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Income Tax Return (ITR) Filing In India

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Income Tax Return – What is it?

  • An Income tax return (ITR) is a form used to file information about your income and tax to the Income Tax Department. The tax liability of a taxpayer is calculated based on his or her income. In case the return shows that excess tax has been paid during a year, then the individual will be eligible to receive a income tax refund from the Income Tax Department.
  • As per the income tax laws, the return must be filed every year by an individual or business that earns any income during a financial year. The income could be in the form of a salary, business profits, income from house property or earned through dividends, capital gains, interests or other sources.
  • Tax returns have to be filed by an individual or a business before a specified date. If a taxpayer fails to abide by the deadline, he or she has to pay a penalty. 

 

Benefits of Filing Income Tax Returns

Advantages of tax filing are, but not limited to:
    • ✔   Processing of Loans & Visa: If you apply for any loans such as a home loan, car loan, etc., the eligibility and quantum of loan would depend on your income. This can be established through filed ITRs. ITR will help your lender to assess your repayment capacity.
      If you plan to travel overseas, proof of earning is required. If you are salaried then a certificate from the employer will work. But if you are self-employed then income proof & details need to be submitted.
    • ✔   Claiming Refund: There could be some TDS cut on some investment. And you will have to file the ITR to claim a refund of the same. Or you may have paid excess tax on your income. To get this refund, you must file ITR.
      Many salaried individuals don’t file ITR as they think that the tax on their income has already been deducted and they have Form 16. But your employer may have paid more tax on your behalf. Not taking into consideration your actual house rent, children’s school fees, tax-saving investments, or insurances. So, the filing of ITR will enable you to get a refund from the IT department.
    • ✔   Carry-forward Losses: As per Income tax rules, losses are allowed to be carried forward and set off against capital gains. But this applies only to those individuals who file ITR in the relevant assessment year. If you have incurred losses for a year and you have earned below the exemption limit. You must file your returns to be able to carry forward the losses you have incurred. And it gets balanced against future gains and income.
      The capital losses can be carried forward for 8 consecutive years, as per the IT Act.
    • ✔   Establishing Income in Compensation Cases: Although the Motor Vehicles Act does not make it compulsory to present the ITR while calculating the compensation in case of accidental death or disability, the procedures approved by Delhi High Court mention the need for ITR for self-employed persons. This helps to establish the income of the person to arrive at appropriate compensation.
    • ✔   Self-Employed Individual Filing for Tenders: Businessmen, consultants, and partners do not get any Form 16. For such self-employed individuals, ITR receipts become an important document. ITR is the only proof of income and tax payment for them, in all sorts of financial transactions. And if they want to take up some contract or tender, they may be asked to show their tax return receipts of the previous 3 to 5 years.

following is the simple four step process to file Income tax Return (ITR) Filing 

 

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Step 1

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Upload your Documents and Make the Payment

Step 2

  • Upload your Documents and Make the Payment

Financial Statements Preparation by LegalDocs Expert

Step 3

  • Financial Statements Preparation by Khata Dekho Expert

Return filed & acknowledgement generated

Step 4

  • Return filed & acknowledgement generated

Documents Required for ITR Filing

ITR forms are attachment-less forms and thus, the taxpayer need not attach any documents along with the return of income unless required by the order of the Income Tax Department. However, some key documents that the taxpayer must keep handy for smooth ITR filing experience include:

PAN cardBank statementInterest certificates from banks or post offices
Proof of tax-saving investmentsForm 16 (for salaried individuals)Salary Slips
TDS certificateForm 16A/16B/16CForm 26AS

Types of ITR Forms

On the Income Tax Department of India website, there are different forms that can be used to file income tax returns based on different income sources and types of taxpayers (resident/non-resident/individual/non-individual, etc.). As of Assessment Year 2022-2023, there are seven forms available from ITR-1 to ITR-7. Some of these forms might be longer than others and may require additional disclosures such as profit and loss statements. To help you know which one of the forms fits best to your requirements, here is each one of them briefly explained:

● ITR-1 –  This form is also called SAHAJ. ITR – 1 is meant to be filed by an individual who gets income from salary, pension, one house property, interest or income from other sources (excluding income from lottery winnings and income from race horses) and having a total income of up to Rs. 50 lakh.

