Filing Income Tax Return: Everything You Need to Know

In the great world of finances, Income Tax Return (ITR) can often be likened to an annoying, yet indispensable “guest” that knocks on our doors every year. If we give this guest due attention and courtesy, we are blessed with peace of mind, financial compliance, and believe it or not, a sense of accomplishment. However, if we ignore or mishandle them, well… let’s just say it doesn’t end well. So, let’s dive into the nitty-gritty of this perennial visitor to our financial households: the Income Tax Return.

Welcome to our comprehensive guide on Filing Income Tax Return in India, where we’ll embark on a journey through the world of tax forms, taxable entities, and the ever-dreaded tax laws. Buckle up, it’s going to be an enlightening ride!

Are you a beginner who has recently earned your first paycheck? A seasoned professional eyeing that promotion or a retiree figuring out pension-related taxes? Or perhaps a non-residential Indian (NRI) puzzled by the tax laws? Don’t worry. This guide has got something for everyone. By the end of this write-up, you’ll feel confident about the daunting tax season.

Here, we’ll unravel the definition and significance of the Income Tax Return. We’ll explain who needs to file it, including various taxpayer categories, and enlighten you about the documentation required. We’ll also take a detailed look at the different types of ITR forms, taking the confusion out of the question, “Which form should I be filling out?”

In addition, we will guide you through the actual process of filing the return, both online and offline. And, as we all are prone to human errors, we will also talk about the common mistakes made during filing and how to avoid them. On a more serious note, we will discuss the consequences of not filing the ITR – because it’s always better to be safe than sorry.

Lastly, we will address some of the most frequently asked questions about filing the Income Tax Return. So, put on your reading glasses, grab that cup of coffee, and let’s decode the maze that is the Indian taxation system.

Let the tax-tacular journey begin!

What is Income Tax Returns?

Before we navigate the winding roads of the Income Tax Return, let’s take a moment to understand what it is. Think of the ITR as your financial report card. It’s a statement that gives the Income Tax Department a snapshot of your income, deductions, tax liability, and taxes paid in a fiscal year.

Income Tax Return is your way of informing the government about the sources of your income, whether it’s from salary, property, business profits, or investments. It’s also where you declare any tax deductions and exemptions you’re eligible for, which can reduce your overall tax liability. As a dutiful citizen, filing your ITR is not only your responsibility but also a statutory obligation under the Income Tax Act of 1961.

Now that you’re introduced to the notion of an Income Tax Return, you might be asking yourself, “Do I need to file an ITR?” Let’s explore this in the next section.

Who Should File Income Tax Returns in India?

In the Indian taxation universe, not all stars are created equal. Each individual’s obligation to file an ITR depends on the nature and amount of income earned in a fiscal year. As per the norms set by the Income Tax Department, any individual whose gross total income exceeds the basic exemption limit has to file an Income Tax Return.

The exemption limit varies with the category of taxpayer. For instance, for individuals below 60 years, the limit is Rs 2.5 lakhs, for senior citizens (60 years and above but below 80 years), it’s Rs 3 lakhs, and for super senior citizens (80 years and above), it’s Rs 5 lakhs.

However, life and tax laws are not always straightforward. There are scenarios where you must file an ITR, regardless of your income level. For instance, if you own assets or financial interest in an entity located outside of India or if you are a beneficiary of assets located outside of India.

It’s worth noting that even if you don’t fall into the above categories, filing an ITR can be beneficial. It can help you avoid tax notices, facilitate easy loan approvals, and is mandatory if you need to claim a tax refund.

Now that we’ve identified who needs to file an ITR, let’s understand which form applies to whom.

Filing Income Tax Returns: Types of Forms

There are different types of forms available. You must carefully select the correct form before starting the filing process. Below are different types of a form available:

ITR-1

The form is also known as the Sahaj form, and individual taxpayers can use this form to file returns. Other categories should not use this form for ITR returns.

ITR-2

It is for those individual taxpayers who have their income by selling properties or assets. Individuals having income from outside India can also use the ITR-2 form to file returns. HUFs can apply for ITR-2 to file ITR.

ITR-3

HUFs or Individuals who operate as partners in a firm and do not conduct any business under the firm are eligible for ITR-3.

ITR-4S

The form is also known as Sugam. It can be used by individuals who run a business and accrue income from it, or other professionals must use this form for ITR. They can club the earnings from any windfall and apply for this form. Also, doctors, shopkeepers, designers, agents, etc. can use this form to file ITR.

ITR-5

Businesses, firms, etc must use ITR-5 to file returns. These are used by those who are eligible for partnership firms or LLPs.

ITR-6

It is for companies to file tax returns. Companies can file income tax by this form only electronically.

ITR-7

Companies or Individuals required to furnish returns under Section 139(4A) or 139(4C) or 139(4D) or 139(4E) or 139(4F) must utilize ITR 7 form to file income tax returns.

