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Basics of ITR

Filing an Income Tax Return (ITR) is essential for nation-building and offers several benefits. It helps you claim TDS refunds, makes loan applications easier, and allows you to carry forward losses. Additionally, you can claim deductions and exemptions under the Income Tax Act, 1961. For example, you can claim your term plan premium as a deduction under Section 80D, potentially saving up to Rs. 1 lakh per year.

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Basics of ITR

What Is an Income Tax Return?

Income Tax Return Guide - Details You Should Know
July 09, 2024

Table of Content

 

India is making new records in terms of direct tax collections. As of 10th January 2024, the tax collection has surged 19.41% to Rs. 14.70 lakh on Year-on-Year(Y-o-Y) basis. The amount has crossed the 80% tax collection target of the total budget estimates for FY 2023-24. 

Income tax plays a very important role in the growth of a country. It is the main source of income for the government. The amount is used to pay salaries, welfare schemes, government projects, defence, etc. To ensure that every taxable entity pays its dues to the government, taxpayers need to file Income Tax Returns (ITR) along with the tax amount.

Read this blog to know more about what is income tax return.

What Is ITR?

Income Tax Return or ITR is a form used to show your gross taxable income for the given fiscal year. The form is used by taxpayers to formally declare their income, deductions claimed, exemptions and taxes paid. Therefore, it calculates your net income tax liability in a fiscal year.

According to the Income Tax Act of 1961, a person under 60 years of age must file tax returns if a part of their income is taxable. If your taxable income exceeds Rs. 5 lakh in a financial year or you have paid advance tax, you also need to file an ITR. When filing tax returns, you also have to pay your due taxes as decided by your applicable income tax slabs. 

Types of ITR Forms

There are nine different types of ITR forms which you can use during ITR filing. According to the Central Board of Direct Taxes in India, you must use the relevant form to file your income tax. Here is a brief about the forms:

  • ITR 1 or Sahaj

ITR 1 or Sahaj is a form for those individuals who have income of up to Rs. 50 lakh from pension, salary, income from other sources and one house property. However, all salaried persons can not use this form to file taxes. 

  • ITR 2

This form can be used by resident individuals or Hindu Undivided Families (HUF) who cannot file the ITR 1 or Sahaj form. However, if your income comes from a business or profession, then you cannot use ITR-2. 

  • ITR 2A

This is a newly launched ITR form created for HUFs and individuals who own more than one house property without any capital gains income and have salary income. If you have long-term capital gains and you have paid Securities Transaction Tax, this form is for you.

  • ITR 3

This form is for individuals or HUFs having income from proprietary business or profession. In short, Hindu Undivided Families or individuals who are ineligible for ITR 1, ITR 2, and      ITR 4, can file ITR 3. Anyone receiving interest, bonus, salary or commission from a partnership firm as business income must also file ITR 3. 

  • ITR-4 or Sugam

ITR 4 or Sugam is for all types of professions, businesses, HUFs and undertakings. You can file ITR-4 if your total income includes business or professional income u/s 44AD, 44ADA or 44AE, income from one house property, salary income, and income from other sources. However, you can not file this form if your income is more than Rs. 50 lakh in a financial year.

  • ITR-4S

ITR-5 is for LLPs (Limited Liability Partnerships), firms, business trusts, Artificial Juridical Persons (AJP), Estate of deceased, BOIs (Body of Individuals), AOPs (Association of Persons), estates of insolvents and investment funds.

  • ITR 5

Co-operative societies, firms, Artificial Juridical Persons, Associations of Persons, local authorities, and Bodies of Individuals are eligible to file their income taxes with this form.

  • ITR 6

This form can be filed by any company only through online mode. Firms and organisations can use this form only if they are not claiming tax exemption under Section 11.

  • ITR 7

This form can be used only by political parties, religious or charitable trusts, colleges, universities, etc. to claim tax exemption.

Is it mandatory to file Income Tax Return?

As per the tax laws laid down in India, it is compulsory to file your income tax returns if your income is more than the basic exemption limit. The income tax rate is pre-decided for taxpayers. A delay in filing returns will not only attract late filing fees but also hamper your chances of getting a loan or a visa for travel purposes.

Who should file Income Tax Returns?

According to the Income Tax Act, income tax has to be paid only by individuals or businesses who fall within certain income brackets. Mentioned below are entities or businesses that are required to compulsorily file their ITRs in India:

  1. All individuals, up to the age of 59, whose total income for a financial year exceeds Rs 2.5 lakh. For senior citizens (aged 60-79), the limit increases to Rs. 3 lakh and for super senior citizens (aged 80 and above) the limit is Rs. 5 lakhs. When using an income tax calculator, remember to input your gross income before applying deductions under Sections 80C to 80U and exemptions under Section 10. This ensures accurate tax calculations based on your total earnings.

