All You Need to Know About Income Tax Returns Filing | ITR Filing Explained
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It’s that time of the year again – the deadline for filing income tax returns is just around the corner, and missing it can attract late-filing fees and penalties.
As the last date for filing income tax returns is July 31st, it's crucial to act quickly and ensure that you file on time.
In this blog post, we will cover everything you need to know about filing your income tax returns on time, including understanding what income tax is, the new slab rates introduced in the?Union Budget 2023, and selecting the right ITR form.
Keep reading to learn valuable tips that will help you file your income tax returns with ease.
Let's start with the basics and understand what income tax is...
Income Tax
Income tax is a tax that the central government charges on the income earned during a financial year by the individuals and businesses.
Taxes are sources of revenue for the government which it uses for developing infrastructure, providing healthcare, education, subsidies to the farmer/agriculture sector and in other government welfare schemes.
Taxes are mainly of two types,?direct taxes?and?indirect taxes.?Tax levied directly on the income earned is called direct tax, for example Income tax is a direct tax.
The income tax is collected by the Central Board of Direct Taxes (CBDT) on behalf of the Government of India. Income tax payers are generally individuals, Hindu Undivided Family (HUF), Body of Individuals (BOI), firms, and companies.
The income tax is charged based on the income tax slab rate, which varies depending on the individual's income.
Let’s have a look at these slab rates...
What’s New in Income Tax 2023
The?new income tax slab?rates announced in the Union Budget 2023 for the upcoming financial year are as follows:
The tax paid on the first Rs. 7 lakh is eligible for a rebate of Rs. 25,000 if your annual income is up to Rs. 7 lakhs. If the annual income exceeds over Rs. 7 lakhs, the individual has to pay the entire tax as per the above slab rates without any rebate.
Watch the short video below to understand this better:
Income of Rs 7 Lakh: Taxable or Not? Explained!
These were the tax rates under the tax regime for 2022-23:
Income Tax Return
An?Income Tax Return (ITR)?is a form used to file information about your income and tax during a financial year to the Income Tax Department.
The tax liability of a taxpayer is calculated based on an individual’s income earned during a financial year i.e. starting on 1st April and ending on 31st March of the next year.
In case the return shows that excess tax has been paid during a year, then the individual will be eligible to receive an income tax refund from the Income Tax Department.
As per the income tax laws, the return must be filed every year by an individual or business that earns any income during a financial year. The income could be in the form of a salary, business profits, income from house property or earned through dividends, capital gains, interests or other sources.
Tax returns have to be filed by an individual or a business before a specified date. If a taxpayer fails to abide by the deadline, he or she has to pay a penalty. The last date for filing ITR in India is July 31st of every year.
The Income Tax Department has prescribed 7 types of?ITR forms?- ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, ITR-7 and the applicability of the form will depend on the nature and amount of income and the type of taxpayer.
Do You Need to File Income Tax Return?
All individuals and entities who earn income are liable to pay income tax.?Income?includes salary, rental income, capital gains, business income, and any other income earned by the individual.
Individuals?are broadly classified into residents and non-residents for tax purposes.
Resident individuals are liable to pay tax on their global income in India i.e. income earned in India and abroad. Whereas, those who qualify as Non-residents need to pay taxes only on income earned or accrued in India.
The residential status has to be determined separately for tax purposes for every financial year on the basis of the individual tenor of stay in India.
It is mandatory for individuals with an income of more than Rs. 3 lakh per annum to file their income tax returns (ITR).
Even if these conditions are not applicable to you, you could still benefit from filing your returns. For instance, the only way to reclaim a refund of excess taxes paid as TDS (tax deducted at source) is by filing ITR on time.
So far, so good.
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Let us now go over a checklist of items you shouldn’t miss while filing your income tax returns.
Selecting the Right ITR Form
Filing the wrong ITR form can result in your returns being rendered invalid. Therefore, it is essential to select the right form.
Out of the seven ITR forms notified by the Central Board of Direct Taxes (CBDT), ITR-1 to ITR-4 are the ones applicable to individual taxpayers.
Here’s a look:
This limit includes the expenses of up to Rs. 5,000 incurred on preventive health check-ups.
So, if you are a salaried individual with total income up to Rs 50 lakh, you can select ITR-1.
If you earn income from other sources like interest from bank deposits and one house property, you can also file a return in ITR-1.
Additionally, if you have agricultural income of up to Rs 5,000, you can use ITR-1.
Submitting Investment Proofs to Employer
The deadline set by employers for submitting investment declarations to claim deductions under sections 80C, 80D, 80E, and so on is January or February and even March in some cases. Make sure you have them handy beforehand with your tax calculations and submit them timely.
If you missed submitting the proofs, you can enter the details in your tax return form and claim such deductions and tax refund for the excess tax deducted.
Due Date for ITR Filing
Following is the due date for filing of ITR:
What Are the Most Common Errors Made While Filing ITR?
Minor errors made when filing ITR can result in your return being considered invalid.
Some of the most common errors include not choosing the?right assessment year,?incorrect?bank account details,?and not declaring the salary paid by your previous employer.
Ensure that you check your ITR form thoroughly before submitting it.
What If I Forget to Disclose Some Income That I Had Earned?
Some taxpayers forget to disclose certain incomes, even if unintentionally.
This is common with salaried individuals who rely solely on their Form-16, which does not contain details of capital gains, or fixed or savings deposit interest incomes, for instance.
If the income tax department detects this missing income, you could end up getting a notice.
Do I Need to Complete the Verification Process After Filing Tax Returns?
Yes, this step is mandatory.
Return-filing won't be considered complete until you verify the returns. You have to complete this process within 120 days of having filed your ITR.
It is best to opt for e-verification, which can be completed in a matter of minutes. You can use Aadhaar-OTP, your internet banking account, or your pre-validated bank or demat account to generate an electronic verification code (EVC) to complete the process immediately after submitting your returns.
In Conclusion
Filing income tax returns could be an important part of your financial plan.
By understanding the rules and regulations surrounding income tax returns, you can ensure that you file your returns correctly and on time. It's crucial to select the right ITR form, and avoid common mistakes that could render your returns invalid.
Finally, don't forget to complete the verification process within the stipulated time to avoid any complications. By taking these simple steps, you can ensure that you file your income tax returns seamlessly, and stay in compliance with the law.
What’s Next...
In the upcoming blog we will have a look at the tax-saving options available to individuals that can help them file their returns and pay taxes more effectively. Don’t forget to check it out!
And for more interesting content on Income Tax Returns, check out our YouTube Playlist -?Income Tax Filing 2023.
Source :?incometaxindia.gov.in