What are Income Tax Returns?

Every individual and entity having income above the prevailing exemption limit needs to pay tax and declare details of their income, deductions availed and taxes paid by filing their return of income in prescribed formats, which are called Income Tax Returns (ITRs). In this article, we will learn more about ITRs.

Income Tax Returns

Apart from paying their income tax in advance, taxpayers also need to assess their income after the completion of a financial year – which is also called the previous year – and file their return of income in the assessment year on applicable formats. The process is also known as filing of Income Tax returns (ITR) and the prescribed formats/forms for filing the returns are called ITR Forms.

At the time of filing ITR, there may be instances, where an assessee may have to pay more tax, if less tax is paid as  advance tax than assessed, or would claim a tax refund if excess income tax is paid in advance.

The taxes paid in advance may be like Advance Tax or Tax Deducted at Source (TDS), while the tax payable at the time of filing ITR after the final assessment is called Self Assessment Tax.

How to file ITRs

Till the introduction of online filing of ITR in September 2004, returns of income were filed offline by filling out printed ITR Forms. At that time taxpayers used to stand for a long time in serpentine queues to submit their ITR in Income Tax Offices, especially before the due date of filing returns.

Initially, it was optional for taxpayers to file their ITRs either in online mode or in offline mode. While in offline mode, the filing process gets completed as soon as the ITR Form is submitted and an acknowledgment is received, the e-filing process – or the process of filing ITR – gets completed only when it is  verified. The verification may also be done either offline by sending the signed ITR-V to CPC, Bangalore, or online (e-verification) through Aadhaar OTP, EVC (Electronic Verification Code), or DSC (Digital Signature Certificate).

Subsequently, e-filing was made mandatory first for Corporate Assessments  in 2006, for companies between 2007 and 2008, and for individuals with annual income of over Rs 10 lakh in 2013. Ultimately, e-filing has been made mandatory for almost all taxpayers.

A person may log in to the official e-filing website of the Income Tax Department to file an ITR. After logging in, an ITR may be filed in two ways – by downloading and filling ITR utilities and uploading the XML file, or by filling in all the details online after selecting an appropriate ITR Form.

A new tax regime has been introduced by Finance Bill 2023,where a  taxpayer needs to select the Tax Regime – that is whether they will file the return as per Old Income Tax Regime or the New Income Tax Regime –. Switching of tax regimes so far is allowed for salaried assesses only.

What are various sources of Income

1. Income from Salary
2. Profit and gain from business and profession
3. Income from House property
4.  Income from Capital gains
5. Income from other sources

The applicability of each form will vary depending on the nature and amount of income earned by the taxpayer, as well as the type of taxpayer filing the return.

There are seven types of Income Tax Return (ITR) forms prescribed by the Income Tax Department, namely ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. Let’s understand more about these forms in detail.

ITR Forms

To file a return of income, selecting the proper ITR Form is the most important thing to ensure proper filing and to avoid rejection of the return. There are 7 types of ITR Forms – 

• ITR-1 (Sahaj)
• ITR-2 
• ITR-3 
• ITR-4 (Sugam)
• ITR-5
• ITR-6 and 
• ITR-7

Out of the 7 ITR Forms, the first 4 Forms may only be used by an Individual or a Hindu Undivided Family (HUF) depending on various eligibility conditions.

Following are the different ITR Forms and there suitability

ITR-1 (Sahaj)

As the name suggests, ITR-1 Form is the easiest one to file among all the ITR Forms. ITR-1 may be filed only by Resident Individuals having taxable income up to Rs 50 lakh from Salary/Pension/Family Pension and income from one house property and interest income – including interest on (a) savings bank account, (b) deposits, (c) income tax refund, etc.

However, ITR-1 can’t be filed by Non-Resident Indians/Not Ordinarily Residents having (a) taxable income of over Rs 50 lakh or (b) more than one house property, or (c) agriculture income of over Rs 5,000, or (d) income from business and/or profession, or (e) capital gains, (f) investments in unlisted equity shares, (g) income from lottery, racehorses, legal gambling etc, or (h) is a director of a company.

ITR-2

An Individual or a Hindu Undivided Family (HUF), who is not eligible to file ITR-1, is eligible to file ITR-2, provided that the assessee doesn’t have any income from business and/or profession. 

So, ITR-2 may be filed only by the taxpayers having taxable income – without any limit – from 

• Salary/Pension/Family Pension
• income from house property
• interest income
• agriculture income
• capital gains
• investments in unlisted equity shares
• income from lottery, racehorses, legal gambling etc.

ITR-3

Individuals and HUFs having income from business and/or profession – which disqualifies them from filing ITR-1, ITR-2, and ITR-4 – need to use ITR-3 to file their return of income.

ITR-4 (Sugam)

Taxpayers fulfilling all the conditions of filing ITR-1, but having income from business and/or profession which is computed on a presumptive basis u/s 44AD, 44ADA, or 44AE of the Income Tax Act, are eligible to file ITR-4.