  2. All registered companies that generate income, regardless of whether they've made any profit or not through the year.

  3. Those who wish to claim a refund on the excess tax deducted/income tax they've paid.

  4. Individuals who have assets or financial interest entities that are located outside India.

  5. Foreign companies that enjoy treaty benefits on transactions made in India.

  6. NRIs who earn or accrue more than Rs. 2.5 lakh in India in a single financial year.

How to File ITR?

Income Tax filing can be completed from both online and offline channels. Here are the ways to file your ITR. Steps to file ITR online - 

  • Online Process

Step 1: Visit the official page of income tax e-filing.

Step 2: Log in to your account using your PAN number and password. In case you do not have an account, you have to create a new account using the correct information.

Step 3: Go to ‘File Income Tax Return’ from the ‘e-file’ tab.

Step 4: Select the correct income category from the list. (individual, HUF, and so on).

Step 5: Choose the correct ITR form and go ahead by entering your bank account details.

Step 6: Check the preview of your income tax return by checking the prefilled form. You can make changes if required.

Step 7: Confirm the form and take a printout. Send a hard copy to the Income Tax Department for verification. Alternatively, you can e-verify your Income Tax Returns via Aadhaar OTP or prevalidated bank account. 

  • Offline Process 

Step 1: Visit the e-filling page of Income Tax India.

Step 2: Download the Utility software (ZIP file) from the ‘Downloads’ page.

Step 3: After downloading the ZIP, extract the file in a different folder.

Step 4: Select the relevant form and enter all the details in it.

Step 5: Generate the form preview as an XML file and save it.

Step 6: Do a quick re-check before calculating your final tax liability.

Step 7: Now open the Utility software and log in using your PAN number and password. 

Step 8: Go to 'Income Tax Return' and choose the Assessment Year and the ITR Form Number.

Step 9: Select the ‘Filling Type’ as ‘Original/Revised Return’.

Step 10: Select the 'Upload XML’ option as the ‘Submission Mode.’ After selecting the correct verification option, submit the ITR.

Documents Required to File ITR

These are the most important documents you need in hand when filing your ITR:

  • Form-16:

    It is a TDS certificate which is issued by your employer when the TDS is deducted from your salary. It has two parts including Part A containing the employer's and employee's details, including the name and address, Permanent Account Number (PAN), and TDS details. Part B includes the details of salary paid, exemptions allowed, deductions claimed, and tax payable on the employee's income

  • Bank/Post Office Interest Certificates:

    As per the Income Tax Act, interest earned from post office savings accounts, savings bank accounts, recurring deposits and fixed deposits are taxable. So, you need to provide the break-up of the interest received from different sources.

  • Form-16A and Other TDS Certificates:

    Salaried individuals have to collect other TDS certificates if applicable on them. Banks are required to deduct TDS if your total fixed deposit income goes above Rs. 40,000 (50,000 for senior citizens). Mutual fund houses have to deduct TDS on dividend payments of more than Rs. 5,000 in a financial year. Collect Form- 16A in both cases.

  • Annual Information Statement (AIS):

    The Annual Information Statement (AIS) was introduced by the Income Tax Department in 2021. It is a more comprehensive document compared to Form 26AS and includes all details of your financial transactions in a financial year.

  • Form 26AS:

    Form 26AS is like a tax passbook which includes the information about taxes deposited and deducted against your PAN. You can download this from the new income tax portal.

  • Proof of Investment and Expenditure:

    You should keep documents like deposit certificates, demat account statements, investment receipts, etc., as investment and expenditure proofs. 

  • Capital Gains:

    If you have investments in shares, mutual funds debentures and property and your realised gains are more than Rs. 1 lakh in a financial year, it is taxable under Long Term Capital Gains. So it is important to prepare the relevant document to show your capital gains income.

  • Details of Foreign Assets:

    You must mention all the assets you hold in any foreign country, including bank accounts, property and so on in your ITR.

  • Aadhaar number:

    As per Section 139AA of the Income-tax Act, 1961, it is mandatory to mention your Aadhaar card number in your ITR.

  • Bank Account Details:

    You have to mention the account number, bank name, account type and IFSC code of all the bank accounts you own. It is required even if you have closed your account in the middle of the financial year.

What's new in the ITR forms?

The new IT return forms include relief measures announced due to the COVID-19 global pandemic. These new tax return forms were recently notified by the Central Board of Direct Taxes.

The forms have the following features:

  • Wider scope of taxpayers:

The tax net has been widened to include individuals, Hindu undivided families (HUFs) as well as partnership firms who have deposited more than Rs 1 crore in a bank, incurred personal travel expense of Rs 2 lakh plus or paid a power utility bill of more than Rs 1 lakh.

