Income tax return filing - meaning, types, process, and more
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What is an income tax return filing?
An income tax return is a form that a taxpayer files to the Income Tax department of India. This form contains information related to a taxpayer’s income and tax paid during the previous year. Whereas, Income tax return filing is a process through which a taxpayer calculates his or her income and tax liability for the financial year and pays it to the government. The tax liability paid is calculated after making a lot of adjustments and deductions from the income earned during the previous year.
Under income tax return filing, income can be of various forms like:
- Income from salary
- Income from house property
- Profit and gain from business and profession
- capital gains and
- Income from other sources like dividends, interest, winnings on lottery, etc.
Who should file income tax returns?
Under Income Tax Act 1961, section 139 subsection 1 provides that an income tax return is required to be filed by the following:
- Every individual (including an HUF or AOP/BOI) whose total income during the previous year exceeds the basic exemption limit (note that the total income here means the income calculated before giving effect to any deductions under Chapter VI-A and exemptions provided under section 10 series and section 54 series, of the Income Tax Act 1949)
- Every company or a firm, irrespective of whether they have generated any profit and gain during the previous year
- An individual who is a resident other than not ordinary resident of India and is a beneficiary or beneficial owner (including financial interest) of an asset located outside India or has signing authority in any account located outside India. However, the beneficiary need not file income tax return if the income from such asset is included in the income of beneficial owner.
- Any individual who is not required to furnish an income tax return but who during the previous year -
- Has deposited an amount or aggregate of an amount exceeding one crore rupees in one or more current accounts in or
- Has incurred expenditure of an amount or aggregate of an amount exceeding two lakh rupees on travel to a foreign country for himself or any other person or
- Has incurred an expenditure of an amount or aggregate of an amount exceeding rupees one lakh on electricity consumption or
- Has fulfilled any other condition as may be prescribed in the act.
Any individual who fulfills the above mentioned conditions has to file income tax return for the previous year.
- Any person deriving income from property held under charitable or religious trust (without giving effect to section 11, 12), a political party (without giving effect to the section 13A), news agency, educational or medical institution, trade union, non-profit institution, hospital, infrastructure debt fund (without giving effect to the section 10) whose total income exceeds the basic exemption limit are required to file income tax return.
However, the following persons, not specified under section 139(1), are also required to file an income tax return
- A foreign company that has undertaken any transaction with India and has enjoyed treaty benefits over that transaction
- Any non-resident of India who has earned income, from India, for an amount more than the basic exemption limit during the previous year
- Any individual who is required to claim a refund of any excess tax liability paid or deducted.
- Any individual who needs to apply for a loan or visa
Note: Basic exemption limit here means an amount that is not chargeable to tax under the income tax act.
Why should anyone file an income tax return?
As per the Income Tax laws, it is mandatory for every person prescribed under the Income Tax Act, 1961 to furnish an income tax return on or before the due date specified under the act.
What are the benefits of filing an income tax return?
Filing an income tax return helps an individual in several ways such as:
- Processing of loans. Banks or other financial institutions ask for the previous year’s income statements as proof before granting loans. This is mainly to check whether the borrower has the ability to return the loan or not. An ITR works as an income statement.
- Claiming refunds. A taxpayer can claim a refund of any excess liability paid or deducted by filing an ITR.
- Visa processing. While applying for a visa to travel outside India, an ITR acts as an important document. All embassies ask for the applicant’s income proof and tax compliances to ensure that he or she is capable of bearing the travel expenses outside India
- Claiming deductions and exemptions. The income tax department offers various deductions and exemptions, specified under the income tax act, from the income of an individual. Filing an ITR can help the taxpayer claim those deductions and reduce his tax burden.
- Availing presumptive taxation schemes. Income tax laws provide various presumptive taxation schemes to taxpayers. Under this, specified taxpayers can enjoy the benefit of reduced tax rates applicable on their income.
Types of Income tax returns
Under the Income Tax Act different types of ITR Forms are provided according to different taxpayers and their income. Those forms are as follows:
ITR 1 (also known as Sahaj): ITR 1 is for resident individuals having total income upto fifty lakh rupees under the heads salary or pension, house property, and other sources and agricultural income upto Rs.5000..
ITR 2: This ITR form is for individuals and HUF having income other than income from PGBP. Provided that the income of an individual is more than rupees fifty lakh.
ITR 3: This form is applicable for individuals working as a proprietor or running a business/profession and having income from profit and gain from business and profession.
ITR 4 (also known as Sugam): ITR 4 is for individuals, HUF and firms (other than LLP) who have opted for presumptive taxation schemes and have income other than PGBP. However, only those individuals can file their return in ITR 4 who have income for an amount up to rupees fifty lakh.
ITR 5: This return is specifically for firms, AOP/BOI, LLP, cooperative society, local authority, or any artificial judicial person.
ITR 6: ITR 6 is for all companies except companies that claim an exemption under section 11 of the Income Tax Act 1961
ITR 7: This return form is applicable for persons or companies specified under sections 139(4A), (4B), (4C), and (4D) of the Income Tax Act 1961.
Due dates for income tax return filing
Due dates for ITR (FY 2021- 2022)
Individual or HUF or AOP/BOI
31st July of A.Y.
Company or firm (requiring audit)
30th September of A.Y.
Company or firm (requires to furnish transfer pricing report)
30th November of A.Y.
How to file an income tax return?
