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What is ITR?

Taxpayers like you and me declare our tax liability, claim tax deductions, and report gross taxable income through an Income Tax Return or ITR. You file that with the Income-Tax Department as an assessee. If you have more than a certain amount of money in a financial year (1st April through 31st March), you must file Income Tax Returns to the department. You could be self-employed or salaried. You may run partnership firms or companies or Hindu Undivided Families (HUFs). All need to file the ITR with the Income Tax Department. An assessee is required to report the income in the form of a salary, business profits, income from house property or through dividends received, capital gains (both short-term and long-term), interests income received through any other source.

Tax returns need to be filed by an individual or a business before a specified date. Individuals can file their Income Tax Returns earned during FY 2020-21 by 30th September, thanks to the government's decision to extend the deadline as per May 2021 updates. The Central Board of Direct Taxes (CBDT) has also extended the deadline for filing ITRs for businesses by one month, until 30th November. If a taxpayer fails to obey the deadline, they have to pay the penalty as specified in the Income Tax Act.

New Tax Regime Slab Rates:

Tax slab (Rs.) Slab rates (%)
0-250000 NIL
250000-300000 5 (optional- tax rebate as per section 87a)
300000-500000 5 (optional- tax rebate as per section 87a)
500000-750000 10
750000-1000000 15
1000000-1250000 20
1250000-1500000 25
Above 1500000 30

Eligibility to file ITR

According to the Income Tax Act, income tax is only required to be paid by individuals or businesses who fall into specific income brackets. Entities or companies that are required to file their ITRs in India are listed below-

Individuals with a total income of more than Rs.2.5 lakh in a financial year.

All registered businesses that generate revenue, whether or not they have made a profit during the year.

Those who wish to receive a refund for any excess tax deducted from their income.

Individuals with assets or financial interests in companies based outside of India.

Treaty-advantaged foreign companies that conduct business in India.

Documents required to file ITR

If you are a salaried individual, you must keep certain documents handy before you sit to file ITR. Those include your salary slips, savings bank account passbook, details of investments made in a year, and capital gains caused, if any, along with your Aadhar card and PAN card. In addition, you also need to understand the usage and purposes of certain forms connected with filing ITR. Those include:

Form 16

This form is provided by your employer and contains information about your salary and the TDS (tax deducted at source) on it.

Form 16A

This form contains information on the TDS deducted on interest received from fixed or recurring bank deposits.

Form 16B

This form contains the information on TDS deducted by the property buyer when you sell a property.

Form 16C

Details of the TDS of the rent paid to you by your tenant are recorded on Form 16C.

Form 26AS

This form is your comprehensive tax statement based on your PAN number. Your employer or anyone who pays you is included in this category. Self-assessment taxes or advance taxes paid, as well as proof of tax-saving investments like deductions as per Sections 80C to 80U, are all listed in form 26AS.

Why should you file an ITR?

According to the Income Tax Act, income tax is only required to be paid by individuals or businesses who fall into specific income brackets. Entities or companies that are required to file their ITRs in India are listed below

Responsibility

Filing tax returns is a yearly activity that every responsible citizen of the country is expected to do. It serves as a foundation for the government to determine the amount and means of citizens' expenditures and a platform for assesses to claim refunds and other forms of relief as needed. Filing income tax returns demonstrates that you are accountable. Not just that, it also makes it easier for individuals and businesses to engage in subsequent transactions because their earnings are recorded by the tax department, with any applicable tax paid.

Utility

Even though your income does not qualify you for mandatory filing, it may still be a good idea to file income tax returns voluntarily. In most states, registering immovable property necessitates submitting three years' worth of tax returns as proof. It's easier to record a transaction if you file returns.

Easy access to credit

If you plan to take a loan like a home loan in the future, it is a good idea to keep a consistent record of filing ITRs because the borrower will almost certainly require you to show. Credit card companies, too, require proof of filing ITR before issuing a card to you.

Necessary for claiming adjustment against previous losses

It is important to note that losses incurred by an individual or a business, including short- and long-term capital losses, which are not recorded in the ITR in a relevant year, cannot be used to set off against the capital gains or business gains in subsequent years. Therefore, it's best to file ITR regularly.

Useful for revision of ITR

If you haven't filed the original Income Tax Return during the specified time, you won't be able to file a revised return later, even if you wish to rectify the error in the ITR.

Types of ITR forms

Before filing Income Tax Returns, you must determine which type of Income Tax Return (ITR) form you need to use. The ITR form to be filled is dependent on the sources of income in the relevant financial year. There are nine different types of ITR forms available. Individual assessee consider only the following forms when filing ITR -

ITR-1

This Income Tax Return form, also known as the Sahaj form, must be filed solely by an individual taxpayer. Any other assessee required to pay tax is ineligible to use this form to file their returns. This form must be completed by residents with a total income of up to Rs.50 lacs from the following sources:

  • a) Earnings from salary
  • b) Income from a house property
  • c) Income from other sources, excluding lottery winnings and horse race earnings
  • d) If a spouse or a minor is included in a clubbed Income Tax Return, this can only be done if their income is limited to the above criteria.

