What is Income Tax Return: A Detailed Guide with Example
- Bhavika Rajput
- 15 hours ago
- 12 min read
Income tax has a significant impact on a nation's development. It is the government's primary revenue source. Salary payments, welfare programs, government initiatives, defence, etc., are all funded with this sum. Income tax returns must be filed by firms or corporations, Hindu Undivided Families (HUFs), and self-employed or salaried individuals by the deadline; failure to do so will result in a penalty. Complying with Indian tax regulations is ensured by knowing what an income tax return is.
Table of Contents
What is Income Tax Return (ITR)?
Your gross taxable income for the current fiscal year is displayed on your income tax return, or ITR. Taxpayers utilise the ITR to formally report their income, claim deductions and exemptions, and pay taxes paid using this form. As a result, it determines your net income tax obligation for a given fiscal year. A person under 60 years of age is required to file tax returns under the Income Tax Act of 1961 if any portion of their income is taxable. You must also file an ITR if you paid advance tax or if your taxable income in a given fiscal year exceeds Rs. 5 lakh. You must pay the taxes that are owed based on your applicable income tax slabs when you file your taxes.
Types of ITRs
When filing taxes, a taxpayer can use various types of ITR forms. But according to the Central Board of Direct Taxes in India, people can only file returns using the following forms:
Sahaj or ITR 1: It should be used by people who make less than Rs 50 lakh a year from a single residence and a wage or pension.
ITR 2: Individuals who have received income from the sale of assets or property utilise the ITR-2 Form. Those who make money outside of India can also benefit from this technique. This form is typically used by individuals or Hindu Undivided Families (HUF) to file their ITR.
ITR 2A: The 2015–16 tax year saw the introduction of a new income tax return form called the ITR-2A. This form may be used by an individual taxpayer or by a Hindu Undivided Family (HUF).
ITR 3: For a Hindu undivided family or individual taxpayer who is a partner in a business but does not carry out any business through the business, the ITR-3 Form is helpful. This also holds true for people who don't profit from the business's activities.
Sugam or ITR-4: Those who operate a business or make a living through their profession will find this type of ITR form helpful. This form has no income restrictions and can be used for any kind of business, endeavour, or profession.
ITR-4S: Any individual or Hindu Undivided Family (HUF) may file income tax returns using the ITR-4S form.
ITR 5: Firms, local governments, cooperative organisations, artificial judicial persons, and bodies of individuals are the only entities that file income tax returns using the ITR-5 form.
ITR 6: All businesses use the ITR-6 form, with the exception of businesses or organisations that seek a Section 11 tax exemption. Organisations that obtain their revenue from property used for charity or religious purposes are eligible to claim tax deductions under Section 11. The only way to file this form is online.
ITR 7: Entities claiming an exemption, such as colleges, universities, scientific research institutes, charitable/religious trusts, political parties, etc., must utilise this form.
Which ITR Form Should You Fill
Depending on their income, taxpayers may need to complete a number of forms listed on the Income Tax Department's official website. Some of these papers are simple to complete, while others, like your profit and loss statements, call for further disclosures. Here is a brief tutorial to help you better understand the forms that are available:
ITR-1: Sahaj, also known as ITR-1, is to be filed by anyone who is a resident (other than a non-resident) and has a total income of up to Rs. 50 lakh, including income from salaries, one home, other sources (such as interest), and agricultural income up to Rs. 5,000.
ITR-2: Individuals and HUFs who do not get income from business or professional earnings and gains are required to file this form.
ITR-3: Individuals and HUFs who receive income from business or professional profits and gains are required to file this form.
ITR-4 (Sugam): You must complete this form if your business generates presumptive income for you. Individuals, HUFs, and firms (apart from LLPs) that are residents and make a total income of up to Rs. 50 lakh, as well as income from business and profession that is calculated under sections 44AD, 44ADA, or 44AE, must file this form.
Who Should File an Income Tax Return?
