses, deductions, or exemptions they were eligible for throughout the course of the year. After then, the total income of the person being assessed is calculated. When calculating the amount of tax that must be paid on such income, the assessee first deducts the TDS and Advance Tax from that total amount. If he owes any tax at all, it would be considered self-assessment tax, and they would be required to pay it in full before he could submit their income return. The method in question is known as “Self Assessment.”
It is a method of evaluation in which there is no involvement from a person in the process. When carrying out this kind of assessment, the information provided by the assessee in his return of income is compared to the data that the income tax department has. During this phase of the procedure, the department will check that the return has been filed reasonably and accurately. The return is processed online, and any mathematical mistakes, inaccurate claims, or disallowances are automatically adjusted before it is submitted. A better tax planning can guide you how & when to file return
For instance, the credit for TDS that the taxpayer claimed is discovered to be more than what is available against his PAN according to the data kept by the department. If the taxpayer adjusts in this respect, it may increase their tax burden. If the assessee is obliged to pay tax after the aforementioned adjustments have been made, an intimation will be provided to him under Section 143 (1). The assessee is required to reply to this notification appropriately.
This assessment may be carried out by an Assessing Officer or Income Tax authority, provided that they are not below the level of an Income Tax Officer. This authorization comes from the Income Tax Department. The goal of this activity is to verify that the assessee has not undervalued their income, inflated any expenses or losses, or underpaid any tax obligations. The Central Board of Direct Taxes (CBT) has determined several criteria that must be followed before a taxpayer’s case may be selected for further investigation so to avoid any unexpected losses read importance of tax planning.
The above methods show different types of assessments your ITR filings can have. Ensure you understand the same thoroughly before filing your tax to avoid any discrepancies.