ITR-2

The ITR-2 form is typically used by people who have earned money from selling assets or property. This form is also helpful for people who make money from countries other than India. Individuals or Hindu Undivided Families (HUF) can use this form to file their IT returns. This form is for the individuals who:

  • a) A resident with any assets or signing authority in any account hat is located outside of India.
  • b) A non-ordinary resident or NRI.
  • c) Taxpayers who earn more than Rs.5000/- from agriculture.
  • d) Other sources of income include lottery, horse race, and gambling winnings, among others.
  • e) Capital gains/losses from the sale of real estate, investments, and securities, both short and long term. (If only long-term capital gains are exempt under section 10(38), ITR-1 can be filed).

ITR-2A

ITR-2A is a newly introduced Income Tax Return form for individuals and HUFs who earn a salary and own more than one home but do not have capital gains income. The following assesses are eligible to file using the ITR-2A Form:

  • a) This form is used by individuals who earn a salary and own more than one home but haven't made any capital gains or losses in a relevant financial year.
  • b) However, this form can be used by those who have long-term capital gains from transactions that are exempt from Securities Transaction Tax.
  • c) NRIs can file ITR-2A; however, residents with a foreign asset or foreign income cannot file this form.
  • d) If a spouse or a minor is included in a clubbed Income Tax Return, this can only be done if their income is limited to the above criteria.

ITR-3

Individual taxpayers or Hindu Undivided Families who solely operate as a firm partner but aren't engaged in any business under the firm should use the ITR-3 form. This also applies to individuals who do not benefit financially from the firm's operations. This form is usually filled out by taxpayers who only have taxable income from their business in the following forms- commission, bonus, salary, interest or remuneration.


ITR-4

Individuals who own a business or earn a living through practising a profession must use this type of ITR form for Income Tax Return filing. This form can be used for any business, undertaking, or profession, and there is no limit to the earnings. Taxpayers can also combine any income from windfalls, speculation, salaries, lotteries, real estate, and other sources with their business income. This form can be used by any individual in any profession, including shopkeepers, doctors, designers, and agents, retailers, and contractors.

  • a) Earnings from salary
  • b) Income from a house property
  • c) Income from other sources, excluding lottery winnings and horse race earnings
  • d) If a spouse or a minor is included in a clubbed Income Tax Return, this can only be done if their income is limited to the above criteria.

ITR-4S

The ITR-4S form, also known as the Sugam form, can file Income Tax Returns by any individual or Hindu Undivided Family (HUF). This form is helpful for ITR filing for the following assessees:

  • a) Individuals who earn their income from any type of business
  • b) Individuals who make through a single rental property
  • c) Individuals who do not make money from the sale of assets or real estate in India (capital gains).
  • d) Individuals with an annual agricultural income of less than Rs.5,000
  • e) Individuals who have no assets or property in any other country than India
  • f) Individuals who do not earn a living in a country other than India.

Steps to file ITR online

1

Calculate your tax liability according to the provisions of applicable provisions of income tax laws.

2

Summarize your TDS payment for all four quarters of the financial year with; the help of Form 26AS available on the income tax department's website.

3

Visit the e-filing website https://www.incometax.gov.in/iec/foportal

4

Enter your user ID (PAN), password, and captcha code in the e-Filing portal and click 'Login.'

5

Click the 'Income Tax Return' link under the 'e-File' menu.

6

When you are on the Income Tax Return page-

  • a. PAN will be auto-populated on the Income Tax Return page.
  • b. Select 'Assessment Year' and 'ITR Form Number' from the dropdown menus.
  • c. Choose 'Original/Revised Return' as the 'Filing Type.'
  • d. Choose 'Prepare and Submit Online' as your submission mode.
7

Continue by clicking the 'Continue' button.

8

Read the instructions carefully and complete all of the fields on the Online ITR Form that are applicable and mandatory.

9

Here, note that-

To avoid data loss or rework due to session timeout, click the 'Save Draft' button to save the entered ITR details as a draft. The saved draught will be available for 30 days from the saving date, or until the return is filed, or until the notified ITR's XML schema is not changed (Whichever is earlier).

10

In the 'Taxes Paid and Verification' tab, select the appropriate Verification option.

11

To verify the Income Tax Return, select one of the following options:

  • a. I'd like to e-Verify later, within 120 days of the date of filing.
  • b. I do not want to use e-Verify and instead prefer to mail a signed ITR-V to the "Centralized Processing Center, Income Tax Department" (of your city) within 120 days of filing.
12

Verify all the entered data in the ITR by clicking the 'Preview and Submit' button.

13

'Submit' the ITR to the IRS.

14

When you select the 'I'd like to e-Verify' option, you can e-Verify using any of the methods below by entering the EVC/OTP when prompted.

  • a. EVC generated at a bank ATM or using the 'Generate EVC' option in 'My Account.'
  • b. OTP for Aadhaar
  • c. Pre-approved bank account Pre-approved depository account

How to check ITR status?

After filing your tax return, you can quickly check its status on the Government of India's e-filing website. Here are simple steps to check your ITR status, depending on whether or not you have created a login account on the website:

A

Without a username and password: On the left side of the website, click the ITR status link. You will then be directed to another page to enter your PAN number, ITR acknowledgement number, and captcha code. Once you've entered your information, your tax filing status will appear.

B

With the following login information: Use your username and password to access the website. Then select the option to "view returns or forms." From the dropdown menu, select the assessment year and Income Tax Returns. You can then check to see if your ITR has been verified or processed.