● ITR-2 – This form is for individuals or the Hindi Undivided Families (HUFs) who have income which is not from the profits and gains of a business or profession.

● ITR-3 – This form is for different persons or the HUFs whose source of income is from the profits and gains of a business or profession.

● ITR-4 – This form is for individuals, HUFs and partnership firms who have opted for the presumptive taxation scheme of section 44AD/ 44ADA/44AE

● ITR-5 – This form is for everyone other than individuals, HUFs, companies and people filing Form ITR-7.

● ITR-6 – This form is for all those companies which are not claiming exemption under Section 11 of the Income Tax Act.

● ITR-7 – This form is relevant for all people including those enterprises who are required to file tax returns under Section 139(4A), Section 139(4B), Section 139(4C) or Section 139(4D)

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Frequently Asked Questions (FAQs)

Every person or entity is liable to pay tax in India if his total income is more than the income notified by the government in the slab rates. 1. Individual – Salaried, Self-employed or Professional, 2. Hindu Undivided Family (HUF) 3. Company 4. Firm 5. Association of Persons (AOP) 6. Local Authority 7. Artificial Juridical Person 8. Body of Individuals (BOI) 9. Political Party, 10. Educational or medical institution, 11. Trade Union, etc.
Taxable income is to be calculated as per the provisions and rules contained in the Income Tax Act, 1961. For calculating income tax, slab rates are applied to the taxable income earned during the previous year. These slabs are notified in the budget at the end of each financial year. The income is calculated under various heads of Income and added. Next, deductions and/or exemptions available under Chapter VI-A, are deducted to get the Net Income Chargeable to Tax.
The return can be filed both physically & electronically. For e-filing download the government utility from the Income Tax portal (in excel format or java utility). Complete all the fields with the information required. Pay the taxes due and generate the XML. You can upload this XML on the government portal by logging into your account. Once the XML has been uploaded, download the acknowledgment in ITR-V. This ITR-V can be verified, either by using EVC code or can be couriered to CPC Bangalore for further processing.
ITR-1 has 4 parts: Part A has Personal Details, Part B is about Gross Total Income, Part C has Deductions and Taxable Total Income, Part D has Tax Computation and Tax Status, Schedule IT contains details of Advance Tax and Self-Assessment Tax Payments, Schedule TDS gives details of Tax Deducted at Source. The ITR-1 cannot be used if you are claiming double taxation relief under Section 90/90A/91.
Yes, return filing is compulsory if your taxable income is above the slab, whether taxes have been paid or not. You can claim the benefit of tax credit or get a refund only if your return is filed.

 

If any error is discovered after the return is filed then it can be revised u/s 139(5). Revised Return of Income Tax can be filed by an assessee any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

 

It is mandatory to file income tax returns in India if any of the below conditions apply to you, whether you are a man, woman, or NRI, for the Assessment Year 2019-2020 (as per the Income Tax Act): (a)Earn gross annual income (before deductions u/s 80C to 80U) more than- 1. Rs. 2.5 Lakhs – For individuals below 60 years, 2. Rs. 3 Lakhs – For individuals above 60 years but below 80 years, 3. Rs. 5 Lakhs – For individuals above 80 years, (b) Earn income other than salary like house property, etc., (c) Want to claim an income tax refund of taxes already paid. Such as TDS, Advance Tax, etc., (d) Earn from or have invested in foreign assets, (e) Looking to apply for visa or loan applications, (f) Company or a firm, irrespective of profit or loss, (g) Having Bank Deposits of over Rs. 1 crore, (h) Bought foreign exchange of more than Rs. 2 lakh, (i) Paid an electricity bill of more than Rs. 1 lakh.

 

You can pay by either cash/cheque in any designated bank branch or online on the NSDL website. Payment is to be made in Challan-280 in both cases. The Challan must be filed accurately for further processing.

 

 

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