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What is Income Tax return (ITR)?
An income tax return (ITR) is the form that an individual or company files to the Income Tax Department as proof of its income, expenses, and other tax information in that financial year. The ITR filed contains the proof of your income and amount paid as tax in that financial year. While filing the income tax return (ITR), an assessee must ensure to enclose the proof of every source of income earned in that financial year including the exempted income thereon to Income Tax Department.
Know well about ITR forms
|
ITR |
Description (AY 2019-20) |
Online |
Offline |
|
ITR 1 |
ITR Form 1 aka Sahaj Form is applicable for individuals with income up to Rs. 50 lakh earned from salaries, one-house property, and other sources (excluding winning from lottery and bets on racehorses). |
Yes |
Yes |
|
ITR 2 |
ITR Form 2 is applicable for individuals and HUFs receiving income from salary/pension, house(s) property, capital gains/loss on the sale of investments/property (excluding capital gains from business or profession), and other sources (including winning from lottery and bets on racehorses). |
No |
Yes |
|
ITR 3 |
ITR Form 3 is applicable for individuals and HUFs receiving income from profits of proprietary businesses and professions. |
No |
Yes |
|
ITR 4 |
ITR Form 4 is aka Sugam Form is applicable for individuals, HUFs, and Firms (not LLP) receiving income on the presumptive basis: · Under Section 44AD (Gross Turnover up to Rs. 2 crores) · Section 44AE (Income from Goods Carriage up 10 vehicles) · Section 44ADA (Gross receipt up to Rs. 50 lakh) |
Yes |
Yes |
|
ITR 5 |
· ITR Form 5 is applicable for LLP, AOP, BOI, and AJP referred to in clause (vii) of Section 2(31) · The local authority referred to in clause (vi) of section 2(31) · Assessee referred to in Section 160(1)(iii) or (iv) · Cooperative society and other society registered under the Societies Registration Act, 1860. |
No |
Yes |
|
ITR 6 |
ITR Form 6 is applicable to those companies that are not claiming exemption under Section 11. |
No |
Yes |
|
ITR 7 |
ITR Form 7 is applicable for individuals and companies that come under · Section 139(4A) · Section 139(4B) · Section 139(4C) · Section 139 (4D) |
No |
Yes |
For reference: http://www.incometaxindiaefiling.gov.in/main/ListOfITRsAndOtherForms
Who can file Income Tax Returns?
Individuals, HUFs, AOPs, BOIs, firms and companies are mandated to file the income tax return (ITR) if the income earned is taxable. Each of these taxpayers is taxed differently under the Income Tax laws of India wherein the domestic companies and firm have fixed a 22 per cent tax rate but the individuals are taxed as per the tax slabs.
Advantages of filing income tax returns (ITRS)
It has often seen that many individuals believe that if their salaries fall below the taxable bracket then they don’t need to file an income tax return (ITR). However, that is not true! Even if your earned income is not taxable, you should file ITR as it will benefit you in different ways.
Listed out the following advantages of filing income tax returns:
Things to remember before filing an Income Tax Return
Income tax return filing is very important and if you have not filed your return yet, it’s a good idea to get going and try to do it as early as possible. Tax filing involves a lot of paperwork, confusion and queries. To ensure a seamless process, give yourself enough lead-time for a smooth and timely return filing. Unfortunately, there are penalties to be paid, if the deadlines are missed. These fines range between Rs. 5,000 to 10,000, depending on the delay.
You can get help from professionals to file your tax return who can advise you on how to save tax, the available deductions and exemptions under 80C and assist you with investment planning. But, if you are planning to file returns yourself, here are a few important things you could keep in mind.
First of all, make sure to collect all the required documents that you will need to file your ITR Form such as Form 16, Form 26AS, investment documents, premium payments, loan statements, salary slips, bank statements, and proof of capital gains (if any) that will help you in providing the details of tax deducted at source (TDS) and to compute the gross taxable income of yours in that financial year.
Similar to this, if you have redeemed mutual fund units within that year, you can reach out to your mutual fund house to provide you with the transaction statements and capital gain statements. Remember, if the gains exceed Rs. 1 lakh, you will be required to pay tax on LTCG. Once you finished computing your total income, the next thing is to calculate your tax liability by applying the tax rates as per your income slab.
Important Things To Remember While Filing Income Tax Returns
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Know Your ITR Forms Well
The Central Board of Direct Taxes (CBDT) has made few amendments in the ITR forms to ease the process of filing Income Tax returns. The number of forms to be used by taxpayers has been reduced from 9 to 7. For individuals with annual taxable income (from salary, interest, one house property) of up to Rs. 50 lakh, ITR 1 is required to be filed. Whereas, for individuals with annual taxable income of more than Rs. 50 lakh, ITR 2 is required to be filed.
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Mandatory Disclosure
Following up on the Central Government's efforts on demonetisation, the Income Tax department has made it mandatory to disclose cash deposits of Rs. 2 lakh and more in bank accounts. This was first initiated during the demonetisation period and continues to this day. The Income Tax department requires a declaration in a separate column giving details of money deposited along with bank details in the income tax returns. To prevent being taxed at 60% plus surcharge and cess, tax payers need to explain all sources or forms of income or investment.
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Carefully Select the Assessment Year and Financial Year
Assessment Year and Financial Year are not the same and you need to be familiar with them in order to correctly file your taxes. Financial Year is the period or year within which you earn the income, whereas Assessment Year is the period or year that follows Financial Year and it is in this year that you file your tax return. Every Financial Year and Assessment Year begins on the 1st of April and ends on 31st of March. Assessment Year always comes after Financial Year.
Since your income is taxed in the Assessment Year, you have to select Assessment Year while filing your income tax return.
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Check For Deductions Under 80C
Section 80C entitles you to certain deductions from the gross total income, up to a maximum limit of Rs. 1.5 lakh. It is the most widely used option to save income tax. The investments and expenditures that qualify for deduction under section 80C are investments in National Savings Certificates (NSC), Kisan Vikas Patra (KVP), notified Equity Linked Saving Scheme (ELSS) of a mutual fund, five-year post office term deposits, five-year bank fixed deposits, contribution to Employee Provident Fund (EPF), Public Provident Fund (PPF), Superannuation Funds and premiums paid for life insurance, annuity plan and Unit-Linked Insurance Plans (ULIP), etc.
These investments can not only be claimed as deduction while calculating your total taxable income but can also generate good returns. Moreover, investment in PPF, superannuation funds, etc. also help in accumulating funds for retirement planning.
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Check TDS on Form 26A
Form 26A is an important document for tax filing. It provides details of the income paid to you, the tax deducted on that income and the amount of TDS deposited by the payer with the Government. The form also contains details of any refund applicable to you. To check your tax deduction on Form 26A, you have to go to https://incometaxindiaefiling.gov.in and login to your account. Next, you have to go to ‘My Account’ and click on ‘View Form 26AS’ in the drop down.
Conclusion
While filing your income tax return, ensure that you know the relevant ITR forms well, make the necessary disclosures, select appropriate assessment year, take advantage of 80C deductions and verify your TDS from Form 26A. This will ensure a smooth and hassle-free tax filing process.
