What is ITR or Income Tax Returns?

Sources of Income

Income can come from various sources, including: 

• Salary: Earnings from employment. 

• Business or Profession: Profits and gains made from running a business or practicing a profession.

• House Property: Income from renting out property.

• Capital Gains: Profits from selling assets like property or stocks.

• Other Sources: Income from dividends, interest on deposits, royalty income, lottery winnings, etc. 

The Income Tax Department has provided seven different types of ITR forms (ITR-1 to ITR-7). The specific form you need to use depends on the nature and amount of your income and the category of taxpayer you fall into.

What are the Benefits of Filing Income Tax Returns?

1. Easy Loan Approval:

   Lenders often require borrowers to submit ITRs for at least the last three years when applying for loans like Home Loans, Car Loans, or Personal Loans. This helps verify income stability.

2. Proof of Income:

   An ITR serves as a widely accepted proof of income, detailing your annual earnings and taxes paid. If you need to prove your income, filing an ITR and using the receipt as proof is highly effective.

3. Quick Visa Processing:

   For international travel, embassies often require your ITR to assess your income and tax status quickly when applying for a visa.

4. Claim Tax Refund:

   Filing an ITR allows you to claim a refund if you have paid more tax than your actual liability. The tax department will deposit any eligible refund directly into your bank account after verification.

5. Compensate for Losses:

   If your business incurs losses in a financial year, filing an ITR lets you carry forward these losses to offset future income. This compensation is only available if the ITR is filed before the due date.

6. Presumptive Taxation Scheme:

   Self-employed individuals and professionals can benefit from the Presumptive Taxation Scheme, which simplifies accounting by allowing them to declare income at a prescribed rate when filing their ITR.

7. Avoid Penalties:

   Filing your ITR on time helps you avoid penalties and severe consequences associated with late filing.

8. Medical Insurance Deductions:

   Under Section 80D of the Income Tax Act, you can claim a tax deduction of up to INR 25,000 per year for health insurance premiums. Senior citizens have higher deduction limits, making ITR filing beneficial for claiming these deductions.

What are the Different Types of Income Tax E-Filing Forms?

There are seven different types of Income Tax Return (ITR) forms available to Indian taxpayers. These forms cater to both individual taxpayers and organizations. The specific form you need to use depends on whether you are an individual or an organization, your total income, and your sources of income. Here is an overview of the seven types of ITR forms:

ITR-1

• For individuals with income from salary or pension with income up to Rs. 50 lakhs.

• Income from other sources, excluding lottery winnings or horse racing.

• Agricultural income up to Rs. 5,000.

• Income from a single house property, with certain exceptions.

ITR-2

• For individuals and Hindu Undivided Families (HUF) with income over Rs. 50 lakhs.

• Income from salary, pension, capital gains, and other sources.

• Income from foreign assets.

• Agricultural income exceeding Rs. 5,000.

ITR-3

• For individuals and HUFs with income from business or profession.

• Income from being a partner in a firm.

• Income from salary, pension, capital gains, and other sources.

• Investments in unlisted equity shares.

• Individual directors in a company.

ITR-4

• For individuals, HUFs, and firms with income up to Rs. 50 lakh from business or profession.

• For those opting for the presumptive income scheme under Sections 44AD, 44ADA, and 44AE of the Income Tax Act.

ITR-5

• For firms, Body of Individuals (BOI), cooperative societies, Limited Liability Partnerships (LLP), Association of Persons (AOP), local authorities, Artificial Judicial Persons, estates of insolvents, estates of deceased, and business trusts (not for individual taxpayers).

ITR-6

• For companies, except those claiming exemption under Section 11 (income from religious or charitable property).

• Must be filed electronically.

ITR-7

For entities filing under specific sections of the Income Tax Act:

• Section 139(4A): For individuals holding property for charitable or religious purposes.

• Section 139(4B): For political parties and their affiliates.

• Section 139(4C): For institutions or associations like medical institutions, news agencies, educational institutions, think tanks, and scientific research agencies.

• Section 139(4D): For colleges and universities, or other institutions where revenue and losses are not required to be reported as per this section of the Act.

