ITR: Different Slabs, Exemptions, Eligibility & more.

What Is ITR And Why It Is Important?

1. Income tax is one of the two forms of direct taxes that the citizen pays to the government.
2. The other direct tax is the corporate tax that is applicable for companies on their profit.
3. Income tax is payable on the net income after removing the deductions.
4. Anyone who is earning or getting an income in India is liable to pay income tax, whether or not he or she is an Indian resident or not.
5. Some of the earnings that constitute towards an income that is taxable are:

a) Income from Salary: Salary and Pension Income

b) Income from Other Sources: Interest, Game Show Wins like KBC, FD, etc.

c) Income from House Property: The Rental Income

d) Income from Capital Gains: Sales of Mutual Funds, Shares, House Property, etc.

e) Income from Business & Profession: Self-employed Income like Freelancers and Contractions, or Business Income for Proprietorship, etc.

Income Tax Calculation Slab

1. Income Tax is applicable for an income above Rs. 2,50,000 annually.
2. This also has certain relaxations and deductions possible. Income above Rs. 2,50,000 is taxable at 5% rate.
3. The different individuals or groups that are liable to pay income tax are:

a) Individuals

b) HUF (Hindu Undivided Families)

c) Association of Persons (AoP)

d) Body of Individuals (BoI)

e) Firms

f) Companies

What is Income Tax Return?

• Income Tax Return is, in very basic terms, the form that the assessee files the information to the income tax authorities.
• Income Tax Return is, simply, filing the Income Tax details, including taxable income and tax, using the forms provided by the Income Tax Department.
• The different forms that are used to file Income Tax Returns are:

1. ITR Form 1: Salaried Individuals
2. ITR Form 2: HUFs and Individuals with Income Sources different from business and profession.
3. ITR Form 3: HUFs with Business and Professional Income.
4. ITR Form 4: Individuals/HUFs with House Property Income.
5. ITR Form 4S: HUFs Special Taxation Scheme u/s 44AD/AE
6. ITR Form 5: AOPs/Artificial Judiciary Entities/Firms/LLPs/Local Authorities
7. ITR Form 6: Companies that don’t Claim Exemptions u/s 11 of the IT Act
8. ITR Form 7: U/s 139 (4D), 139 (4B), 139 (4C) individuals

Income Tax Slabs

The following income tax slab demonstrates the differences between the existing Income Tax Slabs and the ones from the 2020 Budget, hence applicable for Financial Year 2020-21 onward.

1. Income tax is calculated sequentially.
2. So for an income of 6 lakh, the first 2.5 lakh will be exempted, 2.5-5 lakh (or a 2.5 lakh) will be taxed at 5%, that is Rs. 12,500, and 1 lakh (or 6 – 5 lakh) will be taxed at 20% (as per current slab), or Rs. 20,000.
3. Hence, total tax amount will be Rs. 32,500 as opposed to Rs. 1,50,000 (20% of 6 lakh) or Rs. 70,000 (Rs. 6 lakh – 2.5 lakh).
4. The slabs are different for senior citizens and super seniors.
5. The slab for senior citizens (60-80 years of age) are as follows:

The slab for super senior citizens (80+ years of age) are as follows:

Exemptions in the Taxation

• U/s 80, all taxpayers are liable to get certain exemptions on some form of income and expenditure.
• These sections are 80C, 80CC, 80CCD, 80TTA, 80GG, 80E, 80EE, 80CCG, 80D, 80DD, 80DDB, 80U, 80G, 80GGB, 80GGC, 80RRB, 80TTB.

Who Can File an Income Tax Return?

• Anyone who is a resident of India, or is earning from India, including the individuals and groups mentioned above, can file an income tax return.
• It is mandatory to file an income tax return for all firms and companies.
• For individuals, HUFs, AoPs, BoIs, etc., the filing of income tax returns is mandatory in case the income falls in taxable income slabs.
• Even if there are exemptions and net tax will be zero, filing income tax is mandatory.
• Moreover, it is always recommended to file an income tax return for the following reasons:

1. Easier Approval for Loans
2. Tax Refund Claim
3. It serves as both Income and Address Proof
4. Better Chances of Credit Card Application
5. Visa Processing is Smoother and Quicker
6. Help carry forward the Losses
7. Saves penalty

What if You Don’t File the Income Tax Return or File it Wrongly?

Penalty

• If the return is filed within the due date, there’s no penalty—the penalty of Rs. 5,000 is charged for returns filed within the due date.
• It is increased to Rs. 10,000 after another point.
• The penalty is capped at Rs. 1,000, for an annual income of or under Rs. 5,00,000.

Lesser Time to Improve ITRs

1. The window for rectifying a mistake is one year.
2. It was earlier of two years, making it more convenient to rectify mistakes.

Interest on the Taxes Owed

• An interest is levied on the tax amount at the rate of 1% per month or part of the month till the tax is finally cleared.

Losses won’t be Carried, Forward

1. Failing to file the income tax return, the losses won’t be carried forward.
2. It is recorded in “the profits and gains of business or profession” or “capital gains.”

Delay in ITR Refund

• There’s a delay in ITR Refund and the method of refund in case of delay or non-filing of ITR.

In Case of Notice by ITO

• A notice may be served via postal mail or manually, or via email. In both cases, the replies are the same.
• Only the process is carried out digitally in case of an email and via post in case of manual delivery.
• If the return isn’t filed because the taxable income is below the slab (and you had filed the ITR the previous financial year), make all the computations using the real figures and show how there’s no tax liability, attaching the same via the postal mail.
• In case the TDS (or tax deducted at source) covers the entire tax, file a reply suitable to the case.
• Wherein it is mentioned the net tax payable and the tax deducted at source, thereby showing there’s no tax liability.

You might also be interested in:

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Income Tax: Difference between Old Regime & New Regime

How does the Income Tax System work in India?

FAQs

Q- Do I need to file an ITR for my child?

• If your child earns Rs. 1500 or more, you can control and file an ITR as a parent.
• In case of any disputes, the official legal guardian takes control.
• If the child is above 18 years of age, he or she is liable to file ITR as per the above slabs.

Q- If I don’t have an income, do I still file an ITR?

Ans- If you don’t have an income, or your income falls under the exempted category, it is still wiser to file an ITR to build a history with the biggest organization in the country.

Q- IF I don’t file an ITR, what will happen?

1. Notice is sent by IT officials.
2. Interest keeps adding on till the tax is filed and paid.
3. You also lose any refund that the Income Tax Department owed you.

Q- Should exempt income be declared in ITR Form?

• The schedule EI allows you to list exempted income.
• It is important to mention in it ITR and then use the schedule EI, making sure the ITR is filed.