Introduction:

In India, it is essential to file income tax returns. They record your financial activities for a fiscal year, such as income, investments, deductions, and taxes. ITRs demonstrate your contribution to the provision of public services and infrastructure. Understanding the importance of ITRs is essential for tax compliance and national development. This article provides an overview of the ITR filing process in India, highlighting its significance and procedural details.

 

Income Tax Return (ITR):

An Income Tax Return (ITR) is a document that taxpayers use to report their income and corresponding tax liabilities to the income tax department. The tax department offers seven different forms: ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7. Each taxpayer must file their ITR within the prescribed deadline. The appropriate ITR form is determined by various factors, including the taxpayer's sources of income, the amount of income earned, and the taxpayer's classification (such as individuals, HUFs, companies, etc.).

 

Who Needs to File an Income Tax Return:

Filing an income tax return is a legal requirement that depends on various scenarios. Here's an overview of who needs to file an income tax return:

 

  1. Salaried Individuals: If your gross income exceeds the exemption limit before accounting for deductions under Sections 80C to 80U, you must file an income tax return.
  2. Firms: Regardless of whether they are in profit or loss, entities such as private limited companies, LLPs (Limited Liability Partnerships), and partnerships are required to file their IT returns.
  3. Directors and Partners: Individuals who are Directors in Private Limited Companies or Partners in LLPs must file an income tax return.
  4. Dividend Earners: Those earning dividends from mutual funds, bonds, equities, fixed deposits, and interest must file an income tax return.
  5. Charity and Religious Trusts: Individuals receiving income from charity or religious trusts and from voluntary contributions are also required to file an income tax return.
  6. Tax Refunds: Individuals and businesses eligible for tax refunds should file an income tax return to claim their refunds.
  7. NRIs and Tech Professionals: Non-Resident Indians (NRIs) and technology professionals should file an income tax return based on their income and specific circumstances.

 

Mandatory Income Tax Return Filing in India:

In India, filing an Income Tax Return (ITR) is mandatory under certain conditions. If your gross total income exceeds the basic exemption limit, which varies by age group, you must file an ITR:

  • Individuals below 60 years: Rs 2.5 lakh
  • Individuals between 60 and 80 years: Rs 3.0 lakh
  • Individuals above 80 years: Rs 5.0 lakh

Even if your income is below the exemption limit, you must file an ITR if you meet any of the following criteria:

  1. Deposited over Rs 1 crore in a current bank account: Required if you deposited Rs 1 crore or more in one or more current bank accounts (excluding post office accounts).
  2. Deposited over Rs 50 lakh in a savings bank account: Required if you deposited Rs 50 lakh or more in one or more savings bank accounts.
  3. Spent over Rs 2 lakh on foreign travel: Required if your foreign travel expenses exceed Rs 2 lakh.
  4. Electricity expenses exceeded Rs 1 lakh: Required if your electricity expenses during the previous year exceeded Rs 1 lakh.
  5. TDS or TCS over Rs 25,000 (Rs 50,000 for senior citizens): Required if your tax deducted at source (TDS) or tax collected at source (TCS) is over Rs 25,000 (Rs 50,000 for senior citizens) in the previous year.
  6. Business turnover over Rs 60 lakh: Required for businesses with total sales, turnover, or gross receipts exceeding Rs 60 lakh during the previous year.
  7. Professional income over Rs 10 lakh: Required for professionals with gross receipts exceeding Rs 10 lakh during the previous year.

 

Income Tax Slab Structure:

According to the Union Budget 2024-25, the individual income tax slabs have been revised for the new tax regime. Below you will find updated income ranges and tax rates.

Total Income

Tax Rate

Upto ₹ 3,00,000

Nil

From ₹ 3,00,001 to ₹ 7,00,000

5 per cent

From ₹ 7,00,001 to ₹ 10,00,000

10 per cent

From ₹ 10,00,001 to ₹ 12,00,000

15 per cent

From ₹ 12,00,001 to ₹ 15,00,000

20 per cent

Above ₹ 15,00,000

30 per cent

 

 

The Right ITR Form: A Quick Guide

Here's a straightforward overview of the applicable ITR forms for various scenarios:

Here's a simplified guide to the applicable ITR forms for various situations:

ITR-1: SAHAJ

  • For individuals with an annual income below Rs. 50 Lakhs from salary or pension.
  • Must have only one house property.