Filing Income Tax Returns: Documents Required

Now that we’re on the paperwork stage, it’s time to pull out those files and folders. Here’s your checklist of the documents required to file your Income Tax Returns:

1. Form 16: If you’re a salaried person, this document is your Holy Grail. It’s issued by your employer and has details of the salary paid to you and the TDS (Tax Deducted at Source) on it.
2. Salary Slips: These will provide the breakdown of your income and allow you to calculate your net taxable income from salary.
3. Interest Statements: You’ll need statements showing interest earned on your savings account and fixed deposits. Remember, up to Rs 10,000 interest on savings accounts is tax-exempt.
4. Form 26AS: Consider this your tax passbook. It shows the amount of tax deducted from your income and deposited with the IT Department by the deductor.
5. Proof of Deductions: Have all your receipts handy for claims under sections 80C, 80D, 80E, 80G, etc. This can be EPF statements, tuition fee receipts, medical insurance premium receipts, and others.
6. Aadhaar and PAN Card: You’ll need both numbers for filing your ITR.
7. Bank Account Details: Keep your bank statements, passbook, cheque leaves, and IFSC codes handy.
8. Capital Gain Statement: If you’ve sold any investments or property, you need to report the capital gains.

Remember, collecting these documents in advance can make the process smoother and help you avoid last-minute scrambling.

The Process of Filing Income Tax Returns

Filing your ITR can feel like trying to solve a Rubik’s cube. But fear not, with our step-by-step guide, it will be as easy as pie. You can choose to file your ITR either online (on the Income Tax e-Filing portal) or offline. However, if your income exceeds Rs 5 lakhs, e-filing is mandatory.

Online Process:

The process is slightly different for different forms. Below are steps on how an individual can file his income tax returns. You can submit ITR-1 via Offline mode or Online Mode. In this article, we are listing the steps to submit ITR-1 online. Below are the steps for the same:

• Login to the e-file portal giving your user ID and password. If you are a first-time user, you can Register on the site.
• Click on the Dashboard, click e-File > Income Tax Returns > File Income Tax Return.
• Select the Assessment Year and click continue. The assessment year is the year during which your prior year’s income is assessed for ITR filing. If you are filing returns for the previous financial year, the assessment year will be AY 2022-23.
• Choose Mode of Filing as Online and move to the next step.
• Select Status (Individual, HUF, or Others) as applicable to you and click Continue to proceed further.
• Select the ITR Form as per your category.
• Once you have selected the ITR applicable to you, note the list of documents needed and click Let’s Get Started.
• Select the applicable checkboxes to you and click Continue.
• The details will be auto-picked from your FORM-16. Review your pre-filled data and edit it if necessary. Enter the additional data (if required). Click Confirm at the end of each section.
• Enter your income and deduction details in the different sections. After completing and confirming all the sections of the form, click Proceed.
• If there is a tax liability, you get the Pay Now and Pay Later options at the bottom of the page. You can select either of these options.
• On the Preview and Submit Your Return page, enter Place, select the declaration checkbox and click Proceed to Validation.
• Once you have checked all the details, on your ‘Preview and Submit your Return’ page, click Proceed to Verification.
• On the ‘Complete your Verification’ page, select your preferred option and click Continue. 
• On the e-Verify page, select the option through which you want to e-Verify the return and click Continue. 

For the offline process, you’ll need to download the relevant ITR form from the Income Tax Department’s website, fill it out, and submit it to your nearest Income Tax office.

Common Mistakes While Filing Income Tax Returns

Tax filing can be fraught with pitfalls, but with a bit of attention, you can avoid these common errors:

• Choosing the wrong form: As we discussed, each ITR form serves a different purpose. Picking the wrong one can render your return invalid.
• Inaccurate personal information: Always double-check your PAN, Aadhaar, address, and bank account details.
• Not declaring all income: All your income – salary, interest, rental, capital gains – should be reported. Income from previous jobs in the same year should also be included.
• Incorrect claim of deductions: Make sure you’re eligible for the deductions claimed under sections 80C, 80D, etc. Have the supporting documents at hand.
• Not e-verifying the ITR: Your tax filing process is incomplete until the ITR is e-verified. Make sure you complete this within 120 days of filing.

As the saying goes, “An ounce of prevention is worth a pound of cure.”

Consequences of Not Filing Income Tax Returns

While the prospect of filing your tax return may seem intimidating, the penalties for not doing so are even scarier. Not filing your ITR can lead to:

• Penalties: Under Section 234F of the Income Tax Act, you may be fined up to Rs 10,000 if your ITR is not filed before the deadline.
• Delayed Refunds: If you’re eligible for a tax refund, failing to file your ITR will obviously delay this.
• Prosecution: In extreme cases where the tax due exceeds Rs 25 lakhs, you could even face imprisonment under Section 276CC.
• Loan Difficulties: Future loan or credit card applications may be impacted as banks usually require the last 3 years’ ITRs for loan processing.

So, better to be a bit bothered now than regret it later!

Conclusion

In conclusion, tax planning and filing your Income Tax Return might seem like a Herculean task, but with a little patience, accurate documents, and the right knowledge, you can certainly conquer it. Remember, when it comes to taxes, the early bird definitely gets the worm, and in this case, peace of mind too. Happy tax filing!

Frequently Asked Questions