Everything you should know about ITR filing

Have you ever wondered, ‘what is an income tax return?’ Simply put, an income tax return or ITR is a form used to declare your gross taxable income for a given financial year. It 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 that the government mandates it beyond a certain income. Further, even voluntarily, producing proof of tax returns, helps with availing certain financial products and services. Typically, for loans and other credit options, you must show tax returns of the past three years to qualify. Also, since the previous year incurred losses cannot be shown for exemption later, it helps to have them on record via income tax returns filing. Doing so allows you to reduce your tax liability 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 under 60 years of age and earns a total income of Rs. 2.5 lakh or more in a financial year must file ITR. Read on to know who else is eligible.

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

How can you download the income tax return form?

To proceed with the 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 this website.

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 acknowledgment 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. On the other hand, 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 simplify the process, 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.