The Income Tax Act states that only people or companies who are in specific income brackets are required to pay income tax. The following lists the organisations or companies that must file their ITRs in India:
Everyone who earns more than Rs 2.5 lakh in a FY, and is under the age of 60. The maximum rises to Rs. 3 lakh for senior persons (60–79 years old) and Rs. 5 lakh for super seniors (aged 80 and above). Remember to enter your gross income before using Section 10 exemptions and Sections 80C–80U deductions when using an income tax calculator.
Every registered business that makes money, whether or not they have turned a profit this year.
People who want a return for the extra tax they paid or the excess tax that was withheld.
People with financial interest in entities or assets located outside of India.
International businesses that profit from treaties on transactions conducted in India.
NRIs who, in a single fiscal year, earn or accumulate more than Rs. 2.5 lakh in India.
How to File ITR?
Both online and offline methods are available for reporting income taxes. Here's how to submit your ITR. How to submit an online ITR.
Online Process
Step 1: Go to the official income tax e-filing website.
Step 2: Enter your password and PAN number to access your account. You must create a new account with the necessary details if you don't already have one.
Step 3: From the "e-file" tab, select "File Income Tax Return."
Step 4: From the list, choose the appropriate income category. (HUF, individual, etc.).
Step 5: Select the appropriate ITR form and proceed to enter the information for your bank account.
Step 6: Examine the prefilled form to see a preview of your income tax return. If necessary, you can make adjustments.
Step 7: Verify the document and print it off. For verification, submit a paper copy to the Income Tax Department. As an alternative, you can use a pre-validated bank account or an Aadhaar OTP to electronically authenticate your income tax returns.
Offline Process
Step 1: Go to Income Tax India's e-filing page.
Step 2: From the "Downloads" page, download the utility software (ZIP file).
Step 3: Extract the file in a separate folder after downloading the ZIP.
Step 4: Choose the appropriate form and fill it out with all the information.
Step 5: Create and save the form preview as an XML file.
Step 6: Before figuring out your ultimate tax liability, quickly double-check.
Step 7: Next, launch the utility software and enter your password and PAN number to log in.
Step 8: Select the Assessment Year and the ITR Form placed under “Income Tax Return”.
Step 9: Next select “Original/Revised Return" as the "Filling Type.”
Step 10: As the "Submission Mode," opt for "Upload XML." Submit the ITR after clicking the appropriate verification option.
How to Check ITR Status Online
The status of your tax return is 'confirmed' after you have filed and confirmed your income tax returns. The status changes to 'ITR Processed' once the procedure is finished. Here are some simple procedures to follow if you want to check your ITR status online and want to know what stage your tax return is at after filing it.
Without Login Credentials
Step 1: On the far left side of the e-filing website, you can select the ITR status tab.
Step 2: After that, you are taken to a new page where you must enter the captcha code, your PAN number, and your ITR acknowledgement number.
Step 3: The status of your filing will appear on the screen after this is finished.
With Login Credentials
Step 1: Go to the e-filing website and log in.
Step 2: Select the 'View Returns/Forms' option.
Step 3: Choose the assessment year and income tax returns from the dropdown menu.
Step 4: When this is finished, the screen will show the status of your filing, including whether it has been processed or just validated.
You can stay out of trouble with the law and avoid any obstacles to your financial competency by keeping the Income Tax Department updated on your income and taxability. You must make sure that you finish the process before the annual deadline now that you are aware of whether filing your ITR is mandatory or not.
Steps to Download Income Tax Return
In order to prevent last-minute stress and fines, it is crucial to know how to file your ITR on time. The IT department creates the income tax verification form after you file your ITR so that you can confirm the authenticity of your electronic filing. Only if you filed your returns without a digital signature are these applicable. It is simple to download the income tax return verification form.
Step 1: Access the income tax e-filing website of Income Tax India.
Step 2: Select the 'View Returns/Forms' option to view electronically filed tax returns.
