Citizens of India must pay income tax to the Government of India in accordance with the Income Tax rules and regulations, whether they are individuals, associations, firms, LLPs, local authorities, or Hindu undivided families. Income for each financial year is subject to taxation under Income Tax laws, making it crucial to annually file your Income Tax return (ITR). You can opt to file your income tax return online or offline, based on your preference.
What is an Income Tax Return?
An individual submits an Income Tax Return (ITR) form to the Income Tax Department of India, providing details about their income and tax obligations for a specific financial year, spanning from April 1st to March 31st of the subsequent year.
Income can originate from various sources like salary, business profits, property sales, dividends, capital gains, and interest earnings. If you’ve overpaid taxes in a given year, the Income Tax Department will issue you a refund.
Is filing an Income Tax Return mandatory?
Filing an Income Tax Return is obligatory in India when your income surpasses the basic exemption threshold, in accordance with Indian tax regulations. Tax rates are predetermined for taxpayers. Failing to file returns promptly not only results in late filing penalties but can also negatively impact your eligibility for loans or travel visas.
Who is required to file Income Tax Returns?
Individuals or businesses falling within specific income brackets must file Income Tax Returns, as mandated by the Income Tax Act. The following entities or businesses are obligated to submit their ITRs in India:
- Individuals under 59 years of age with total annual income exceeding Rs 2.5 lakh. For senior citizens aged 60-79, the limit is Rs. 3 lakh, and for super senior citizens aged 80 and above, it’s Rs. 5 lakhs. This income should be calculated before considering deductions under Sections 80C to 80U and other exemptions in section 10.
- All registered companies, regardless of profitability during the year.
- Individuals seeking refunds for excess tax deducted or income tax payments.
- Individuals with assets or financial interests located outside India.
- Foreign companies benefiting from treaty agreements on transactions within India.
- Non-resident Indians (NRIs) earning over Rs. 2.5 lakh in India during a fiscal year.
Essential Documents for Income Tax Return Filing
Before commencing the e-filing process, it’s crucial to have the following essential documents readily available:
- Passbooks for bank and post office savings accounts, as well as PPF accounts.
- Salary statements (salary slips).
- Aadhar Card and PAN card.
- Form-16, which is a TDS certificate provided by your employer, outlining your salary details and any TDS deductions.
- Interest certificates issued by banks and post offices.
- Form-16A, if TDS has been deducted on payments other than salaries, like interest from fixed deposits or recurring deposits exceeding specified limits per current tax laws.
- Form-16B, if you’ve sold a property, which shows the TDS deducted on the payment.
- Form-16C, obtained from your tenant, containing details of TDS deductions on the rent received.
- Form 26AS, your consolidated annual tax statement, encompassing information about taxes deposited under your PAN:
- a) TDS deductions by your employer.
- b) TDS deductions by banks.
- c) TDS deductions by other organizations from payments to you.
- d) Advance taxes deposited by you.
- e) Self-assessment taxes you’ve paid.
- Proof of tax-saving investments.
- Documentation to claim deductions under sections 80D to 80U, such as health insurance premiums and education loan interest.
- Home loan statements from your bank.
What is Form 26AS?
Form 26AS is a crucial document that displays the tax deductions at source on payments and investments made by individuals, employees, and freelancers. It empowers taxpayers to seek refunds for any excess or overdue tax payments.
The updated Form 26AS, effective from AY2020-21, has been revamped to simplify online income tax return filing and promote adherence to tax regulations.
A notable feature of the new Form 26AS is its inclusion of statements of financial transactions. These statements require taxpayers to recall significant financial transactions they’ve undertaken, which can benefit them when filing their returns.
The revised 26AS format also presents your Aadhar card details, birthdate, email and residential addresses, and mobile number, and indicates whether there are any pending or concluded tax proceedings with the tax authorities.
How to File ITR Online?
Filing your Income Tax Return (ITR) online has become convenient, thanks to e-filing and approved tax preparation software provided by the Income Tax Department. More taxpayers are opting for online filing due to its advantages, which include:
- Refund Processing: If tax has been deducted at source on your income and you seek a refund, you must submit your ITR for the respective financial year to initiate the refund process.
- Verification for Loans: When applying for a loan, your annual income plays a crucial role in determining your eligibility. Providing an ITR form with income details offers clear insight to lenders, enhancing your loan application’s credibility. Similarly, visa applications often require income proof, with tax returns being the most widely accepted documentation.
- Income Confirmation: Purchasing a term insurance plan may necessitate your ITR as a means to determine the compensation amount to be paid to your beneficiaries in the event of your death or disability. The ITR serves as an officially verifiable proof of income for such purposes.
How to link Aadhar to Income Tax returns?
To link your Aadhar to your Income Tax returns, follow these steps:
- Mandatory Aadhar Quoting: Every individual taxpayer must include their Aadhar number when filing tax returns. Additionally, it’s necessary to link your PAN card with your Aadhar number. Filing tax returns, whether digitally or manually, requires quoting the Aadhar number. While senior citizens can file manually, individuals below 80 years of age must file electronically.
- Updating Aadhar in ITR Forms: In the new ITR forms available on the Income Tax website, you should enter your Aadhar number in the designated spaces.
- Enrolment ID: If you’ve applied for an Aadhar number but haven’t received it yet, you can use the 28-digit enrolment ID in its place.
- Automatic Aadhar Population: If you’ve already electronically linked your Aadhar number, it will automatically populate in the ITR forms.
Which ITR to File?