  • Separate schedule:

A separate schedule called Schedule DI has been allotted in the new form to enable the tax payer to indicate the amount invested or spent on which he/she needs a tax rebate.
The earlier amendment prohibiting joint owners of a house from filing tax return, either with ITR-1 or ITR-4, has been done away with.

Which ITR Form should you fill?

The official website of the Income Tax Department lists several forms that taxpayers may be required to fill up based on their income. While some of these forms are easy to fill, others require additional disclosures such as your profit and loss statements. To help you better understand the forms available, here's a quick guide:

  1. ITR-1:

    2. Sahaj or ITR- 1 is to be filed individuals being a resident (other than not ordinarily resident) having total income upto Rs.50 lakh, having Income from Salaries, one house property, other sources (Interest etc.), and agricultural income upto Rs.5 thousand.

  2. ITR-2:

    3. This form should be filed by Individuals and HUFs not having income from profits and gains of business or profession.

  3. ITR-3:

    4. This form is for individuals and HUFs having income from profits and gains of business or profession

  4. ITR-4 (Sugam):

    5. If your business attracts presumptive income for you, then you need to fill this form. This form is to be filed by Individuals, HUFs and Firms (other than LLP) being a resident having total income upto Rs.50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE.

How to check ITR status online?

Once you have filed your income tax returns and verified it, the status of your tax return is 'Verified'. After the processing is complete, the status becomes 'ITR Processed'.

If you wish to know which stage your tax return is after filing it and want to check your ITR status online, here's how you can do it in easy steps.

1. Option One

Without login credentials

You can click on the ITR status tab on the extreme left of the e-filing website.

You are then directed to a new page where you have to fill in your PAN number, ITR acknowledgement number and the captcha code.

Once this is done, the status of your filing will be displayed on the screen.

2. Option Two

With login credentials

Login to the e-filing website.

Click on the option 'View Returns/Forms'

From the dropdown menu, select income tax returns and assessment year

Once this is done, the status of your filing (whether only verified or processed) will be displayed on the screen.

Keeping the Income Tax Department informed about your income and taxability will keep you on the right side of the law and prevent any blocks in your financial competency. Now that you know whether or not you compulsorily have to file your ITR, you need to ensure that you complete the process before the deadline every year.

How to Download Income Tax Return?

It is important to how to file ITR on time, to avoid last minute stress and penalties. Once you have filed your ITR, the income tax verification form is generated by the IT department so that taxpayers can verify the validity and legitimacy of e-filing. These are applicable only if you have filed your returns without a digital signature.

The income tax return verification form can be downloaded in easy steps.

1.) Log in to the Income Tax India website - income tax e-filing

2.) View e-filed tax returns by clicking on 'View Returns/ Forms' option

3.) Select option Income tax returns. Details of all the years for which returns are filed will be displayed

4.) Click on the acknowledgement number to download the ITR-V.

5.) Begin the download by selecting 'ITR-V Acknowledgment'

6.) To open the downloaded document, enter your password to open the document. The password is your PAN number in lower letters along with your birth date.

For example-

PAN - ASIJP2345P

Date of Birth - 31/12/1980

Password - asijp2345p31121980

  • You need to send the printed and signed document to CPC Bangalore within 120 days of the e-filing. There is also an option of E verification of Income tax return by generating Aadhar OTP, through net banking, through ATM etc

Why should I file my Income tax return?

A lot of individuals seem to think that filing tax returns is voluntary and therefore dismiss it as unnecessary and burdensome. As we will see, this is not a very healthy perspective on tax-filing.

Filing tax returns is an annual activity seen as a moral and social duty of every responsible citizen of the country. It is the basis for the government to determine the amount and means of expenditure of the citizens and provides a platform for the assesse to claim refund, among other forms of relief from time to time.

1. Filing returns is a sign you are responsible

The government mandates that individuals who earn a specified amount of annual income must file a tax return within a pre-determined due date. The tax as calculated must be paid by the individual. Failure to pay tax will invite penalties from the Income Tax Department.

Those who earn less than the prescribed level of income can file returns voluntarily.

Filing returns is a sign that you are responsible. Not just that, it also makes it easier for individuals and businesses to enter into subsequent transactions since their income is recorded by the tax department with applicable tax, if any, having been paid.

2. Filing returns is mandatory in some cases

Even if your income level does not qualify for mandatory filing of returns, it may still be a good idea to voluntarily file returns. In most states, registration of immovable properties requires advancing as proof the tax returns of last three years. Filing returns makes it easier to register the transaction.

3. Your loan or card company may want to see your return

If you plan to apply for a home loan in future it is a good idea to maintain a steady record of filing returns as the home loan company will most likely insist on it. In fact, you may even consider filing your spouse's returns if you want to apply for a loan as a co-borrower. Likewise, even credit card companies may insist on proof of return before issuing a card.

