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Income Tax Return: Everything You should Know about ITR Filing

  • Highlights

  • Filing ITR is mandatory if your income is over Rs.2.5 lakh

  • Pick from 7 ITR forms basis your financial profile

  • Filing ITR can only be done via the official online portal

  • Failure to file ITR attracts a hefty penalty

Have you ever wondered, ‘what is income tax return?’ Simply put, income tax return or ITR, is a form used to declare your gross taxable income for a given financial year. This comprises income from all sources and dictates the income tax slab that you qualify for. ITR also helps you claim deductions and thereby determines your annual tax liability. The last date for filing income tax returns is 31 August 2019 and filing your tax returns is mandatory when you earn an amount that qualifies as taxable as per the income tax slabs determined by the government.

However, you can also file your returns voluntarily if your income is below the threshold as it helps you qualify for loans and partake in other similar transactions. To understand the importance of filing ITR, read on.

An Introduction of Income Tax Return (ITR)

Why is It Important to File Income Tax Returns in India?

The most important reason to file ITR in India is because the government mandates it beyond a certain income. Further, producing proof of tax returns, even voluntarily, helps with availing certain financial products and services. Typically, for loans and other credit options, you are required to show tax returns of the past three years in order to qualify. Also, since losses incurred in previous years cannot be shown for exemption at a later stage, it helps to have them on record via income tax returns filing. Doing so allows you to reduce your tax liability against in the subsequent years.

Now that you’re aware of the reasons and benefits of filing tax returns, take a look at how you can go about filing your returns.

What are the Eligibility Criteria to File Income Tax Returns?

As per the Income Tax Act of 1961, any individual who is under 60 years of age and earns a total income of Rs.2.5 lakh or more in a financial year is required to file ITR. Read on to know who else is eligible.

  • Any individual between the ages of 60 and 80 years with total annual income of Rs.3 lakh or higher

  • Any individual over the age of 80 years with total annual income great than Rs.5 lakh

  • Any company or organisation operating in India regardless of whether it is in profit or loss

  • Any Indian resident who owns an asset or has any financial ties to an international entity

  • Any individual who wishes to carry forward losses that have been incurred

What are the Documents Required to File Tax Returns?

The documents required for the online income tax returns filing procedure are as follows.

  • PAN card

  • Proof of tax-saving investments, if any

  • Form 16A/16B/16C

  • Salary slips

  • Bank statements

  • TDS certificate

  • Interest certificates

  • Form 26AS

What are the Different Types of ITR Forms?

There are 7 types of forms that you should know of when you’re considering online filing of income tax returns. They are as follows.

  • ITR-1: Individuals who earn an income from salary, pension, 1 house property, interest or any other form up to Rs.50 lakh in a financial year are eligible to use this form

  • ITR-2: Any individual or Hindu Undivided Family (HUFs) whose income is not from the profit of a business or a profession in a financial year is eligible to use this form

  • ITR-3: Individuals or HUFs whose source of income is from the profits of a business or profession in a financial year are eligible to use this form

  • ITR-4: Individuals who qualify under the presumptive taxation scheme, earning less than Rs.50 lakh from a profession or under Rs.2 crore from a business income, are eligible to use this form

  • ITR-5: Associations, partnerships and Limited Liability Partnerships reporting their income for a financial year must use this form

  • ITR-6: Any company registered in India, filing tax for a financial year, is supposed to use this form

  • ITR-7: Entities including universities, research institutions, political parties or charitable trusts filing tax returns for a financial year are to use this form

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How can You Download the Income Tax Return Form?

In order to proceed with e-filing of income tax returns, you need to download the right form, as stated above. Here’s how to go about the selection and download process.

  • Visit the Income Tax Department’s online portal

  • Look for the ‘Forms/Downloads’ button on the homepage

  • Hover over it and click on the ‘Income Tax Returns’ option

  • You will be redirected to a page that lets you choose from different forms. Pick the one that matches your financial profile

  • Download it and fill in the necessary information

How can You File your Income Tax Returns?

As per the latest income tax filing policy change, filing your ITR is now an online process and must be done through the official Indian income tax website. However, to begin you must first register yourself by visiting http://www.incometaxindiaefiling.gov.in/

After registering for the e-filing service, here are the steps to follow.

  • Login by entering your user ID and CAPTCHA

  • Select the appropriate assessment year and ITR form

  • You will be redirected to a page to fill the form. Read the guidelines carefully to avoid mistakes

  • After entering the relevant information, check the details. Then, click the ‘Preview and Submit’ button to proceed

  • After submitting, your will need to verify the return either through your Aadhaar card or via an electronic verification code

  • Upon successful verification and processing, you will receive an e-mail on your registered email address and an SMS on your registered mobile number

How can You Check your ITR Status Online?

Checking your ITR status can only be done after you’ve successfully filed your income tax returns. These are the two methods that you can follow.

  • You can either use your acknowledgement number by logging into the portal and clicking on the ‘ITR Status’ button

  • You can also use your login credentials to check the status on your dashboard

Both methods are fairly straightforward and help you access your ITR status in minutes.

What is the Penalty if You don’t File Income Tax Returns?

The penalty you incur for not filing tax returns depends on two main factors: the income tax rate applicable and the number of days it has been since the due date for filing. Based on these parameters, you can be penalised anywhere between Rs.1,000 and Rs.10,000 if your income is below Rs.5 lakh. If you earn more than Rs.5 lakh, you may be penalised between Rs.5,000 and Rs.10,000.

The most important thing to note is that filing tax returns is imperative to being a law-abiding citizen. To make the process simple, try to file your tax returns well before the income tax return last date. Keep in mind the above pointers, and take note of the clauses that apply to your financial profile before filing your ITR.

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