Step 3: Choose an income tax return option. All of the years' details for which returns are submitted will be shown.
Step 4: To download the ITR-V, click on the acknowledgement number.
Step 5: Choose 'ITR-V Acknowledgement' to start the scan.
Step 6: After the document has been downloaded, open it by entering your password. Your birthdate and your PAN number in lower letters make up the password.
For instance:
ASIJP2345P PAN
Birthdate: December 31, 1980
Enter asijp2345p31121980 as the password.
After e-filing, you have 120 days to provide the printed and signed document to CPC Bangalore. Additionally, income tax returns can be electronically verified by creating an Aadhar OTP, using online banking, an ATM, etc.
Documents Required for ITR Filing
Form 16: When TDS is withheld from your pay cheque, your company issues a TDS certificate, known as Form-16. The employer's and employee's information, including name, address, Permanent Account Number (PAN), and TDS details, is contained in Part A of the document. Details of the employee's salary, permitted exemptions, claimed deductions, and tax due on their income are all included in Part B.
Form-16A and Other TDS Certificates: If relevant, salaried individuals must get additional TDS certificates. If your total income from fixed deposits exceeds Rs. 40,000 (or Rs. 50,000 for elderly persons), banks must deduct TDS. TDS must be withheld by mutual fund companies on dividend payments exceeding Rs. 5,000 during a fiscal year. Gather Form-16A in both situations.
Aadhaar number: In accordance with Section 139AA, your ITR must include your Aadhaar card number.
Bank Account Information: For each bank account you own, you must include the account number, bank name, account type, and IFSC code. Even if you closed your account in the middle of the fiscal year, it is still necessary.
Annual Information Statement: In 2021, the Income Tax Department unveiled the Annual Information Statement (AIS). Compared to Form 26AS, it is a more thorough document that contains all the information about your financial activities over a certain fiscal year.
Bank/Post Office Interest Certificates: Interest received from post office savings accounts, savings bank accounts, recurring deposits, and fixed deposits is subject to taxation under the Income Tax Act. As a result, you must present the breakdown of interest obtained from various sources.
Form 26AS: This document, which contains details on taxes deposited and withheld against your PAN, functions similarly to a tax passbook. This is available for download on the new income tax portal.
Capital Gains: You are subject to Long Term Capital Gains tax if your realised gains from investments in shares, mutual fund debentures, and real estate exceed Rs. 1 lakh during a fiscal year. To demonstrate your capital gains income, it is crucial to prepare the appropriate paperwork.
Proof of Investment and Expenditure: As evidence of investment and expenditure, you should preserve records such as investment receipts, demat account statements, and deposit certificates.
Information about Foreign Assets: In your ITR, you must list all of your assets held in any foreign nation, such as bank accounts, real estate, and so forth.
Why ITR Should Be Filed Every Year?
Every year, filing tax returns is regarded as a moral and civic obligation for all law-abiding citizens. In addition to giving the assessee a platform to request a refund and other types of relief occasionally, it serves as the foundation for the government's determination of the amount and means of expenditure of the citizens.
Filing taxes shows that you are accountable. The government requires people who make a certain amount of money each year to submit a tax return by a certain date. The Income Tax Department will impose fines for nonpayment.
Maintaining a consistent record of submitting returns is a good idea if you want to apply for a home loan in the future, as the home loan business will probably require it. If you wish to apply for a loan as a co-borrower, you can even think about submitting your spouse's taxes. Similarly, before providing a card, credit card providers may need proof of return.
A return is required if you wish to claim an adjustment against previous losses. For the purposes of tax calculation, a variety of losses incurred by a person or a business, including both speculative and non-speculative, short-term and long-term capital losses, and other types of losses not reported in the tax return during a fiscal year, cannot be claimed for exemption in subsequent years.
