A Complete Guide to Income Tax Returns: Everything You Need to Know

Income tax is the largest tax in the country and the main source of revenue for the Government of the country. Income tax is paid by both individuals and organisations against the income which may have been generated from salary, dividends, capital gains, interest rate from savings, rent payment, pension, insurance commission, fees for professional services etc.

The income tax department has set slabs and if one falls under them, they are liable to pay the income tax. The tax is calculated on the income generated on the previous year and is paid in the current assessment year(AY).

What is Income Tax Return?

An income tax return is one important document which encompasses details about one’s income and tax paid on the income. It acts as proof that tax has been paid.

Every earning individual is required to pay the income tax if their income falls in the said income tax slab. Failure of filing the ITR and depositing the tax can have heavy penalties and serious legal consequences.

As per the Income Tax Act, if the total income of the individual is more than Rs. 2.5 lacks, then he/she has to file the ITR. The maximum limit for senior citizens whose age is less than 60 is Rs. 3 lakhs. And the limit for the senior citizens above 80 years is Rs. 5 lakhs. If however, one has paid more taxes than the liability, then with Income Tax Return, they can get the refund of the extra amount paid as tax. The taxpayers should file their ITR by 31st July which happens to be the due date. If however, the income requires auditing, then the return should be filed by 30th September.

On the basis of an individual’s income type, the forms for filing an Income tax return are provided by the government.

Return of Income

It is the form which contains information about the income and tax paid by individual or organisation in the financial year. Based on one’s income, there are different types of forms viz. ITR 1 to ITR 7, ITR 4S, and ITR-V. These forms can be downloaded from Income tax department website.

Why is Filing of Income Tax Return Necessary?

Income tax provides the needed money for nation building and providing the required infrastructure to the citizens and people living in the country. Filing of income tax return is mandatory for

• the citizens who fall into the income tax slab

• any resident acting as a signatory in the foreign account

• individuals seeking a tax refund

• individuals seeking loans/visa approvals

• individuals getting income from property which is used as educational purpose, religious purpose,  medical institutions, charitable trust,  infrastructure debt funds, NGO, trade union etc.

Anyone who incurs income from Indian resources is eligible to file the income tax return.

Income Tax Return Forms

On the basis of one’s income, there are different types of income tax return forms which are made available by the Government of India. These forms are:

• ITR-1:  This income tax form is for individuals getting income from salary, pension, rent, interest or other sources. The form is also called as SAHAJ. It doesn’t include the income from lottery or horse racing.

• ITR-2: This form is for individuals and HUFs who earn additional income other than business and professional gains.

• ITR-3: This income tax form is for individuals whose income comes from professional and business gains.

• ITR-4: This income tax form is for individuals whose income comes from the business/ professional proprietorship.

• ITR-4S: This form is meant for individuals seeking a presumptive taxation scheme as mentioned in Section 44AD, 44ADA, 44AE. This form is also called SUGAM.

• ITR-5: This income tax form is designed for firms, co-operative society, BOI, LLP, AOP etc. It is not meant for entities filing ITR under section 139 (4A), (4B), 4(C) or 4(D). It includes colleges, political parties, institutes, trusts etc.

• ITR-6: This income tax return form is for those companies apart from the ones which stand eligible for claim of tax deduction or exemption under Section 11 of the Income Tax Act.

Which ITR Should I File?

It is very important to file the ITR using the correct ITR form. Keep the following pointers:

• ITR-1 form is not meant for individuals with income greater than 50 lakhs, taxable capital gains, foreign assets, agricultural income more than Rs.5000.

• ITR-2 is not meant for individuals in business or profession. Those people should file ITR using form ITR-3 and ITR-4.

• ITR-3 is for those businesses opting for presumptive tax scheme whose turnover exceeds Rs.2 crore.

• ITR-7 is for those who file an income tax return under section 139 (4A).

Benefits of Filing Income Tax Return Online

Filing your ITR online has various benefits.

• One can file the income tax return on time and hence avoid any penalty or interests.

Process of E-Filing ITR offline

To file the ITR offline,

1. Visit the Income Tax Department website and select ‘e-filing’ option.