Filing Income Tax Return: Everything You Need to Know

Filing Income Tax Return: Introduction

As per the Indian Income Tax Act, you have to pay taxes to the government if you have a taxable income and are an individual, company, firm, association of persons, Hindu Undivided Families (HUFs), local authority, or any other artificial juridical person.

Every financial year, you file your income tax returns as a taxpayer. Depending on your income source, and residential status, you need to follow specific rules to file your Income Tax Returns (ITRs).

What is Income Tax Returns?

As mentioned above, you need to file your returns every financial year. An Income Tax Return (ITR) is a form used to file information about taxpayers' income and the tax paid to the Income Tax (IT) Department. 

Your tax liability is calculated based on your income. If you have paid less tax in a financial year than what you needed to pay, you need to pay the balance at the time of filing income tax returns. However, if you have paid more tax than you were liable to pay, in that case, you are eligible to receive a refund from the IT department.

Tax returns need to be filed by both individuals and businesses before the specified date. If you submit the form after the deadline, you can still file the returns, but you will also have to pay a penalty.

What are direct and indirect taxes?

Before we discuss how you can file your income tax returns, it is essential to understand the types of taxes. There are two types of taxes:

• Direct taxes: The taxes you directly pay to the government come under direct taxes. These are non-transferable - it means you have the liability to pay the tax and cannot transfer the liability to someone else. Examples of direct taxes are Income Tax, Capital gains tax (LTCG, STCG), and Corporate tax.
• Indirect taxes: These are taxes paid by the end consumer to purchase specific goods and services. It is imposed and collected by the state and central government. Examples are Goods and Service Tax (GST), Stamp duty, Entertainment tax, etc.

Filing Income Tax Returns: Why Should You Do It?

As per the Indian tax laws, it is mandatory to file an income tax return if your income is more than the basic exemption limit. The tax rate is pre-decided for taxpayers and depends on the category - individual or business. There are some other benefits to filing income tax returns:

• You may require this tax file document when taking a loan: If you plan to take a home loan in the future, it is good practice to have a steady filing return record. Most home loan companies are likely to evaluate your return. Some credit card companies may insist on proof of return before they issue their credit card to you.
• To claim an adjustment against past losses: You need to file your returns if you want to claim an adjustment against past losses.
• Helps you in VISA processing: During visa processing, some countries ask you to submit your ITRs during the verification process.
• Help you claim TDS refunds: You can claim a deduction under TDS by filing your income tax returns for the year within the deadline.

Who should file Income Tax Returns?

Below categories are required to file their ITRs:

• Individuals: If your age is up to 59 and your total income for a financial year is more than 2.5 lakh, you need to file an ITR. If your age is between 60 and 79, you need to file ITR if your income exceeds Rs 3 lakh. For those 80 years and above, the limit is 5 lakh.
• All registered companies in India that have an income should file an ITR--whether they are making a profit or loss is not important.
• If you have an asset or financial interest outside of India, you need to file ITR to disclose it.
• NRIs earn more than Rs 2.5 lakh in India in a financial year.
• Foreign firms that enjoy treaty benefits on transactions conducted in India

Filing Income Tax Returns: Types of Forms

There are different types of forms available. You must carefully select the correct form before starting the filing process. Below are different types of a form available:

ITR-1: The form is also known as the Sahaj form, and individual taxpayers can use this form to file returns. Other categories should not use this form for ITR returns.

ITR-2: It is for those individual taxpayers who have their income by selling properties or assets. Individuals having income from outside India can also use the ITR-2 form to file returns. HUFs can apply for ITR-2 to file ITR.

ITR-3: HUFs or Individuals who operate as partners in a firm and do not conduct any business under the firm are eligible for ITR-3.

ITR-4S: The form is also known as Sugam. It can be used by individuals who run a business and accrue income from it, or other professionals must use this form for ITR. They can club the earnings from any windfall and apply for this form. Also, doctors, shopkeepers, designers, agents, etc. can use this form to file ITR.

ITR-5: Businesses, firms, etc must use ITR-5 to file returns. These are used by those who are eligible for partnership firms or LLPs.

ITR-6: It is for companies to file tax returns. Companies can file income tax by this form only electronically.

ITR-7: Companies or Individuals required to furnish returns under Section 139(4A) or 139(4C) or 139(4D) or 139(4E) or 139(4F) must utilize ITR 7 form to file income tax returns.

Filing Income Tax Returns: Documents Required

At present, most of the information on your ITR form is auto-filled. However, if you do not see those details, you can fill out the ITR form on your own. You will need your bank statement, salary slips, Aadhar card, and PAN card. Along with the above, you may also need FORM-16. It is a TDS certificate issued by your employer and provides details of the salary paid to you and TDS deducted.

How do you file Income Tax returns?

The process is slightly different for different forms. Below are steps on how an individual can file his income tax returns. You can submit ITR-1 via Offline mode or Online Mode. In this article, we are listing the steps to submit ITR-1 online. Below are the steps for the same:

• Login to the e-file portal giving your user ID and password. If you are a first-time user, you can Register on the site.
• Click on the Dashboard, click e-File > Income Tax Returns > File Income Tax Return.
• Select the Assessment Year and click continue. The assessment year is the year during which your prior year's income is assessed for ITR filing. If you are filing returns for the previous financial year, the assessment year will be AY 2022-23.
• Choose Mode of Filing as Online and move to the next step.
• Select Status (Individual, HUF, or Others) as applicable to you and click Continue to proceed further.
• Select the ITR Form as per your category.
• Once you have selected the ITR applicable to you, note the list of documents needed and click Let’s Get Started.
• Select the applicable checkboxes to you and click Continue.
• The details will be auto-picked from your FORM-16. Review your pre-filled data and edit it if necessary. Enter the additional data (if required). Click Confirm at the end of each section.
• Enter your income and deduction details in the different sections. After completing and confirming all the sections of the form, click Proceed.
• If there is a tax liability, you get the Pay Now and Pay Later options at the bottom of the page. You can select either of these options.
• On the Preview and Submit Your Return page, enter Place, select the declaration checkbox and click Proceed to Validation.
• Once you have checked all the details, on your 'Preview and Submit your Return' page, click Proceed to Verification.
• On the 'Complete your Verification' page, select your preferred option and click Continue. 
• On the e-Verify page, select the option through which you want to e-Verify the return and click Continue.