Different types of ITR forms are available to cater to various categories of individuals and income sources. The Income Tax Department provides specific forms based on the nature of income generation:
- ITR-1: This form is for resident individuals (not applicable to NRIs/HUF/other entities) with total income up to Rs 50 lakhs, having income from Salary/Pension, One house property, and Other Sources.
- ITR-2: ITR-2 applies to individuals/HUFs who cannot use ITR-1 and have income from sources other than Business or Profession.
- ITR – 3: This form suits individuals and HUFs with income from profits and gains from a business or profession.
- ITR-4: ITR-4 is for resident individuals/HUFs/firms (except LLP) with total income up to Rs 50 lakhs and income from business or profession computed on a presumptive basis under section 44AD or 44AE or 44ADA, along with income from Salary/Pension, One House Property, and Other Sources.
- ITR-5: ITR-5 is for entities other than Individuals, HUFs, Companies, and those filing ITR 7. It covers partnership firms, LLPs, AOPs, BOIs, Artificial Judicial Persons, Co-Operative Societies, Local Authorities, investment funds, business trusts, and estates of deceased and insolvents.
- ITR-6: ITR-6 is for all Companies, excluding those claiming exemption under section 11. Section 11 relates to charitable/religious trusts for which ITR 7 is applicable.
- ITR-7: ITR-7 applies to entities, including companies, required to furnish returns under various subsections of 139. This category includes organizations that are not for profit, such as religious groups, charities, political parties, scientific research organizations, universities, and colleges.
Deadline for Verifying Previous ITRs Extended to September 2020
The Income Tax Authority of India has extended the opportunity for a one-time verification of previously filed returns until September this year. Earlier, taxpayers had a limited window of 120 days to verify their returns from the filing date. This extension, valid until September 2020, applies to taxpayers who haven’t verified their tax returns for assessment years 2015-16 to 2020-21.
When an individual files a return online, they must verify it by sending the signed ITRV slip via post or digitally to the CPC, Bengaluru. This verification serves as a declaration by the taxpayer, confirming the accuracy and truthfulness of the information provided in their filed returns. Verification is crucial, as an unverified return renders the tax filing process incomplete and can result in penalties for the taxpayer.
How to check ITR status online?
To check the status of your income tax returns online, follow these steps:
- Visit the e-filing website and click on the “ITR Status” tab on the left.
- Fill in your PAN number, ITR acknowledgement number, and the captcha code on the new page.
- Once done, the screen will display your filing status.
- Log in to the e-filing website.
- Click on the “View Returns/Forms” option.
- Select “Income Tax Returns” and the assessment year from the dropdown menu.
- The screen will then display the status of your filing, whether it’s verified or processed.
It’s essential to keep the Income Tax Department informed about your income and tax liability to stay compliant with the law and avoid financial complications. Knowing your filing requirements and completing the process before the annual deadline is crucial.
Advantages of filing Income tax return
Filing an Income Tax Return (ITR) offers several advantages:
- Swift Processing: ITR acknowledgements are processed quickly, with refunds processed faster for e-filed returns compared to paper filings.
- Enhanced Accuracy: E-filing software includes validations and electronic checks, reducing the likelihood of errors. In contrast, paper filings are more prone to mistakes, especially during data entry when transitioning to electronic systems.
- Convenience: E-filing is available 24/7, allowing you to file from anywhere, at any time, according to your convenience.
- Confidentiality: E-filing offers better data security compared to paper filings. With paper returns, your income details could potentially end up in the wrong hands, whether in your chartered accountant’s office or within the Income Tax Department.
- Access to Previous Data: E-filing applications securely store past data, making it easily accessible when filing future returns.
- Receipt Confirmation: You receive prompt confirmation of filing via email on your registered email address, providing assurance of successful submission.
- User-Friendly: E-filing platforms are user-friendly, with detailed instructions, making them accessible even for individuals with limited internet proficiency.
- Electronic Banking: E-filing allows for convenient direct deposit of refunds and direct debit for tax payments. You can choose when to debit your bank account for tax payments, offering flexibility and ease of use.
What is an Income Tax Return (ITR)?
An ITR is a form used to report your income and tax liability to the government. It is a way for taxpayers to declare their income sources and pay taxes accordingly.
Who needs to file an ITR?
Individuals and entities with taxable income exceeding the basic exemption limit, as per income tax laws, are required to file an ITR.
When is the deadline for filing an ITR?
The deadline for filing ITR varies by country and assessment year. In India, it is typically July 31st for most individuals, with some exceptions.
Can I file my ITR online?
Yes, many countries offer online platforms for e-filing ITRs, making the process convenient and efficient.
What documents do I need to file my ITR?
You may need documents like a PAN card, Aadhar card, Form-16 (for salaried individuals), bank statements, investment details, and other financial records.
What are the benefits of filing an ITR?
Filing an ITR helps you comply with tax laws, claim refunds if overpaid, provide income proof for loans or visas, and maintain a clean financial record.
What happens if I don’t file my ITR on time?
Late filing may result in penalties and interest charges. It can also affect your ability to claim refunds or face legal consequences.
How can I check the status of my filed ITR?
You can check the status of your filed ITR online through the tax department’s website using your PAN and assessment year details.
What is the difference between ITR-1, ITR-2, and other ITR forms?
Different ITR forms are designed for various categories of taxpayers based on their income sources and other factors. Choosing the correct form is essential for accurate filing.
Can I revise my ITR if I made a mistake?
Yes, you can file a revised ITR if you discover errors or omissions in your original filing. However, there is a time limit for revision.
Read our previous blog – Major Differences Between Private Limited and Public Limited Companies