Income Tax Return (ITR) Filing: A Complete Guide

Income Tax Return (ITR) filing is the process through which individuals, businesses, and entities report their income, expenses, deductions, and tax payments to the Income Tax Department. Filing ITR is a legal requirement for taxpayers in India, and it helps to determine whether the taxpayer owes additional taxes or is eligible for a refund.

Why is Income Tax Return Filing Important?

1. Legal Obligation: It is mandatory for individuals and businesses with income above the basic exemption limit to file an ITR.
2. Tax Refund: If excess tax has been paid or deducted (TDS), ITR filing allows the taxpayer to claim a refund.
3. Loan & Visa Processing: Many banks and financial institutions require ITR filing documents for processing loans. Also, visa applications may ask for the same.
4. Avoid Penalties: Timely ITR filing ensures you avoid penalties, interest, and late fees.

Who Needs to File an Income Tax Return?

• Individuals:

  • If your annual income exceeds the basic exemption limit (₹2,50,000 for individuals below 60 years, ₹3,00,000 for senior citizens, ₹5,00,000 for super senior citizens).
  • If you are receiving income from sources like salary, house property, capital gains, business or profession, or other sources like interest or dividends.

• Businesses/Corporates:

  • All businesses and professionals earning income need to file ITR regardless of their income level.

• Other Conditions:

  • If TDS (Tax Deducted at Source) is deducted from your income and you want to claim a refund.
  • If you have foreign income or assets.
  • If you need to carry forward losses (business loss, capital gains loss, etc.).

Types of Income Tax Returns (ITR Forms)

The Income Tax Department provides different forms to file tax returns based on the taxpayer’s category and nature of income.

1. ITR-1 (Sahaj):

   • For individuals earning income from salary, one house property, other sources (interest, dividends, etc.).
   • Total income should not exceed ₹50 lakh.

2. ITR-2:

   • For individuals and HUFs (Hindu Undivided Families) having income from salary, house property, capital gains, and other sources.
   • Applicable if the taxpayer holds foreign assets or has income from business/profession.

3. ITR-3:

   • For individuals and HUFs earning income from business or profession.
   • Applicable to those who are professionals or self-employed.

4. ITR-4 (Sugam):

   • For small businesses and professionals opting for the presumptive taxation scheme (Section 44ADA).
   • Income should not exceed ₹50 lakh.

5. ITR-5:

   • For partnership firms, LLPs (Limited Liability Partnerships), association of persons (AOP), bodies of individuals (BOI), and others.

6. ITR-6:

   • For companies other than those claiming exemption under Section 11 (income from trusts).

7. ITR-7:

   • For entities that are required to file returns under specific sections (like charitable/religious trusts, political parties, etc.).

Steps for Filing Income Tax Return (ITR)

1. Gather Required Documents:

• Form 16 (Salary) or other income statements (for self-employed or freelancers).
• Form 26AS (TDS details).
• Bank statements for interest income.
• Proof of deductions (PPF, insurance premiums, educational loans, etc.).
• Capital gains statements (for sale of assets like property or stocks).

2. Choose the Correct ITR Form:

• Select the ITR form based on your source of income, and download the correct one from the Income Tax Department website or use an online platform.

3. Calculate Your Income and Taxable Income:

• Calculate total income from all sources (salary, house property, capital gains, business, etc.).
• Apply any eligible deductions (like 80C for investments, 80D for insurance, etc.).
• Subtract deductions to determine your taxable income.

4. Fill Out the ITR Form:

• Enter your personal details (name, PAN, address, etc.).
• Fill in details of income from various sources.
• Provide TDS information (from Form 16/26AS).
• Include deductions under various sections (80C, 80D, etc.).
• Compute the final tax payable.

5. Verify Your Return:

• Verify that all details are correct and all necessary documents are attached.
• If you’re filing online, you will be asked to validate the information.

6. Submit Your ITR:

• Online Filing:

  • File your return online through the Income Tax Department portal or third-party portals.
  • Once submitted, the portal will generate an acknowledgment (ITR-V).

• Offline Filing:

  • If you’re filing offline (for specific ITR types), submit the form at the Income Tax Department office.

7. E-Verify Your ITR:

• Once the return is filed, e-verify it using methods like Aadhaar OTP, Net Banking, EVC (Electronic Verification Code), or by sending a signed copy of ITR-V to CPC (Centralized Processing Center).

Income Tax Slabs (FY 2023-24)

For Individuals Below 60 Years:

For Senior Citizens (60+ Years)

For Super Senior Citizens (80+ Years)

Tax Rebate Under Section 87A

• A rebate of ₹12,500 is available for individuals whose taxable income is up to ₹5,00,000. This reduces the overall tax liability.

Penalties for Non-Filing or Late Filing

1. Late Filing Penalty (Section 234F):

   • If you file your return after the due date, the penalty can be up to ₹5,000.
   • If the return is filed after the assessment year, it may not be accepted, and penalties will apply.

2. Interest on Late Payments (Section 234A, 234B, 234C):

   • Interest will be levied for late payment of tax due.

Common Deductions Under Income Tax

• Section 80C: Deduction for investments in PPF, life insurance premiums, ELSS, etc. (up to ₹1.5 lakh).
• Section 80D: Deduction for premiums paid for health insurance.
• Section 80G: Donations to charitable organizations.
• Section 24(b): Deduction for home loan interest (up to ₹2 lakh).

Conclusion:

Filing your ITR is essential for maintaining compliance with the law and ensuring that you do not face penalties. It helps you claim tax refunds and provides a record of your income and taxes paid. If you need help filing your ITR or want assistance in choosing the right form, feel free to contact AK Mehta & Associates😊