Income Tax Return

Taxes in India are grouped into direct and indirect taxes. Direct tax is where the total burden of tax payment falls on the taxpayer, as in the cases of wealth tax, income tax etc. Whereas in indirect taxes, tax payment is made via third parties like VAT, Service tax, etc. Income tax is the Government of India’s main source of revenue, as it is the largest tax resource in the country. Income tax is collected from individuals as well as organizations- the only exception here is agricultural income. 

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This income can come from one’s salary, securities interests, dividends, lottery winnings, capital gains, fees from professional services, insurance commission, rent payments, royalty payments, or any other sort of profit.

The total tax calculated based on an individual’s previous year’s income is paid in the current assessment year if her/his income falls under any of the tax slabs set by the Income Tax Department.

What is Income Tax Return?

Income Tax Return (ITR) works as proof of tax payment, which consists of one’s income details and the tax paid by her/him on her/his income.

It is mandatory for all earning Indian citizens to file ITR annually, provided they fall into the income tax slab. In case you haven’t paid your income tax, you will be liable to pay penalties or face other legal consequences.

Filing Income Tax Return ensures that one is able to get a refund if s/he has paid more taxes than her/his tax liability. In the current scenario, according to the Income Tax Act, anyone whose total income exceeds Rs. 2.5 lakhs should file ITR. For senior citizens who are below the age of 60, the maximum income limit set is Rs. 3 lakhs, while for those who are above 80 years of age, it is Rs. 5,00,000.

If anyone wants to claim a tax refund, be it a firm or an individual, they will have to file Income Tax Return, regardless of whether they made a profit or a loss or have any tax liability or not. Currently, ITR filing has become a mandatory check when applying or being considered for a loan/visa.

All taxpayers (Association of Persons, Body of Individuals (BOI, Hindu Undivided Family (HUF), and Individuals) are required to file ITR by the due date of 31st July every year. However, individuals with accounts that require auditing should file Income Tax Return by 30th September. The Indian Government provides the forms to file ITR depending on an individual’s income type.

What is Return of Income?

It is a form that has details pertaining to all the income and tax payments made by a particular person or organization in a given financial year. The different forms, which range from ITR-1 to ITR-7, ITR-4S, and ITR-V, are available on the Income Tax Department online portal. Once the relevant forms have been adequately filled, they are submitted to the Income Tax Department.

The Necessity of Income Tax Return Filing

Yes, ITR filing is necessary for every individual, including:

  • All citizens who earn an income above the maximum set limit, as discussed earlier

  • Any resident who acts as a signatory in a foreign account

  • Any individual who needs a tax refund

  • Anyone who gets income from property held as an educational or medical institution, charitable trust, religious purposes, a nonprofit educational institution, infrastructure debt fund, political party, research association, trade union, news agency, or any other authority.

  • Any citizen who wants access to loans or travel visas.

  • Any citizen who incurs a loss under income and needs it to be carried forward.

All individuals- residents or non-residents, who earn their income using Indian resources are eligible to file ITR by filing in the ITR forms 3 to 7.

Income Tax Return forms

The Government of India has made several forms available to file ITR depending on an individual’s type of Income. These Income Tax Return forms are listed below:

  • ITR-1: This form is also called SAHAJ, and it deals with salary income, pension income, house or property income, interests earned, and any other income excluding, lottery or horse racing income. It is tailor-made for individuals.

  • ITR-2: This form is uniquely created for individuals and HUF (Hindu Undivided Families) who have any additional income apart from professional and business gains.
    Such income may include partnership firm remuneration that is not from carrying out business under proprietorship, bonus, commission, interests earned from profit in a business, income from more than one house property, and agricultural income that is above Rs. 50,000, etc.

  • ITR-3: This Income Tax Return form is for individuals and HUFs that derive their income from any business/ professional gains or profits.

  • ITR-4: This Income Tax Return form is for individuals and HUFs that derive their income from any business/ professional proprietorship.

