Income Tax Return

ITR (Income Tax Return) is a form used by individuals and entities to report their income earned and taxes paid to the government. It summarizes financial transactions and ensures compliance with tax laws. Filing ITR is mandatory for taxpayers to declare their income and pay applicable taxes.

Click here

What is Income Tax Return

Income Tax Return or ITR is a form used to show your gross taxable income for the given fiscal year. The form is used by taxpayers to formally declare their income, deductions claimed, exemptions and taxes paid. Therefore, it calculates your net income tax liability in a fiscal year.

 

According to the Income Tax Act of 1961, a person under 60 years of age must file tax returns if a part of their income is taxable. If your taxable income exceeds Rs. 5 lakh in a financial year or you have paid advance tax, you also need to file an ITR. When filing tax returns, you also have to pay your due taxes as decided by your applicable income tax slabs.

T (27)

Benefits of Income Tax Return

Legal Compliance:

It fulfills the legal obligation mandated by tax authorities, avoiding penalties and legal repercussions.

Claiming Refunds:

Taxpayers can claim refunds for excess tax paid through the ITR process, ensuring timely returns of their money.

Financial Documentation:

ITR serves as essential financial documentation, required for loan applications, visa processing, and other financial transactions.

Building Financial History:

Regular filing helps in building a credible financial history, which is beneficial for future financial planning and investments, demonstrating financial responsibility to institutions and potential business partners.

Types of ITR Forms

There are nine different types of ITR forms which you can use during ITR filing. According to the Central Board of Direct Taxes in India, you must use the relevant form to file your income tax. Here is a brief about the forms:

Types of ITR Forms

This form can be used by resident individuals or Hindu Undivided Families (HUF) who cannot file the ITR 1 or Sahaj form. However, if your income comes from a business or profession, then you cannot use ITR-2.

ITR 2

This form can be used by resident individuals or Hindu Undivided Families (HUF) who cannot file the ITR 1 or Sahaj form. However, if your income comes from a business or profession, then you cannot use ITR-2.

ITR 2A

This is a newly launched ITR form created for HUFs and individuals who own more than one house property without any capital gains income and have salary income. If you have long-term capital gains and you have paid Securities Transaction Tax, this form is for you.

ITR 3

This form is for individuals or HUFs having income from proprietary business or profession. In short, Hindu Undivided Families or individuals who are ineligible for ITR 1, ITR 2, and ITR 4, can file ITR 3. Anyone receiving interest, bonus, salary or commission from a partnership firm as business income must also file ITR 3.

ITR-4 or Sugam

ITR 4 or Sugam is for all types of professions, businesses, HUFs and undertakings. You can file ITR-4 if your total income includes business or professional income u/s 44AD, 44ADA or 44AE, income from one house property, salary income, and income from other sources. However, you can not file this form if your income is more than Rs. 50 lakh in a financial year.

ITR-4S

ITR-5 is for LLPs (Limited Liability Partnerships), firms, business trusts, Artificial Juridical Persons (AJP), Estate of deceased, BOIs (Body of Individuals), AOPs (Association of Persons), estates of insolvents and investment funds.

ITR 5

Co-operative societies, firms, Artificial Juridical Persons, Associations of Persons, local authorities, and Bodies of Individuals are eligible to file their income taxes with this form.

ITR 6

This form can be filed by any company only through online mode. Firms and organisations can use this form only if they are not claiming tax exemption under Section 11.

ITR 7

This form can be used only by political parties, religious or charitable trusts, colleges, universities, etc. to claim tax exemption.

Is it mandatory to file Income Tax Return?

As per the tax laws laid down in India, it is compulsory to file your income tax returns if your income is more than the basic exemption limit. The income tax rate is pre-decided for taxpayers. A delay in filing returns will not only attract late filing fees but also hamper your chances of getting a loan or a visa for travel purposes.

Who should file Income Tax Returns?

According to the Income Tax Act, income tax has to be paid only by individuals or businesses who fall within certain income brackets. Mentioned below are entities or businesses that are required to compulsorily file their ITRs in India:

Who Prepares the Balance Sheet?

Depending on the company, different parties may be responsible for preparing the balance sheet. For small privately-held businesses, the balance sheet might be prepared by the owner or by a company bookkeeper. For mid-size private firms, they might be prepared internally and then looked over by an external accountant.
 
Public companies, on the other hand, are required to obtain external audits by public accountants, and must also ensure that their books are kept to a much higher standard. The balance sheets and other financial statements of these companies must be prepared in accordance with Generally Accepted Accounting Principles (GAAP) and must be filed regularly with the Securities and Exchange Commission (SEC).

1. All individuals, up to the age of 59, whose total income for a financial year exceeds Rs 2.5 lakh. For senior citizens (aged 60-79), the limit increases to Rs. 3 lakh     and for super senior citizens (aged 80 and above) the limit is Rs. 5 lakhs. It is important to note that the income amount should be calculated before factoring in       the deductions allowed under Sections 80C to 80U and other exemptions under section 10.

2. All registered companies that generate income, regardless of whether they’ve made any profit or not through the year.

3. Those who wish to claim a refund on the excess tax deducted/income tax they’ve paid.

4. Individuals who have assets or financial interest entities that are located outside India.

5. Foreign companies that enjoy treaty benefits on transactions made in India.

Documents Required for ITR Filing

  • PAN Card
  • Aadhaar Card
  • Form 16
  • Form-16A/ Form-16B/ Form- 16C
  • Bank Account details
  • Bank Statement/ Passbook
  • Form 26AS and AIS/TIS
  • Home Loan Statement
  • Tax Saving Instruments
  • Capital Gains Details
  • Rental Income
  • Foreign Income
  • Dividend Income

FAQs on Income Tax Return

An ITR is a form used by individuals, businesses, and other entities to report their income earned and taxes paid to the government.

Anyone whose income exceeds the exemption limit set by the government, including salaried individuals, self-employed professionals, businesses, and entities earning income in India.

The due date varies depending on the taxpayer’s category and is typically July 31st for individuals and September 30th for businesses. It can be extended by the tax authorities in certain cases.

Late filing may attract penalties and interest charges. It can also lead to loss of certain tax benefits and opportunities to claim refunds.

ITR can be filed online on the Income Tax Department’s e-filing portal or offline by submitting a physical form to the tax office.

Yes, taxpayers can revise their ITR within a specified time frame if they discover any errors or omissions in the original filing.

Balance sheets are typically prepared at the end of each accounting period, such as quarterly or annually. Publicly traded companies must publish balance sheets quarterly and annually for transparency and regulatory compliance.

Filing ITR is beneficial for those with income below taxable limits as it serves as proof of income and can be required for various purposes such as visa applications, loan processing, and claiming tax refunds.

Tax liability is calculated based on taxable income after deducting eligible deductions and exemptions as per the Income Tax Act applicable for that financial year.