A taxpayer can file an income tax return, regardless of the amount of income (a nil return can also be filed), through the official website of the income tax department, i.e.,incometax.gov.in. The income tax department of India has provided the facility of electronic filing of income tax returns to all taxpayers and the step by step process for that is as follows:
Step 1: Calculate taxpayer’s income and tax liability paid after taking into consideration all the deductions and exemptions prescribed under the income tax act. Pay any balance tax payable calculated as per self assessment.
Step 2: Verify the details of taxpayer’s tax deducted at source, tax collected at source and advance tax paid during the year with the help of Form 26AS downloaded online from TRACES
Step 3: Visit the official website of income tax department of India and login with the taxpayer’s valid username and password. If the taxpayer is a new assessee then click on the register option instead of login to register the taxpayer on the website
Step 4: Go onto the File income tax return option under e-filing tab
Step 5: After this choose the category of assessee that the taxpayer fall in i.e., individual, HUF, company, firm or any other
Step 6: Select the ITR form applicable to the taxpayer according to his income
Step 7: After this, verify the pre-filled bank account and ITR details. You can make the changes if required.
Step 8: If all the details provided on the portal are correct then confirm the same and validate it.
Step 9: Once you have validated the ITR details on the portal the process will be completed.
Step 10: Then at the last step verify the income tax return and file its copy to the income tax department
How to file an income tax return without Form 16?
For salaried individuals, Form 16 works as a basic and necessary document to fill their itr. However, sometimes employers do not issue form 16 due to several reasons. This makes it difficult for the individual to file his or her return. In that situation, the individual can use other various documents and file his return. The process to file an income tax return without form 16 is as follows:
Step 1: Compute the salary income generated through salary slips received during the year
Step 2: Download form 26AS through TRACES and verify the tax deducted from salary income and other income like fixed deposit, interest etc, earned during the financial year
Step 3: Calculate the total income under other heads of income as well i.e., house property, PGBP, capital gain, and other sources
Step 4: Claim the deductions, exemptions, rebates and other reliefs, available under the income tax act, from the total income earned during the year and compute
Step 5: Compute the tax liability payable on the total taxable income.
Step 6: Compute the difference between the tax liability payable and the tax deducted under source as shown in form 26AS. If the tax payable is in excess of tax deducted then the taxpayer is required to pay that difference amount. However, if the tax liability payable is lower than the tax deducted then the taxpayer can claim a refund for the excess amount paid.
Step 7: After this file the income tax return on the portal by following the steps as shown above
Late fees, penalty, interest rate chargeable for late filing of an income tax return
A taxpayer is required to file his or her income tax return on or before the due date specified under the income tax law. However, the taxpayer can also furnish the return after the due date provided late fees or penalties or interest will be charged from him by the government.
As per section 234F of the Income Tax Act 1961, late fees are charged. is as follows:
Where return is filed after the due date but on or before 31st december of the A.Y - Fee will be charged at rupees five thousand.
Where return is filed after the due date and after 31st december of the A.Y - Fee will be charged at rupees ten thousand.
Where the taxable income of the individual is upto rupees five lakh - Fee will be charged at rupees one thousand in all the cases.
Along with the fee, the taxpayer will also be liable to pay interest under section 234A of the Income Tax Act 1961. The interest rate chargeable from the taxpayer if he fails to file the income on or before the due date is at the rate of 1% for every month or part of the month on the amount of tax remaining unpaid.
Glossary - income tax return filing
Assessee: Under income tax act, an assessee means a person by whom any tax or other sum of money is payable
Financial year: It refers to the calendar year in which the assessee generates income. It begins from 1st April of each calendar year to 31st March of the next calendar year.
Assessment year: It refers to the year in which an individual files the return of income generated during the previous year. For the financial year 2020-2021, the assessment year will be 2021-2022.
Exempt income: It refers to the income which is not chargeable to tax under the income tax law.
Taxable income: It refers to the income which is chargeable to tax. It is included in the computations while filing an itr
Tax regime: Tax regime refers to the tax slabs and rates prescribed under the Income tax law. In budget 2020, the government introduced a new tax regime with a higher tax rate with more tax saving options. However, both old and new tax regimes are available for assessees as of now.
Form 16: This refers to the certificate which is issued by the employer and contains the salary statement along with the TDS deducted on the salary or other transactions of the individuals.
TDS: Tax deducted at source refers to the tax deducted from the amount paid by the assessee at the time of making payments in relation to rent, commission, interest, salary, professional fees etc.
Why choose an eAuditor office for income tax return filing?
Filing an income tax return can be too tricky for an assessee if he or she is not familiar with the income tax law. The process itself is very lengthy and complicated to follow for a normal assessee. Various sections and provisions and rules are there to follow to furnish a simple tax return with the IT department. An eAuditor office can help the assessee file the return without much hassle. An eAuditor office is a specialist in its work and the auditors there perform their services with utmost brilliance and dedication towards their clients. Not only this, they know about the law thoroughly with every section or provision involved. Visit an eAuditor office and experience their services yourself.
Frequently Asked Questions
Yes, it is mandatory for every assessee falling under the tax regimes to file an income tax return.
An assessee can check the status of his itr online through the common portal of income tax department by entering the PAN and valid password.
Yes, an income tax return can be filed after the due date. However, a late fee will be charged in that case.
If an assessee has sustained losses in a financial year which he proposes to carry forward to subsequent year for adjustment from income then he must file the return before the due date. Carry forward loss cannot be claimed if the return is filed after the due date
Form 26AS is a consolidated annual tax statement of the assessee which contains the following information in relation to PAN: TDS TCS Details of advance tax and self assessment tax paid Details of refund Details of AIR transactions