  • ITR-4S: This is a form designed for HUFs and individuals who prefer the presumptive taxation scheme as specified in Section 44AD, 44ADA, or 44AE. It is also referred to as the SUGAM.

  • ITR-5: This form is specifically designed for entities like firms, BOI, LLP (Limited liability partnership), AOP (Annual Operations Plan), co-operative society, artificial juridical person, local authorities, etc.
    It is also important to note that this form is not to be used by any entity that files ITR under Section 139(4A), (4B), (4C), or (4D). This includes all political parties, colleges, trusts, institutions, etc.

  • ITR-6: The form is for companies other than those eligible to claim a tax deduction or exemption in Section 11 of the Income Tax Act.

  • ITR-7: This is specifically for all entities who file ITR under section 139(4A), (4B), (4C), or (4D).

  • ITR-V: This is a verification form or an acknowledgment form that is received once one has filed his/her Income Tax Return.

Which ITR Should I file?

It is of great importance to file Income Tax Return in the appropriate form. To do so, it is important to keep in mind the following:

  • ITR-1 cannot be used by people with income above Rs. 50 Lakhs, foreign assets, capital gains that are taxable and agricultural income more than Rs. 5000.

  • ITR-2 is not applicable to people who pursue a profession or business. ITR-3 and ITR-4 are required for these incomes.

  • Once the turnover of a business that opts for a presumptive tax scheme exceeds Rs. 2 Crores, the taxpayer should file ITR-3.

  • ITR-7 should be filled by people who file ITR under Section 139 (4A), which is income from property held under legal obligations or trust or for religious or charitable reasons.

Political parties should file under Section 139 (4B) if their income exceeds the maximum un-taxable limit. All research associations, institutions as per section 10 (23A and 23B), and news agencies should follow the process as specified under Section 139 (4C). Section 139 (4D) is for all Universities, colleges, and institutions.

The list of benefits associated with filing Income Tax Return Online:

One can get access to loads of benefits by going for online ITR filing:

  • Avoid any penalty or interest on fines by filing your Income Tax Returns on time.

  • You are provided with an ITR-V form as a payment acknowledgment receipt that can be represented as financial proof if you are looking to get a loan.

  • It also serves as a mark of your credibility with organizations or people with whom you might want to do business in the future.

  • The income tax department has your financial history once you file your ITR online, hence giving you quick and easy access to your financial history.

  • You are in a position to follow up on your ITR filing and are able to get timely feedback on any discrepancies in them, which further enables you to fix those issues on time.

How to file ITR for AY 2022-2023

There are 2 ways to file an Income Tax Return for an individual. Either an individual can opt for the offline process or the online process of filing the return. In the current scenario, the e-filing process is considered a much better, convenient, and quick option for individuals.

Here are the steps on how one can file ITR, both through an online and offline method.

  1. What is the process to e-file your ITR offline?

    The Income Tax Department of India has simplified the process of e-filing tax returns. They have made it possible to file your tax returns offline as well as online. To e-file your taxes offline, one needs to visit the Income Tax Department website and follow the given steps:

    • Select the e-filling option

    • The website will then direct you to a webpage that will provide you with different ITR forms, and you need to select the suitable ITR form.

    • Subsequently, you will be given the option of downloading the ITR form either in the Excel or Java Utility format.

    If you have downloaded the Java Utility form, you need to follow these steps:

    • Open the form and click ‘Prefill.’

    • Fill in your ID, Date of Birth, Password, and choose your Prefill address

    • Enter your Income details and calculate your taxes, and do not forget to save the file in the XML format.

    • Review and Click on submit

     If you have downloaded the Excel form:

    • Fill in the form.

    • Counter check the details and calculate the taxes

    • Click on ‘Generate XML’ and save the form

    • Upload the form to the Income tax e-filing website

    While submitting, it is crucial to attach your bank statements, previous year’s ITR copy, deduction or saving certificates, TDS certificates, Interest statements, P & L statements (Profit & Loss Statements), and balance sheets where applicable.

