It is our responsibility to pay income tax regularly to the government. An income tax return is a statement that a person submits to the Income Tax authorities of India. It states the amount of income earned by a person from different sources in a financial year, i.e. from April 1st to March 31st. Many people want to know what is ITR and how to file ITR. ITR stands for Income Tax Return and it is a form that gives an account of your income and the tax payable on it in a particular financial year.
To file an ITR, incomes are divided into the following five categories:
1. Income from salary: Salaries of people and pension of retired employees
2. Income from business: Profits from the business of self-employed persons
3. Income from house property: Rental income
4. Income from capital gains: Income earned when you have a capital asset like property, shares, etc.
5. Income from other sources such as lottery, fixed deposits, etc.
Income Tax Slabs
In India, people are required to pay income tax according to different slabs or ranges of income. If your income exceeds the threshold limit, you are liable to pay income tax. According to the new regime, the income tax slabs are as follows:
The new tax regime offers more tax slabs and lower rates of income tax but without any advantage of availing the deductions and exemptions. All business organisations should understand the fundamentals of the income tax return for the smooth functioning of their businesses. It is very important to record all the financial transactions of your business organisation to calculate your income. Small and medium business organisations can use digital ledger and accounting apps like Okcredit, which are highly beneficial in maintaining a systematic record of your financial transactions.
Advantages of filing ITR
There are a myriad of benefits of ITR for individuals as well as business organisations. All the persons whose incomes are above the minimum prescribed limit should file income tax returns as it is very advantageous in the long run. Filing ITR makes us tax-compliant and we fulfil our responsibility of being a good citizen. Apart from this, it offers the following benefits:
- Processing of Loans: Income tax returns are required if you want to apply for loans from banks. All the financial institutions demand your ITRs for processing your loan application. You can easily get loans if you have copies of Income Tax Returns filed by you.
- Document of Proof of Address and Income: ITRs serve as proof of income earned by you in a financial year. It can also be used as a document of address proof.
- Avoid Penalties: If you are liable to file your income tax return but do not file the return, then the tax department can penalise you by imposing a penalty of up to Rs. 5000 for the same. If you do not file your ITRs on time, you are liable to pay the penalties imposed by the income tax authorities. You should file your income tax returns on time to avoid the penalties levied by the tax authorities.
- Refund of Tax: In case, you want to claim a refund of tax from the government, you are required to file an ITR. Without filing your income tax return, you cannot claim the tax refund.
- Carry Forward Business Losses: You can carry forward your business losses in the subsequent year only if you file an income tax return for your business within the stipulated due date. This is helpful as you can settle these losses against the income of the following year.
- Processing of Visa: Income tax returns are also required at the time of applying for visas. Embassies ask for your ITRs and furnishing the copies of ITRs fasten the process of obtaining visas.
Process of Filing an Income Tax Return
You can file your income tax returns online, offline, or through ITR filing software. The following process answers the question of how to file an ITR easily. You should have all the necessary documents before you start filing your return online. The chief documents are as follows:
- PAN Card
- Aadhaar Card
- Details of Bank Accounts
- Form 16
- Details of the Investments made
Methods of filing an ITR:
- The user is required to visit the income tax e-filing portal and download the applicable ITR form.
- He/she should fill the form, validate the form and calculate the amount of tax liability.
- Next, he/she should generate an XML and save it.
- He/she should log in to the portal for e-filing the return and choose the menu of ITR.
- PAN details would come automatically, choose the assessment year, ITR form number and choose Filing Type- Original Return or Revised Return and select the mode of submission as- Upload XML
- Choose how to verify the ITR.
- Attach the XML file of ITR and submit it.
- Verify the return according to the option chosen earlier.
- Submit the ITR
You can choose to file your ITR online only if form ITR-1 or ITR-4 applies to you, which means only people who are salaried or who have earned income from house property or other sources can choose online mode. The process is as follows:
- Visit the e-filing portal for income tax returns
- Log in and choose the Income-tax return option in the e-file menu
- PAN details would be populated automatically, choose the assessment year, ITR form number, and choose filing type as original or revised as the case may be.
- Fill all the required fields and select the verification option given under “the taxes paid and verification” tab
- Click the preview button to cross-check and submit the ITR
- Verify according to the option selected earlier
ITR filing Software
This is the most effective mode of filing ITRs and can be used in all cases of income tax returns. It is a very easy and simplified process to file your ITR through the software. IT also saves your precious time. Business organisations widely use the software as it validates errors and saves your preferences.
Income Tax Due Dates
It is very significant to follow the income tax due dates to avoid the income tax penalties levied by the tax authorities. For all the individuals, the income tax return last date is March 31st. You should comply with the guidelines and meet the income tax return filing due date to abide by the laws and serve as a responsible citizen.
Income Tax Penalties
If an income tax assessee is found to violate the guidelines and hide his income or furnish erroneous information or file ITR after the due date, the income tax authorities can impose income tax penalties on him. If the total income is below Rs. 5 lacs, the tax department can levy a penalty of up to Rs. 1000 and if the total income exceeds Rs. 5 lacs, the amount of penalty can be up to Rs.10, 000.
1) How to Start Your Own Income Tax Business?
2) A Complete Small Business Income Tax Guide
3) What is Business Tax, Property Tax & Corporation Tax?
4) What Are The Tax Deductions for Joint Property Owners?
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Q. Who should file an ITR?
Ans. All individuals whose income exceeds the minimum prescribed limit are required to file an income tax return.
Q. Is it easy to file your ITR online?
Ans. Yes, it is very easy to file your ITR online through the portal. You need to have all the required documents ready before filing the return online.
Q. Is it possible to file ITRs for previous years?
Ans. Yes, you can file ITRs for previous years as well.
Q. If I miss the last date for filing the ITR, what should I do?
Ans. In case you have missed the last date, you can still file your ITR with the late fees.
Q. How can I refund the excess tax paid by me?
Ans. You can claim the refund of the excess amount by filing your return. The excess would be credited to your bank account.