Filing Income Tax Return (ITR)

4 min readJun 3, 2022

What is Income Tax Return?

An ITR is a document that captures an individual’s income, exemptions and deductions claimed during an assessment year. It also includes tax payments made by a taxpayer or on their behalf in the form of tax deducted at source by employers on salary etc. It is mandatory for all Indian citizens with an annual income of more than ₹2,50,000 to file an ITR even if you are not liable to pay income tax. Most salaried individuals are expected to file their returns by July 31 and failure to do so can attract a penalty.

Benefits of filing an ITR

Getting loans or raising funds: An IT return is a summary of your financial health so getting a loan or raising funds becomes easier. In most cases, it is a compulsory document.
Travelling abroad: IT returns have become a mandatory requirement for visa applications to many countries. Returns from recent years are used to gauge the financial stability of an individual and are key in deciding whether or not to grant the visa.
Claim refund: If you do not have any tax liability or any excess tax has been deducted by your employer or any other party at the source, you can claim a refund of all such taxes. This is ascertained during the process of filing your IT return.
Serves as authentic proof of income: It serves as a legal document giving all the details of your financial status
Benefits of Set off and carry forward of losses: Suppose you have taken a home loan and you are paying interest on that loan and your salary is not taxable in that case you have a house property loss which you can carry forward in the next years and utilise against the taxable income that you earn in the coming years. This is possible only if you file the return.

What is the process of filing an income tax return?

- Gather the relevant information and documents -

Form 16: This is a certificate of tax deducted at source (TDS) by your employer(s). It includes details of your salary including complete salary break-up, tax-exempted allowances, perquisites, etc. It is mandatory for all employers to issue Form 16 to their employees. The TDS is connected to your PAN, so ensure that your PAN is mentioned correctly in the Form 16.
Form 16A: Form 16A is TDS certificate on Income ‘Other than Salary.’ For example, if you work as a freelancer, you will be issued Form 16A by the clients to whom you provide service.
Form 26AS: Issued by the Income Tax department, it is a statement provided to taxpayers with details of all taxes paid by and refunds due to them. It also includes TDS deducted, paid on your behalf by employers, banks and other and entities who have made payments to you.
Proof of deductions: Ensure you have supporting documents for all deductions claimed under various sections of Income Tax Act. This includes receipts for life and medical insurance premium, receipts for tax-exempted donations, signed rent receipts with details of landlord’s PAN, statement of interest from banks, receipts of earnings from investments among others.

- Choose the right ITR form — ITR forms have been designed based on the category of taxpayers. The following ITR forms are applicable for individual taxpayers :

ITR-1 or SAHAJ: For salaried individuals and pensioners, who have income from one house or earn ‘Income From Other Sources’ (such as returns on investments). The total income should not exceed ₹50,00,000 and should not include ‘Capital Gains’, gains from other businesses or professions or winnings from lotteries or horse racing.
ITR-2: For individuals with a total income of more than ₹50,00,000 and who do not have additional income from ‘Business or Profession’.
ITR-3: For all individuals who have additional income from ‘Business or Profession’.
ITR-4 or SUGAM: This is based on presumptive earnings for the year, for a cumulative annual amount upto ₹50,00,000.

- E-filing of income tax return: It is mandatory to file Income Tax Return at (www.incometax.gov.in/iec/foportal). There are few exceptions such as Super Seniors over the age of 75 and taxpayers with an annual income under ₹5,00,000.

Register: Register on the above portal with PAN and basic details.
Select ITR form: Choose Assessment Year and the right ITR Form.
Enter general information: PAN, Aadhaar and other relevant information.
Compute income and tax payable: Include details of all incomes and deductions claimed. After including details of the taxes already paid you will get the next payable tax liability.
Pay tax or claim refund: If your total tax due is more than the total tax paid, you will be directed to e-Pay for paying the tax online. Alternately, if the total tax paid is more, you would be able to claim refund.
Submit ITR: After going through all these steps, submit your ITR and download the acknowledgment.
E-Verification: Unverified ITRs are not processed by the IT department, so this is the last but important step. Your ITR can be e-Verified on the portal using EVC, Aadhaar or Demat account or through your net banking portal.

Importance of PAN

PAN is one of the most crucial documents, not just for tax purposes but also as a proof of identity. Often there are reasons for change in PAN information like name change after marriage, change in address, mobile number or email ID. Sometimes people lose PAN card or may like to change the photograph on the PAN card. Important thing to remember in all such cases is that once allotted, PAN does not change. While number does not change, information on the PAN card or in the record of income tax department may be updated by filling up application for ‘Reprint of or change/correction in PAN Data’.

Consequences of non-compliance

If an individual required to furnish an ITR fails to do so within the time prescribed, they would have to pay interest on tax due and a late filing fee of ₹5,000.

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Originally published at https://www.yourcaguide.com on June 3, 2022.