Tax is a central element to the revenue generation system of the Indian government. Among the multitude of taxes present in the system, income tax is the one that deals with the taxation of the earning of every individual, firm or organisation in a financial year. The earning or income could be in the form of regular wages, interest, dividends, capital gains or any other profits.
What is a Return of Income?
A return of income is a defined form which can list out the particulars of income and the taxes paid on the same by an individual, firm or organisation in a financial year. This in turn can be presented to the Income Tax Department. There are differing forms for incomes of different status and nature and they are readily available on the online portal of the Income Tax Department of India.
There are currently nine different forms available for filing of income tax returns. They go from ITR-1 to ITR-7 and also include the ITR-4S and ITR-V.
Filing an Income Tax Return - Is it Necessary?
Currently (as of 2015), is mandatory for one to file income tax returns in India if the following conditions are applicable -
- If the gross total annual income (before deductions under 80C to 80U) is Rs. 2,50,000 (for ages less than 60 years), Rs. 3,00,000 (for ages 60 years but less than 80 years) and Rs. 5,00,000 (for ages 80 years and above)
- If it’s a company or firm, irrespective of the profit or loss made in a financial year
- If a tax refund needs to be claimed
- If a loss under a head of income needs to be carried forward
- If being a resident of India, one has an asset or financial interest in any entity located outside India
- If being a resident of India, one is a signing authority in a foreign account
- If one receives income derived from property held under a trust for charitable or religious purposes or a political party or a research association, news agency, educational or medical institution, trade union, a not for profit university or educational institution, a hospital, infrastructure debt fund, any authority, body or trust
- If one is applying for a loan or a visa
If an NRI derives any or all of his/her income through sources in India, that income is liable to be taxable in India, and income tax returns for the same will be necessary.
With the implementation of e-filing of Income Tax Returns, the following cases will require an e-filing of Income Tax:
- In case a refund is required
- In case the gross total annual income exceeds Rs. 5,00,000
- In case an income tax refund is required
- ITR-3, 4,5,6,7 have to be mandatorily e-filed
Income Tax Returns - Explanation on the Forms:
The various forms that are available for the purpose of income tax returns have the following functionality -
|ITR-1||Otherwise known as SAHAJ, deals with income of an individual with salary or pension or income from one house property or other sources (not including lotteries or race horses)|
|ITR-2||Applicable for individuals or Hindu Undivided Families having any income other than ‘Profits and gains of business or profession’|
|ITR-3||Applicable for individuals or Hindu Undivided Families having income sources from ‘Profits and gains of business or profession’|
|ITR-4S||Known as SUGAM, it is applicable to individuals and HUFs opting for presumptive taxation scheme under Section 44AD/44AE|
|ITR-4||Applicable for an individual or a HUF carrying out a proprietary business or profession|
|ITR-5||For entities being a firm, LLP, AOP, BOI, artificial juridical person, co-operative society and local authority. This, however, does not include trusts, political parties, institutions, colleges or entities who are required to file the return of income under Section 139(4A), 139 (4B), 139(4C) or 139(4B)|
|ITR-6||Applicable to companies other than the ones which claim a deduction under section 11|
|ITR-7||Applicable to all entities who should furnish a return of income under Section 139(4A), 139 (4B), 139(4C) or 139(4B)|
|ITR-V||The acknowledgement form of filing a return of income|
How to File Income Tax Return Online? - E-filing of Income Tax Returns
Further to the different forms available for filing tax returns, there are a few things that become a prerequisite to filing for an income tax return online. They are -
- Bank statements
- Form 16
- Copy of the previous year’s return
Having the documents ready, the following steps need to be observed to allow for a smooth filing of income tax return online. The URL that needs to be followed is e-Filling
The steps further to that are -
- Registration - The Permanent Account Number (PAN) is the user ID
- Tax Credit Statement (Form 26AS) - This needs to be checked for the previous financial year. This will list all the taxes deducted that are actually deposited with the Income Tax Department.
- The Tax Deducted at Source (TDS) of the Form 16 should tally with the ones in Form 26AS
- Tax Return for the current year - Under the ‘Download’ menu, click on Income Tax Return Forms and choose the current financial year. The appropriate ITR form should be downloaded. There is an option to complete the process on the portal itself, through the ‘Quick e-file ITR’ link
- Return Preparation Software - It is a spreadsheet that can be used through Microsoft Office, Open Office or other online spreadsheet applications and it should be filled in using the details from Form 16
- Find out the tax payable by clicking the ‘Calculate Tax’ tab. If applicable, pay the tax and fill in the details of the challan in the tax return
- Confirm all the information through the ‘Validate’ tab
- Generate an ‘XML file’ and save it on your local disk on the computer
- Upload Return - After selecting the current financial year in the ‘Upload Return’ link on the portal’s left hand navigation area, select the XML file that had been saved earlier. There might be an option to digitally sign the file. In case you have a digital signature, choose ‘Yes’ else ‘No’
- ITR - V - If the process of filing has been completed successfully, the website will flash an appropriate message and you will be able to download the acknowledgement form, the ITR-V
- A printed copy of the ITR-V needs to be signed by you and sent to the Income Tax Department office nearest to you through normal or Speed Post within 120 days of filing the return
Apart from the official site operated by the Government of India, there are many private portals that allow filing of returns and charge a specific fee depending upon the service level they offer.