  2. What is the process to e-file your ITR Online?

    Keep the important documents handy before you start e-filling online so you can upload the relevant document readily when required. This includes your bank statements, previous year’s ITR copy, deduction or saving certificates, TDS certificates, Tax Credit Statements, Interest statements, etc.

    Please follow the given steps:

    • Start with the registration procedure using your PAN as the user ID. If you are already registered, log in to the Income Tax Department Website.

    • Go to the downloads menu and select ITR forms. Choose the current assessment year. You can either download the form or fill it in online using the “Quick e-file ITR link” provided.

    • Fill in your details on the spreadsheet using the Return Preparation Software with details on Form 16.

    • Auto-calculate your payable tax by clicking the ‘calculate tax’ button.

    • Validate all the information.

    • Generate an XML file and ensure you have saved it.

    • Go to the ‘upload return link’ and upload your XML file.

    • You will receive the ITR-V form if the process is successful.

    • Sign the ITR-V acknowledgment form and send it to your nearest Income Tax Office within 120 days of filing your Income tax returns.

Penalty for Not Filing ITR

In general, 31st July of every assessment year is the last date for filing your Income Tax Return. Taxpayers who fail to file their return till the last date assigned have to face penalties and other financial consequences.

  1. Section Wise Penalty for Not Filing ITR

    Section Reason for Penalty Penalty Charged
    Section 234F Late filing of ITR past due date If reported before 31st December of the AY (Assessment Year) - Rs. 5,000
    If reported after 31st December but before 31st March of the AY (Assessment Year) - Rs. 10,000
    Section 271H TDS or TCS filing failure within the defined date Penalty between Rs. 10,000 to Rs, 1,00,000
    Along with it, Rs. 200 / per day under Section 234E till the amount of TDS / TCS is fully paid.
    Section 234A If tax is outstanding even after the ITR filing due date Interest on the remaining amount at 1% per month from the due date time.
    Section 270A If the tax amount is reported incorrectly at the time of ITR filing 50% penalty is levied on the income for which no tax was payable.
  2. Taxpayer Wise Penalty for Not Filing ITR

    Category Penalty Charged
    Salaried Individuals Annual income less than Rs. 2,50,000 - No penalty
    Annual income above Rs. 2,50,000 but less than Rs. 5,00,000 - Rs. 1,000 penalty (maximum)
    Annual income above Rs. 5,00,000 - up to Rs. 10,000
    Companies Up to Rs. 10,000
    Self-Employed Up to Rs. 10,000
    Senior Citizens Only for senior citizens falling in the following categories:
    From 60 to 80 years, tax is levied if the total income exceeds Rs. 3,00,000 annually.
    Above 80 years, tax is levied if the total income exceeds Rs. 5,00,000 annually.

Documents Required to File ITR

It is recommended to gather all the important documents related to Income Tax Return Filing to avoid last minute tension. The following documents are mandatory for an individual to file ITR without any hassle:

  • Form 16 – It is a TDS (Tax Deduction at Source) certificate and is considered the most important form for ITR filing.

  • Form 16A – Records all the details related to TDS by the deductors, excluding the employer. Generally used by banks and other financial institutions on interest earned in the financial year. 

  • Form 26AS – Records all the details regarding any tax deduction from your income by any authority or person. It can be downloaded from the income tax department’s official website.

  • Capital Gain Tax – A capital gain statement is mandatory in case any investment is made in mutual funds, shares, etc. Even though long-term capital gains are not taxable every year, it is mandatory to declare them every time in ITR.

  • Aadhaar Card

  • PAN Card

  • Bank statement details

  • Home loan statement, if any.

  • Deductions under Section 80D to 80U

  • Tax Saving Proof – Some tax-saving investment examples are Employee Provident Fund (EPF), National Pension Scheme (NPS), Public Provident Fund (PPF), etc.

  • Salary slips for every salaried employee

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