What is Income Tax Return (ITR) in India - Meaning & Benefits

ITR or Income Tax Return is a formal document used to report your income details to the Income Tax Department (ITD) for a particular financial year. It shows your total income from various sources, claimed deductions, exemptions, and the taxes you’ve paid to the government. Based on the information, it estimates your net income tax burden in a financial year.

The Income Tax Act of 1961 mandates that ITR be submitted by every taxpayer, including an individual, company, business, and Hindu Undivided Family (HUF), depending on the nature and amount of their income. It must be filed before a specific due date to avoid penalties, along with the tax amount payable based on applicable income tax slabs. Check Form 26AS and Form 16 for the necessary details to ensure accuracy, especially when reporting salary and fixed deposit interest and claiming deductions.

ITR Example

Now, let’s get a deeper understanding of what an income tax return is with an example.

Suppose Mr. Sharma earns Rs. ₹8,00,000 annually from his salary. He invests ₹1,50,000 in tax-saving instruments under Section 80C and pays advance tax through TDS. While filing his ITR, he reports his total income, claims deductions, and adjusts the TDS already paid. Based on this, the department calculates his final tax liability. If excess tax has been deducted, he receives a refund. On the other hand, if less tax has been deducted, he pays the balance.

Thus, filing ITR is essential for claiming refunds and maintaining a financial record.

ITR forms are of 7 types. According to the Central Board of Direct Taxes in India, each form is relevant to a particular category of taxpayers.

ITR - 1 Form or Sahaj

This form is relevant for individuals with an income of up to ₹50 lakhs from salary, interest, one house property, and pension. However, some salaried individuals may not be eligible to use this form for ITR filing.

ITR - 2 Form

Resident individuals or HUFs not eligible to file the ITR-1 Form can use ITR-2. However, the income earned should not be from the profit of a business or profession.

ITR 2A is a new addition. It is designed for individuals and HUFs who have salary income and own more than one house property without any capital gains. You can use this form if you have long-term capital gains and have paid Securities Transaction Tax (STT).

ITR - 3 Form

HUFs or individuals who have an income from a profession or proprietary business can use this form. In other words, ITR-3 is right for individuals or HUFs for whom ITR-1, ITR-2, and ITR-4 are irrelevant. You must also file ITR-3 if you receive a bonus, interest, commission, or salary from a partnership firm as business income.

ITR - 4 Form or Sugam

ITR-4 is suitable for all types of businesses, professions, HUFs, and undertakings qualifying under the presumptive taxation scheme. These taxpayers must earn income from the profit of a business or profession u/s 44AD, 44ADA, or 44AE, salary income, income from one house property, and income from other sources. The total income must be under ₹50 lakh from a profession or under ₹2 crore from a business income.

ITR - 5 Form

Limited Liability Partnerships (LLPs), associations, co-operative societies, Artificial Juridical Persons, local authorities, Bodies of Individuals, and partnerships must use this form to report their income for a financial year.

ITR - 6 Form

This form must be used by any company registered in India filing income tax returns online. However, it is only for firms and organisations not claiming tax exemption under Section 11.

ITR - 7 Form

This form is for entities, such as research institutions, universities, colleges, charitable trusts, religious organisations, or political parties, to claim tax exemption.

The Income Tax Act of 1961 mandates individuals and businesses whose income meets a specific threshold to pay income tax. The entities or individuals that must not miss out on filing ITRs in India are:

• Any individual under 59 years of age with an income exceeding ₹2.5 lakh in a financial year.
• Senior citizens between 60 and 79 years of age with an income exceeding ₹3 lakh.
• Super senior citizens aged above 80 with an income greater than ₹5 lakh.
• Any company registered in India, regardless of whether they are earning a profit or incurring a loss.
• Any individual or entity wishing to carry forward the losses incurred.
• Any Indian resident having an asset or financial ties to an international entity.
• Foreign companies earning treaty benefits on transactions made in India.
• NRIs accruing or earning greater than ₹2.5 lakh in India in a single financial year.