For aspiring home loan borrowers, it is essential to understand and fill out the correct ITR form. Lenders often require income tax returns to assess a borrower's creditworthiness. The ITR form serves as proof of income and helps establish the borrower's various income sources.

What is an Income Tax Return File?

An Income Tax Return (ITR) is a document that individuals or entities submit to the Income Tax Department of India. It is used to report their income, deductions, and tax payments for a particular financial year.

In simple terms, an ITR is a formal report of your financial activities to the government. This report helps the tax authorities determine how much tax you owe or whether you are eligible for a refund.

Key components of an ITR include:

• Personal Information: Your name, Permanent Account Number (PAN), address, and other identifying details.

• Income Details: Information about income from various sources such as salary, business, property, and capital gains.

• Deductions and Exemptions: Claims for deductions and exemptions allowed under different sections of the Income Tax Act.

• Taxes Paid: Details of taxes paid, including advance tax and Tax Deducted at Source (TDS).

• Net Tax Payable or Refundable: The final calculation of the tax amount due or the refund you are eligible for.

Filing an ITR helps you comply with tax laws, maintain a tax credit history, and enjoy benefits like claiming refunds, carrying forward losses, and making it easier to obtain loans. 

What are the Documents Required to File an ITR?

When filing your Income Tax Return (ITR), you need to have certain documents ready to make the process smooth and accurate. Here are the key documents you will need:

1. Income Proofs

   • Form-16: This is a TDS (Tax Deducted at Source) certificate issued by your employer. It provides details about your salary, deductions, and the tax deducted.

   • Bank/Post Office Interest Certificates: These certificates provide a breakdown of interest earned from your savings accounts and fixed deposits.

   • Form-16A and Other TDS Certificates: These certificates cover TDS on income other than salary, such as interest on fixed deposits and mutual fund dividends.

2. Tax Information

   • Annual Information Statement (AIS): This comprehensive document outlines all your financial transactions for the year. It was introduced in 2021 to provide a detailed summary.

   • Form 26AS: Known as the tax passbook, it summarizes all taxes deducted and deposited against your PAN. You can download it from the Income Tax Department's portal.

3. Investment and Expenditure Proofs

   • Investment Proofs: Documents such as deposit certificates, demat statements, and investment receipts. These are necessary for claiming deductions and exemptions.

   • Capital Gains Documents: If applicable, you need documents related to investments in shares, mutual funds, debentures, and property. This is crucial for reporting capital gains, especially if they exceed Rs. 1 lakh.

   • Foreign Assets: If you have any assets abroad, including bank accounts or property, you need to provide details about them.

4. Identity and Bank Details

   • Aadhaar Number: It is mandatory to include your Aadhaar number when filing your ITR.

   • Bank Account Details: You need to provide details of all your bank accounts, including the account number, bank name, type of account, and IFSC code. This includes accounts that have been closed during the financial year.

   Having these documents handy will help you file your ITR accurately and efficiently, ensuring compliance with tax regulations and helping you claim any eligible deductions and exemptions.

How to File ITR?

Filing your Income Tax Return (ITR) in India can be done in two main ways: online (e-filing) and offline. Here’s a step-by-step guide for both methods:

1. E-Filing of Income Tax (Online):

   • Visit the Income Tax E-filing Website: Go to [Income Tax e-filing portal](https://www.incometax.gov.in/iec/foportal/).

   • Log in: Use your PAN number and password to log in. New users need to create an account.

   • File Income Tax Return: Navigate to the 'e-File' section and select 'File Income Tax Return'.

   • Select Your Category & ITR Form: Choose your income category (individual, HUF, etc.) and the appropriate ITR form.

   • Enter Bank Details: Provide your bank account information for refunds or payments.

   • Preview & Edit: Review the pre-filled data for accuracy and make any necessary changes.

   • Verification:

     • Print a copy for your records (optional).

     • E-verify your return using methods like Aadhaar OTP, pre-validated bank account, or other available options.

2.  E-Filing of Income Tax (Offline):

   • Download Utility Software: Visit the Income Tax e-filing website and download the relevant ITR form utility from the 'Downloads' section.