Benefits of Filing Income Tax Return Online
Though it might be a tedious process to keep a track of every nifty detail needed in order to file the proper details for the Income Tax Return, it actually helps a lot when it is done in the earnest and ahead of time, preferably, online -
- Online filing of returns ends by July 31 or every financial year, and being a month or two in advance in filing the income tax returns actually ensures one encounters lesser traffic and the entire process goes much smoother.
- In case one has missed filing tax returns for the previous year, every additional day till July 31 increases the penal interest. Thus, filing a tax return in advance is very advisable.
- Creating a favourable financial history - Online filing of the income tax returns actually creates a history of your financial records with the tax department in a much faster and easier way. This history is favoured by a lot of organisations, be it financial or otherwise, whom you might have a business relationship with in the future.
- Proof of financial record - Having an ITR-V form is always handy, since one can readily furnish the same as a proof for any kind of financial liability or opening a line of credit.
Frequently Asked Questions: Income Tax Return
- I am a self-employed professional. My income this year is below the minimum income tax slab, but it was higher in the previous 2 years and I had filed ITRs then. Do I have to file a return this year?
A) Ideally, if your income is below the minimum slab, you do not need to file your income tax return. But if you have been filing it previously, it would be better if you file a return this year declaring low income. This is because the Income Tax Department may construe your non-filing as a delay or non-compliance because of your past record of filing ITR. They might send you a notice. In case you do not want to file ITR, be prepared to reply to the income tax notice if it comes into your mail box.
- If I have already paid advance taxes and have no dues or refunds, can I skip filing of income tax return?
A) No, you have to file your ITR especially if you have paid the taxes. It is not an optional activity. An ITR gives the government a complete record of how your income is distributed – assets, total income, tax liability, tax paid and refunds. This helps them monitor people for tax fraud of any kind. If you fail to file ITR, you are liable to pay penalty or face scrutiny and prosecution.
- Is an ITR useful to me in daily life?
A) Of course, yes. You’ll find a duly-filed ITR very useful as a proof of income when you have to apply for a bank loan, when you have to make accident claims in third party insurance, for immigration and visa, for appointment in judicial and class 1 jobs, for winning government tenders, for registration in professional panels, for seeking funding for a startup, etc.
- How long do we need to wait to get income tax refund?
A) Refunds are disbursed only after your ITR is processed. This may take up to 1 year after you file your return. It is also possible that even if you are claiming refund, the taxman may have ascertained that you are not liable for a refund for various reasons such as a calculation error on your part. If you think your calculations are right and you have to get a refund, then you can write to the I-T Department again. Sometimes, you do not get a refund because of wrong PAN or bank account number on the ITR, or the cheque not reaching you because of wrong address or you not being at home when the postman reached. If you filed your ITR online, you can check the status of your refund through your Income Tax e-filing account.
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News About Income Tax Return
Income Tax Returns To Shape India’s Future: Indian Finance Minister, Arun Jaitley
Arun Jaitley, Union Finance Minister, is of the belief that acknowledging the taxpayers for doing their bit through their contribution as well as promptly filing their IT Returns, is expected to be very important in nation building. The Finance Minister also added that this would henceforth help in changing people’s attitude about paying taxes in time. Finance Minister Jaitley was made the statements when presenting Certificates of Government’s appreciation and acknowledgement of taxpayers for their contribution towards nation building here today. Mr. jaitley believes that with time people will see the advantage of paying taxes.
21st September 2016
Large taxpayers allowed to file returns until October 17
Taxpayers whose business or professional receipts exceed Rs. 1 crore or Rs. 25 lakh, respectively, in the year 2015-16 can now file I-T returns and submit the audit report by October 17, 2016. The Revenue Department has extended the date from the previously communicated deadline, in view of the Income Declaration Scheme that is ongoing.
As per the IDS-2016, taxpayers can declare undisclosed assets and pay the corresponding tax, penalty and cess, in complete secrecy. The last date for this scheme had been communicated as September 30, 2016.
The final date for filing returns by large taxpayers was also initially set to September 30. But this has now been extended to enable ease of compliance and to remove the inconvenience of having the same deadline as IDS-2016.
13th September 2016
75 Lakh Taxpayers Used E-Verification For ITR
The number of takers for e-verification of income tax returns (ITR), a facility that was introduced last year for the convenience of taxpayers, is steadily increasing. As per the Income Tax Department, more than 75 lakh persons verified their ITR online instead of sending a physical copy of the ITR-V to the Centralised Processing Centre, Bengaluru.
Around 17.68 lakh taxpayers used Aadhaar-based e-verification this year, while only 10.41 lakh persons had used it last year. About 3.32 lakh returns has digital signatures. A total of 226.98 lakh e-returns were filed this year so far.
As of August 5, 2016, the department has issued Rs.14,332 crore as refunds.