Here’s the step-by-step process to file ITR:

Online method

• Step 1: Go to the government’s official income tax e-filing website.
• Step 2: Enter your PAN number and password to log in to your account. If you don’t have an account, you can create one.
• Step 3: Under the ‘e-file’ tab, navigate to the ‘File Income Tax Return’ option.
• Step 4: Pick the correct income category (individual, HUF, etc.) from the list.
• Step 5: Select the suitable ITR form and proceed by entering the bank account details.
• Step 6: Review the prefilled form to preview and check your income tax return. Make the necessary edits, if required.
• Step 7: Press ‘Confirm’. You can e-verify your Income Tax Returns using the Aadhaar OTP. You can also take a print of the form and courier it to the Income Tax Department for physical verification.

Offline method

• Step 1: Go to Income Tax India’s e-filing page.
• Step 2: From the ‘Downloads’ section, download the Utility software (ZIP file).
• Step 3: Once downloaded, extract the file to a separate folder.
• Step 4: Select the suitable form and fill in all the details.
• Step 5: Save the XML file after generating the form preview.
• Step 6: Re-check everything before completing final tax liability calculations.
• Step 7: Log in to the Utility Software using your PAN number and password.
• Step 8: Move to the ‘Income Tax Return’ option and select the Assessment Year and the relevant ITR Form Number.
• Step 9: Click on ‘Original/Revised Return’ as the ‘Filing Type’.
• Step 10: Choose ‘Upload XML’ as the ‘Submission Mode’. Select the verification method you prefer to complete filing the ITR.

After filing ITR - what to do?

Once you’ve filed the ITR, you can track its status online. Just log in with your credentials and click on ‘View Returns/Forms’, and the status will appear on the screen.

The list of documents you need to file your ITR is as follows:

• PAN Card
• Salary slips
• Proof of tax-saving instruments, if any
• Bank statements
• Interest certificates
• TDS certificates
• Form 16
• Form 26AS

If you’re planning to opt for e-filing of the income tax return, meaning you wish to file your taxes online, you must keep the following forms ready. This preparation ensures that you don’t waste time and that your filing is completed quickly and smoothly.

Form 16

Every salaried employee receives a Form 16 from the employer. It entails your gross salary, deductions, applicable exemptions, like House Rent Allowance (HRA), Leave Travel Allowance (LTA), etc., and the amount of Tax Deducted at Source (TDS).

Form 15G and 15H

There are TDS deductions on bank interest. However, with Form 15G and 15H, you can avoid such TDS deductions. Individuals under 60 can use Form 15G if their total income is less than the taxable limit. Senior citizens aged 60 and above can use Form 15H if they have no liability. You need to submit these forms to the bank paying interest to you.

Form 26AS

This form consolidates your annual taxes to prepare a statement. It lists all TDS deducted from your income, including interest, salary, property sales, etc., along with self-assessment or advance tax paid during the year.

After acquiring an understanding of what annual ITR means and the forms you require for e-filing, you must stay updated with the latest. ITR forms are frequently updated by the government. In the latest versions, there are broader tax compliance requirements and changes to consider relief measures.

Wider scope of taxpayers

The Income Tax Department has widened its scope, making more people liable to file ITR. Those who deposited more than ₹1 crore in the bank in a year, spent over ₹2 lakh on international travel, and paid electricity bills of more than ₹1 lakh per year must also file ITR.

New schedule DI

Schedule DI has been introduced to let taxpayers claim deductions for payments or investments made within extended timelines.

Recent rules for property owners

Joint property owners couldn’t use simpler forms like ITR-1 and ITR-4 earlier. There is no such rule now, providing flexible form selection.

The last date for ITR filing for different categories of taxpayers is as follows:

Failing to file income tax returns on time can lead to penalties between ₹5,000 and ₹10,000 for individuals earning an annual income exceeding ₹5 lakh. The penalty range is between ₹1,000 and ₹5,000 for taxpayers with an income below ₹5 lakh.

Income Tax Return (ITR) filing is important for the nation’s growth. It also offers benefits, such as TDS refund claiming, easier loan approval, quick visa processing, and carry-forwarding losses. You can claim several exemptions and deductions under the Income Tax Act of 1961. One such deduction applies under Section 80D on the medical insurance premium you pay for yourself, spouse, children, and parents. Thus, always buy a medical insurance plan to claim the deduction and save up to Rs. 25,000 on taxes.

TATA AIG offers low-premium health insurance to make the investment affordable for you. Explore the various health plans listed on the website to make your pick.