ITR-2: Beyond Business

  • Suitable for NRIs, company directors, and private company shareholders.
  • For those with capital gains income, foreign income, or two or more house properties.
  • Applicable for income exceeding Rs. 50 Lakhs.

ITR-3: Professionals and Proprietorships

  • For professionals and individuals running a proprietorship business in India.

ITR-4: Presumptive Taxation Enrolees

  • For those under the presumptive taxation scheme.
  • Business income should be less than Rs. 2 crores, or professional income less than Rs. 50 Lakhs.

ITR-5: Partnerships, LLPs, and More

  • For partnership firms, LLPs, associations, and bodies of individuals.

ITR-6: Companies

  • For companies registered in India.

ITR-7: Special Entities

  • Applicable to entities like charitable/religious trusts, political parties, scientific research institutions, and colleges/universities.

The Advantages of ITR Filing:

  • Valid Proof of Income: Submitting your ITR serves as legitimate proof of your income, useful in various situations such as financial transactions and legal matters.
  • Facilitates Future Loan Applications: Financial institutions often require ITR as an essential document for loan applications. A filed ITR demonstrates your financial stability and repayment capacity.
  • Essential for Credit Card Applications: When applying for credit cards, banks often require your ITR to assess your creditworthiness and determine your credit limit eligibility.
  • Vital for VISA Applications: ITR is important for visa applications, particularly for foreign travel, as authorities use it to verify your financial standing and ties to your home country.

 

E-Filing of Income Tax Return:

The term 'E-Filing of Income Tax Return (ITR)' refers to the process of electronically submitting your income tax return to the tax authorities via online platforms. Instead of utilizing physical paper documents, individuals and entities can file their tax returns online through official websites or designated portals provided by the tax department. This electronic system facilitates and expedites the submission procedure, rendering it more convenient, effective, and sustainable in comparison to conventional paper-based methods.

 

Essential Documents for Income Tax Return (ITR) Filings:

Before delving into the steps involved in e-filing ITR, taxpayers must gather specific documents, including:

  • Permanent Account Number (PAN)
  • Form 26AS and other relevant statements
  • Bank statements
  • Form 16

Step-by-Step Guide to E-File ITR on the Income Tax Portal:

Step 1: Log in to the Portal

Visit the official Income Tax e-filing website and click on the ‘Login’ option. Enter your PAN in the User ID field and click ‘Continue’. Verify the security message by checking the tickbox, then enter your password and click ‘Continue’.

Step 2: Access ‘File Income Tax Return’

Click on the ‘e-File’ tab and select ‘Income Tax Returns’. Then choose ‘File Income Tax Return’.

Step 3: Choose the Correct ‘Assessment Year’

Select the appropriate ‘Assessment Year’ and set the filing mode to ‘Online’.

Step 4: Select Filing Status

Choose your filing status from options such as Individual, HUF, or Others. Select ‘Individual’ and click ‘Continue’.

Step 5: Choose the Appropriate ITR Type

Identify the correct ITR form for your situation. There are 7 ITR forms available. For example, if you are an individual or HUF with capital gains but no income from business or profession, select ITR 2. Ensure you choose the right ITR type.

Step 6: Specify the Reason for Filing ITR

Indicate the reason for filing your return by selecting the applicable option:

- Taxable income exceeds the basic exemption limit

- Mandatory filing due to specific criteria

- Other reasons

Step 7: Add Bank Account Details and Review Information

Enter your bank account details, ensuring they are accurate and pre-validated if previously provided. Proceed to the next page with pre-filled details, carefully review the information for accuracy, and confirm the summary of your return.

Step 8: E-Verify Your ITR

The final and crucial step is to verify your return, as failure to do so means it is not considered filed. Choose from verification methods such as Aadhaar OTP, electronic verification code (EVC), Net Banking, or sending a physical copy of ITR-V to CPC, Bengaluru.

Late Filing Fees under Section 234F:

Starting from the fiscal year 2017-18, a late filing fee will be imposed if you submit your income tax returns after the specified due date, as stipulated in Section 234F.

For example, if the due date for filing returns for the fiscal year 2021-22 is July 31, 2022, and you miss this deadline, you can still file a belated return until December 31, 2022.

However, a late filing fee will apply. If you file your ITR after the due date, but before the extended deadline, you will face a maximum penalty of Rs 5,000.

There is a provision providing relief for small taxpayers. If your total income is below Rs 5 lakh, the maximum penalty for delay will be Rs 1,000.