10th August 2016
Special Counters Set Up By I-T Department for Income Tax Return Filing
The Income Tax Department is setting up special counters for filing income tax returns at Gayathri Vihar in Palace Grounds, Bangalore. The counters will be put up from 29th July to 31st July between 9:30 a.m. to 5:30 p.m. According to the department, 80 special counters have been arranged for filing I-T returns. During this period, bulk returns will not be received at HMT Bhavan and arrangements will be made for filing returns in bulk in a separate venue.
There will also be swipe machines, ATMs and even bank extension counters at the special counters where taxpayers will be able to pay taxes on the spot. There will also be PAN Service (NSDL) counters, Tax Return Preparers (TRPs) as well as medical support unit. There will be separate help desks exclusively for differently-abled individuals and senior citizens. Volunteers will be present at the venue to help the taxpayers.
29th July 2016
Easy income tax return filing via e-portals
Gone are the days when filing income tax was a tedious job which required some serious professional intervention. Several web portals on the internet are now making the e-filing services really easily available to taxpayers. These portals charge a nominal fee and do all the cumbersome calculation on your behalf and file your income tax. Some of these websites even suggest investment options to help their customers save on income tax.
The right mix of technology and finance is the key to the success of this industry. These web portals are also offering relevant and curated content to users so that they can take informed decisions in terms of their investment options. Such websites are quite user-friendly and aim to lessen the complexity involved in processes like tax collection and filing.
7th July 2016
e-Appeal deadline extended to 15th June - CBDT
Central Board for Direct Taxes has extended the deadline for e-appeal to 15th June after taxpayers complained that to come up to terms with the new operation of the process will take time. The complaint was looked into by the CBDT which found that the new mandatory e-filing requirement might be too taxing for taxpayers and as such it decided to extend the corresponding deadline.
CBDT was notified that taxpayers had filing issues owing to lack of knowledge about the filing procedure as well as certain technical issues pertaining to the filing process. The e-appeal is a first of its kind initiative launched by the CBDT to reduce hassles and offer paperless process for filing of appeals before the commissioner of Income Tax.
15th June 2016
Taxpayers Can Now File Returns Through Bank Account Based Validation System
In a bid to move forward with the paperless filing of income tax returns, the Income Tax Department has introduced the bank account-based validation system through which taxpayers can e-file their tax returns. The department stated that taxpayers can now generate an Electronic Verification Code (EVC) by pre-validating their bank accounts on the e-filing website. The Punjab National Bank (PNB) has become the first bank to implement the new system, with other banks expected to follow suit. Taxpayers who wish to access the new facility can do so by visiting the e-filing portal of the Income Tax Department, where they will be required to use the One Time Password (OTP) verification system. The department has taken these measures in order to provide validation for the e-filing of tax returns, thereby making it more convenient for the taxpayer. With the new system in place, taxpayers need not submit their ITR-V forms via post to the Central Processing Centre in Bangalore for processing and resolution.
3rd June 2016
Government To Reduce Tax Return Scrutiny Period To One Year
In a bid to ensure taxpayers are less burdened, the government has put in place plans to reduce the amount of time it takes for random scrutinization of an individual’s tax returns. With the new decision, an assessment of a taxpayer’s returns that are chosen for random scrutiny, will be completed to one year from the current time frame of two years. Assessment of tax returns is done through a computer driven scrutiny system, and for the first stage of the plan, the government has floated the idea of reducing the time frame to 21 months. This would mean that assessments for the previous financial year can be completed up to December 2017. The next stage of the plan will also see the revenue department ensuring completion of assessments on time, to avoid bunching during the months preceding the deadline. A department officer stated that almost 70% of all assessment orders are issued and completed within two months of the stipulated deadline.
Subsequently, a consumer whose combined taxable income of self and spouse is above Rs.10 lakh will become ineligible to claim subsidy.
20th May 2016
LPG Subsidy will require submission of IT Return Copy in the Future
In an attempt to filter out those with a yearly income of more than Rs.10 lakh from the subsidy scheme, the Petroleum Ministry has requested CBDT (Central Board of Direct Taxes) to add the ministry as an ITR recipient under Section 138 of Income Tax Act. The IT Act will forbid the tax department from revealing income details of an assesse unless an officer, body or authority is specified by the Central government under a law.
Subsequently, a consumer whose combined taxable income of self and spouse is above Rs.10 lakh will become ineligible to claim subsidy.
10th May 2016
All ITRs can be Filed Online now
From assessment year 2016-17, you can file all types of Income Tax Return online. The Income Tax Department said it has opened up e-filing of Income Tax Return for all category of taxpayers – including ITR-6 and ITR-7.
Nine different ITR categories – Sahaj (ITR-1), ITR-2, ITR-2A, ITR-3, Sugam (ITR-4S), ITR-4, ITR-5, ITR-6, ITR-7 and an acknowledgement form called the ITR-V – have been notified by the Central Board of Direct Taxes (CBDT). Those who earn more than Rs. 50 lakh per annum and who own luxury assets will have to declare their assets through the new ITRs.
The department also launched a ‘tax calculator’ to help taxpayers determine their tax liability.
3rd May 2016