   • Extract & Open: Extract the downloaded ZIP file and open the appropriate form.

   • Fill & Save: Enter all your income details and save the completed form as an XML file.

   • Re-check & Calculate: Double-check your entries and calculate your tax liability.

   • Upload XML:

     • Open the downloaded utility software and log in with your PAN details.

     • Choose 'Income Tax Return' and select the Assessment Year and ITR Form number.

     • Select 'Original/Revised Return' as applicable.

     • Choose 'Upload XML' and select your preferred verification method.

   • Submit ITR: Submit your completed ITR file.

   By following these steps, you can ensure that your ITR is filed accurately, complying with tax regulations and claiming any eligible deductions and exemptions.

Who Needs to File an Income Tax Return (ITR)?

If you fall into any of the following categories, you are required to file an Income Tax Return (ITR):

1. Income Above the Basic Exemption Limit:

   • Under 60 Years Old: If your income exceeds the limit set for your age group.

   • Senior Citizens (60-79 Years Old): If your income is above a higher exemption limit for seniors.

   • Super Senior Citizens (80 Years and Older): If your income surpasses the even higher exemption limit for this age group.

2. Claiming Tax Refunds:

   If you’ve paid more tax than required, you need to file an ITR to get a refund.

3. Carrying Forward Losses:

   If you experienced financial losses in a year, filing an ITR allows you to carry these losses forward to offset future income.

4. Foreign Assets or Income:

   If you have assets or income from abroad, you must file an ITR to report them.

For Entities:

1. Companies:

   All registered companies must file an ITR, regardless of whether they made a profit or a loss.

2. Hindu Undivided Families (HUFs):

   HUFs with income exceeding the exemption limit need to file an ITR.

3. 3. Other Entities:

   Trusts, partnerships, and other entities with taxable income are generally required to file ITRs.

What’s New in the ITR Forms for AY 2024-25?

For the Assessment Year (AY) 2024-25, the Income Tax Department has introduced several updates to the ITR forms. These changes are designed to improve tax compliance and reflect recent changes in the Income Tax Act. Below is the list of main updates:

 General Changes:

1. Disclosure of All Bank Accounts:

   Taxpayers must now provide details of every bank account they held during the past year, including the type of account.

2. Default Tax Regime:

   The new tax regime is now the default choice. If you prefer to stick with the old tax regime, you need to specifically opt out.

3. Additional Information:

   The new forms require more detailed information to ensure greater transparency and better tax management.

4. Legal Entity Identifier (LEI) Details:

    Some taxpayers may need to include their LEI details.

5. Audit Report and UDIN Details:

   If you have undergone a tax audit, you must provide the acknowledgment number of the audit report and the UDIN (Unique Document Identification Number).

6. Cash Receipts:

   A new section for cash receipts has been added to ITR-4. This is to accommodate an increased turnover limit for presumptive taxation schemes.

7. MSME Act Compliance:

   You are now required to disclose payments made to MSMEs that were beyond the prescribed time limits.

 Specific Changes to ITR-1 and ITR-4:

1. Tax Regime Selection:

   In both ITR-1 and ITR-4, you must choose between the old vs new tax regimes.

2. Deduction Under Section 80CCH:

   A new column has been introduced to claim deductions for contributions made to the Agniveer Corpus Fund under Section 80CCH.

How Filing ITR Helps You With Your Taxes?

Here's how an Income Tax Return (ITR) helps you manage your taxes:

• Declaring Your Income: In the ITR, you need to detail all your sources of income. This includes income from your salary, any business activities, rental income from property, and returns from investments or other sources.

• Calculating Tax Obligation: The ITR assists in determining your total tax liability. It takes into account your total income and any deductions you are eligible to claim.

• Claiming Refunds: If you have paid more tax than necessary over the year, filing an ITR allows you to claim a refund from the Income Tax Department.

According to the Income Tax Act of 1961, individuals below 60 years of age must file an ITR if any portion of their income is taxable. There are also mandatory filing requirements if your taxable income exceeds Rs. 5 lakh in a fiscal year or if you have paid advance tax. When you submit your ITR, you must ensure that you pay any taxes due as per the applicable income tax slabs.