Return filing could be helpful if there are any revisions. Even if it is absolutely necessary, the assessee cannot file an amended return if he has not filed the initial return. The Income Tax Act stipulates that failure to file returns may result in a Rs 5,000 fine. Consequently, while submitting returns is entirely voluntary, there are situations in which failing to do so may have legal repercussions, particularly if the individual in question later has to file an amended return.
Due Date for ITR Filing
The following table highlights the ITR filing due dates:
Taxpayer Category | Due Date for Tax Filing - (unless extended) |
Individual / HUF/ AOP/ BOI(audits not required) | 31st July |
Businesses (requiring audit) | 31st October |
Businesses requiring transfer pricing reports | 30th November |
Revised return | 31 December |
Belated return | 31 December |
Penalty for Delay in ITR Filing
You will be assessed an income tax penalty if you do not pay your income tax by the deadline. If you consistently miss deadlines, the income tax agency may pursue legal action against you in addition to penalties. Therefore, file your income taxes responsibly. The following are the deadlines and the fine for missing them:
ITR Filing Due Date | Penalty for Income below Rs. 5 lakh | Penalty for Income above Rs. 5 lakh |
Before 31 July | Nil | Nil |
From 1 September to 31 December | Rs. 1,000 | Rs. 5,000 |
From 1 January to 31 March | Rs. 1,000 | Rs. 10,000 |
Benefits of Filing ITR Online
Quick processing: The Income Tax Return (ITR) is promptly acknowledged. More significantly, compared to paper-filed taxes, refunds, if any, are processed more quickly.
Convenience: There are no time or location restrictions when filing returns online. You can use the e-filing option whenever and wherever it is most convenient for you.
Increased precision: Errors are significantly reduced by e-filing software that has integrated validations and electronic connectivity. Errors might occur when filing papers. Additionally, human mistakes in data entry may occur when any paper-based form is converted to an electronic system.
Privacy: Better security than paper filings because no one can access your data accidentally or on purpose. When you file on paper, your income information may end up in the incorrect hands at the office of your chartered accountant or the department that handles income tax slab rates.
Availability of historical data: Accessing historical data is simple when filing returns. The majority of e-filing programs securely preserve data and make it accessible when filing subsequent returns.
Conclusion
Income tax returns are crucial for the development of the country. At an individual level, it has a wide range of benefits, from enabling the processing of your loan applications to allowing taxpayers to carry forward any losses, and aiding them in the claim of TDS refunds. In order to claim deductions and exemptions, you must also file an ITR. You can seek help from experts to file your ITR accurately and on time to prevent penalties and legal repercussions.
Frequently Asked Questions
What is an Income Tax Return in India?
The main purpose of an Income Tax Return (ITR) is to submit information to the Indian Income Tax Department regarding your income and any applicable taxes. According to Indian income tax regulations, all individuals and businesses that generate revenue are required to file an IT return.
Is it mandatory to file an ITR?
If your income exceeds the basic exemption limit, an ITR has to be filed. In addition to incurring late filing penalties, a late return will make it more difficult for you to obtain a loan or a visa.
Is it possible to file ITRs after the due date?
Yes. After the deadline, you can submit your ITR. Nevertheless, it will be regarded as a late tax return, and you will be required to pay a penalty of between Rs. 1,000 and Rs. 10,000.
Why do we need to file income tax returns?
The primary source of funding for a nation's government is income tax. This sum is utilised for defence, government project funding, salary payments, and other purposes.
What's new in the ITR forms?
The COVID-19 worldwide pandemic alleviation measures are included in the new IT return forms. The tax net has been expanded to encompass individuals, Hindu undivided families (HUFs), and partnership firms that have paid a power utility bill exceeding Rs 1 lakh, deposited more than Rs 1 crore in a bank, or incurred personal travel expenses exceeding Rs 2 lakh. The new form has a separate schedule called Schedule DI that allows the taxpayer to specify how much they have invested or spent and for which they require a tax refund. The previous amendment that forbade joint homeowners from filing tax returns using either ITR-1 or ITR-4 has been repealed.
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