Financial institutions may insist on seeing your returns over the past few years before transacting with you. In fact, the government may make it mandatory for them to do so, thereby indirectly nudging individuals to file returns regularly even when it's voluntary.

4. If you want to claim adjustment against past losses, a return is necessary

Filing returns on time has many advantages regardless of whether you draw the prescribed level of income necessary to file returns.

Various losses incurred by an individual or a business, both speculative as well as non-speculative, short term as well as long term capital losses and various other types of losses not recorded in the tax return in a financial year, cannot be shown for exemption in subsequent years for the purpose of tax calculation. So it's best to file returns regularly, because you never know when you may want to claim an adjustment against past losses.

5. Filing returns may prove useful in case of revised returns

In case the assesse hasn't filed the original return, he cannot subsequently file a revised return, even when he really needs to. Under the Income Tax Act, non-filing of returns can attract a penalty of Rs 5,000. So while filing returns is a voluntary activity, there are times when it could hold legal implications for those who do not do so, especially if they must file a revised return in future.

What are the Advantages of filing Income tax return?

1. Prompt processing

The acknowledgment of Income Tax Return (ITR) is quick. More importantly, refunds, if any, are processed faster than paper-filed returns.

2. Better accuracy

E-filing software with built-in validations and electronic connectivity is seamless and minimizes errors considerably. Paper-filings can be prone to errors. Also, when any paper-based form is migrated to the electronic system, there is a possibility of human error in data entry.

3. Convenience

No time and place constraint in filing returns online. E-filing facility is available 24/7 and you can file anytime, anywhere at your convenience.

4. Confidentiality

Better security than paper filings since your data is not accessible to anyone either by design or by chance. With paper filings details of your income can fall in the wrong hands at your chartered accountant's office or in the income tax slab rates Department's office.

5. Accessibility to past data

You can easily access past data while filing returns. Most e-filing applications store data in a secure manner and allow for easy access at the time of filing subsequent returns.

6. Proof of receipt

You get prompt confirmation of filing, both at time of filing and subsequently, via email on your registered email id

7. Ease of use

E-filing is friendly and the detailed instructions make it easy even for individuals not very conversant with the internet

8. Electronic banking

Convenience of direct deposit for refund and direct debit for tax payments. You have the option to file now, pay later - decide what day to debit your bank account for tax payment, among other convenience features.

Due Dates for Filing ITR

Go through this table to learn a brief about the due dates for ITR filing:

Category of Taxpayer

Due Date for Tax Filing - FY 2023-24

(unless extended)

Individual / HUF/ AOP/ BOI     

(where audits are not required)

31st July 2024

Businesses (requiring audit)

31st October 2024

Businesses requiring transfer pricing reports   

30th November 2024

Revised return

31 December 2024

Belated return

31 December 2024

Penalty for Late Filing of ITR

Failing to pay your income tax within the due date will impose an income tax penalty against you. Other than penalties, the income tax department can take legal action against you if you continuously miss the deadlines. So be responsible in terms of income tax filing. These are the due dates and penalty amount for missing the deadlines:

Due Date of ITR Filing

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

Conclusion

Income Tax Return is very important to contribute to nation-building. Additionally, it helps to claim TDS refunds, makes your loan applications easier to process, and helps you to carry forward any losses. You also need to file an ITR to claim deductions and exemptions under the Income Tax Act, 1961. 

Do you know you?– You can claim your term plan premium amount as deductions under Section 80D of the Income Tax Act at the time of ITR filing. Click here to term life insurance plan from HDFC Life and avail tax deductions of up to Rs. 1 lakh/year. 

FAQs on What is ITR

Q: Is it possible to file Income Tax Returns after the due date?

Yes. You can file your Income Tax Return after the due date. However, it will be considered under belated tax filing and you have to pay an additional amount as a penalty ranging between Rs. 1,000 to Rs. 10,000.

Q: Why do we need to file income tax returns?

Income tax is the main earning source for the government of a country. This amount is used to pay salaries, funding of government projects, defence, etc.

Q: Is it mandatory to file Income Tax Returns (ITR)?

Yes. It is mandatory to file the ITR if your income profile falls under any taxable income slab according to the Income Tax Act.

Q: What is the minimum salary liable to income tax?

For all HUFs and individuals (aged under 60) the minimum annual salary is Rs. 2.5 lakh or more to pay income tax under the old regime. For senior citizens, the amount is Rs. 3 lakh in a financial year.

Q: Is it possible to file IT returns without Form 16?

Yes. It is possible to file IT Returns without Form 16. In that case, you have to use alternative documents like– Form 26AS, payslips, and investment records.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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