Income Tax Return (ITR) Filings in India: A Comprehensive Guide

Jibran Munaf
Jibran Munaf July 3, 2024

Income Tax Return

In India, filing an Income Tax Return (ITR) is a critical financial task that records your annual income, investments, deductions, and taxes paid. It reflects your financial contribution to public services and infrastructure. Here’s a comprehensive guide to ITR filings in India, emphasizing their importance and procedural aspects.

Understanding Income Tax

Income tax is a portion of your earnings paid to the government, which uses these funds to provide public services such as healthcare, education, and infrastructure. Individuals, families, and companies are required to pay income tax based on their earnings, as determined by government regulations.

What is an Income Tax Return (ITR)?

An Income Tax Return (ITR) is a document through which taxpayers declare their earned income and corresponding tax obligations to the income tax department. The tax department offers seven distinct ITR forms: ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7. The appropriate form depends on various factors, such as income sources, the amount of income, and the taxpayer category (individuals, HUFs, companies, etc.).

Who Needs to File an Income Tax Return?

Filing an ITR is a legal requirement under specific scenarios:

  • Salaried Individuals: Must file if gross income exceeds the exemption level before deductions under Sections 80C to 80U.
  • Firms: Private limited companies, LLPs, and partnerships must file regardless of profit or loss.
  • Directors and Partners: Directors in private companies and partners in LLPs are obligated to file.
  • Dividend Earners: Those earning dividends from mutual funds, bonds, equities, fixed deposits, etc.
  • Charity and Religious Trusts: Income from these sources requires filing.
  • Tax Refunds: Eligible individuals and businesses should file to claim returns.
  • NRIs and Tech Professionals: Based on their income and circumstances.

Mandatory ITR Filing in India

You must file an ITR if your gross total income exceeds the basic exemption limit:

  • Below 60 years: Rs 2.5 lakh
  • 60-80 years: Rs 3.0 lakh
  • Above 80 years: Rs 5.0 lakh

Additionally, filing is mandatory if you meet any of the following conditions:

  • Deposited over Rs 1 crore in a current bank account.
  • Deposited over Rs 50 lakh in savings accounts.
  • Spent over Rs 2 lakh on foreign travel.
  • Electricity expenses exceeded Rs 1 lakh.
  • TDS or TCS over Rs 25,000 (Rs 50,000 for senior citizens).
  • Business turnover over Rs 60 lakh.
  • Professional income over Rs 10 lakh.

Choosing the Right ITR Form

  • ITR-1 (SAHAJ): For individuals with income below Rs. 50 lakhs from salary/pension and only one house property.
  • ITR-2: For NRIs, company directors, those with capital gains income, or owning multiple properties.
  • ITR-3: For professionals and proprietorships.
  • ITR-4: For those under the presumptive taxation scheme.
  • ITR-5: For partnership firms, LLPs, associations, and bodies of individuals.
  • ITR-6: For companies registered in India.
  • ITR-7: For charitable/religious trusts, political parties, research institutions, and educational institutions.

Benefits of ITR Filing

  • Proof of Income: Serves as valid income documentation.
  • Facilitates Loan Applications: Essential for loan approvals.
  • Credit Card Applications: Banks require ITR for credit evaluations.
  • VISA Applications: Proves financial standing for travel.

E-Filing of Income Tax Return (ITR)

E-Filing refers to electronically submitting your ITR through online platforms provided by the tax department. This method is convenient, efficient, and environmentally friendly compared to traditional paper-based methods.

Essential Documents for ITR Filings

Gather the following documents before e-filing:

  • Permanent Account Number (PAN)
  • Form 26AS and other relevant statements
  • Bank statements
  • Form 16

Step-by-Step Guide to E-File ITR on the Income Tax Portal

  1. Log in to the Portal: Access the official Income Tax e-filing website, enter your PAN, and verify your login details.
  2. Access ‘File Income Tax Return’: Navigate to ‘e-File’ > ‘Income Tax Returns’ > ‘File Income Tax Return.’
  3. Choose the Correct ‘Assessment Year’: Select the appropriate year and filing mode.
  4. Select Filing Status: Choose your status (Individual, HUF, or Others) and proceed.
  5. Choose the Appropriate ITR Type: Select the correct form based on your situation.
  6. Specify the Reason for Filing ITR: Indicate why you are filing (income exceeds exemption limit, mandatory filing, etc.).
  7. Add Bank Account Details and Review Information: Ensure bank details are accurate and pre-validated.
  8. E-Verify Your ITR: Verify your return using methods like Aadhaar OTP, EVC, Net Banking, or physical ITR-V submission.

Filing Income Tax Return for Previous Years

Use the ITR U form for previous years, adhering to eligibility conditions and time limitations.

Understanding Belated Return

A Belated Return allows you to file after the due date but before an extended deadline, usually with a late filing fee.

Late Filing Fees under Section 234F

Starting from FY 2017-18, a late fee applies for returns filed after the due date, capped at Rs 5,000 (Rs 1,000 for income below Rs 5 lakh).

Checklist for Filing ITR 2024

  • Verify AIS and Form 26AS: Match TDS details and financial transactions.
  • Verify Form 16/16A: Ensure accuracy in income and deductions.
  • Open a Capital Gains Account: Deposit unutilized amounts for tax exemptions.
  • Scrutinize Various Statements: Ensure all transactions are correctly reported.

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