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 in 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.
This income can come from one’s salary, securities’ interests, dividends, lottery winnings, capital gains, fees from professional services, insurance commission, rent payment, 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 a proof of tax payment, that 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 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 payment 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:
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.
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, agricultural income that is above Rs. 50,000, etc.
This Income Tax Return form is for individuals and HUFs that derive their income from any business/ professional gains or profits.
This Income Tax Return form is for individuals and HUFs that derive their income from any business/ professional proprietorship.
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.
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 authority 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.
The form is for companies other than those eligible to claim a tax deduction or exemption in Section 11 of the Income Tax Act.
This is specifically for all entities who file ITR under section 139(4A), (4B), (4C), or (4D).
This is a verification form or an acknowledgement 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 is required for these incomes.
- Once the turnover of a business that opts for 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) that 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), 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:
- Avoiding any penalty or interests on fines by filing your Income Tax Returns on time.
- You are provided with an ITR-V form as payment acknowledgement receipt that can be represented as a 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 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.
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 in 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.
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, Login to the Income Tax Department Website.
- Go to 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 acknowledgement form and send it to your nearest Income Tax Office within 120 days of filling your Income tax returns.
1. Do I need to file ITR if my income is below the taxable income?
You need to file ITR whether or not you have a tax liability. You give the description of your income and file nil returns to avoid any legal consequences that may arise from not filing your returns.
2. Can I skip filing my ITR if I have already paid taxes in advance?
Even if your taxes have been paid, ITR must be filed. This helps the government monitor tax fraud and gives them a record of how your income is distributed.
3. What is the waiting period for a tax refund?
The Income Tax Department distributes refunds once they have processed the ITR and have ensured that there are no errors in the calculations. The waiting period is about a year if there are no discrepancies and all the PAN and bank account details you have provided are correct.
In case of any miscalculation on the part of the Income tax department, one is allowed to write or visit the Income Tax offices.
4. How do I check the status of my ITR?
The status of Income Tax Return Refund can be checked online on the Income Tax department e-filing portal. You should use your Login credentials to access the portal and go to ‘view forms’, select the ‘Income Tax Returns’ for the year you want to view, then choose the hyperlink that is your acknowledgment number, and a pop up with the ITR details with regards to your status will be shown on the screen.
Alternatively, one can use the TIN NSDL website, fill in your PAN details and assessment year and on clicking submit, your tax refund status will be shown on the screen.
5. What is the recommended way to file ITR?
Income tax returns can be filed using various ways. Chartered accountants can do it for you, or you can choose to do it yourself on the government income tax portal or on a 3rd party website. However, it is advisable to file income tax returns yourself, if you can. This is because one is liable to provide accurate data while filing returns to the government, and you can be prosecuted for updating any false information on your ITR form.
6. Are there any implications of filling ITR after the due date and is it allowed?
If one fails to meet the deadline of filing ITR, the income tax returns filed are referred to as ‘belated’, as per Section 139(4). One can file these belated returns any time before the end of the assessment year. From April 1, 2018, a late fee penalty of Rs. 10000 will be implemented for delayed payment.