ITR-5

Unlike Individuals and HUFs, assessees like Association of Persons (AOP), Body of Individuals (BOI), Artificial Juridical Person (AJP) referred to in clause (vii) of section 2(31), Limited Liability Partnership (LLP), cooperative society, a society registered under Societies Registration Act, 1860 or under any other law of any State, trust other than trusts eligible to file Form ITR-7, business trust referred to in section 139(4E), local authorities referred to in clause (vi) of section 2(31), and investments fund referred to in section 139(4F) need to use ITR-5 to file their ITRs. Apart from such organisations, estate of deceased person, estate of an insolvent, and representative assessees referred to in section 160(1)(iii) or (iv) also need to file ITR-5.

ITR-6

Any company under section 2(17) of the Income-tax Act, 1961(I-T Act) – be it a domestic company, or a body corporate incorporated by or under the laws of the country outside India, or any other institution, association or body, which is declared by general or special order of the board to be a company, etc – need to use ITR-6 to file their return, provided such companies are not required to file return in Form ITR‐7.

ITR-7

Taxpayers who are required to furnish their returns under section 139(4A), or section 139 (4B), or section 139 (4C), or section 139(4D) of the I-T Act, need to use Form ITR-7. This ITR form may also be used by the category of assessees whose income is unconditionally exempt under various clauses of section 10.

Documents required for filing Income tax return 

Following are the documents required for filing Income tax return:

1. Bank and saving account passbook
2. FORM 16
3. FORM 16A, 16B, 16C
4. Salary slips
5. FORM 26 AS

Aadhar Card and PAN card

E-Filing of ITR

Electronic filing or E-filing is a very popular method of filing income tax returns these days. Due to the convenience of filing the return , sitting at home made it very popular amongst citizens. The process involves using a tax preparation software that has been authorized by the Income Tax Department of India.

Benefits of E-filing:

1. E-filing is very user friendly and its detailed instructions even made it easier for individuals who are not very versed with the internet.   
2. Assessee get immediate confirmation of the filing on their registered email id.
3. Direct deposit for tax refunds and direct debit for tax payments offer great convenience to taxpayers. With these options, taxpayers can choose to file their taxes now and pay later, as they have the flexibility to select the day on which their bank account will be debited for tax payment. There are also other convenient features available to taxpayers when using these options.
4. E-filing facility is available 24×7 ad hence there is no time or place constraint for filing of return. 
5. Filing an Income Tax Return (ITR) electronically results in a quick acknowledgment process. Additionally, taxpayers who file electronically can expect faster processing of refunds, if eligible, compared to those who file their returns on paper.

When to file ITRs

Theoretically, an ITR may be filed from the beginning (that is 1st April) of an Assessment Year after the end of a financial year/previous year (on 31st March) for which income is assessed. However, the filing process actually starts only after the required ITR Form is notified and the e-filing site is updated.

A taxpayer should ideally file the ITR on or before the due date of filing the return. Which is 31st July of an Assessment Year, unless extended for the assesses without audit needs. Belated returns may be filed before the end of an Assessment Year till the date permitted by the government.

October 31 of an Assessment Year is the original due date for filing returns for —

(i) By any assessee other than companies and working partner of a firm whose accounts are to be audited under the Income-tax Law or under any other law.

(ii) By the companies other than a company who is required to furnish a report in Form No. 3CEB under section 92E.

November 30 of an assessment year is the original due date for any assessee who is required to furnish a report in Form No. 3CEB under section 92E.

Benefits of filing ITR on time

Filing an ITR before the due date of filing is important in order to –

(i) Get tax refunds, if any, 

(ii) Claim deductions under various sections of the Income-ax Act, 1961 – like 10(38), 10A, 10B, 10BA 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB or Chapter VIA (i.e., deduction under section 80C to 80U), etc. The point to be noted is that most of the deductions are available under the Old Income Tax Regime.

(iii) Get tax rebate u/s 87A, a taxpayer needs to file ITR. 

(iv) Carry forward losses, if any.

Consequences/ Penalty of non-filing of ITR

Consequences of non filing ITR

1. If the assessee will not file their income tax return then they will get notice from the Income Tax Department or prosecution under the I-T Act.
2. Taxpayers have to pay penalties, fine and interest and late fees.
3. If an individual wants to take loan the also these documents are required and non filing of ITR can creates difficulty in obtaining loans
4. Non filing of ITR on time can also lead to delay in claiming income tax refund.

Penalty for non filing of ITR

1. Penalty for delay in filing ITR: If an assessee fails to furnish their income tax return within the due date prescribed under section 139(1) of the I-T Act and is required to do so, section 234F stipulates that they will be required to pay a fee of Rs. 5,000 if they file the return after the due date. However, if the assessee’s total income does not exceed Rs. 5 lakh, the fee will be Rs. 1,000.
2. Penalty for non filing of ITR: If a taxpayer fails to file their Income Tax Return (ITR), they may be subject to a penalty of up to Rs. 10,000, in addition to any tax liability they may have.

How to Check ITR Status Online?

There are two ways to check status online

1. Pre-login

• At least one ITR filed on the e-Filing portal with valid acknowledgement number 
• Valid mobile number for OTP

2. Post Login

• Registered user on the e-Filing portal with valid user ID and password 
• At least one ITR filed on the e-Filing portal

Process of checking ITR Pre-login

Step 1: Go to e-filing portal homepage

Step 2: Click on Income Tax Return status

Step 3: On the ITR page enter Acknowledgement number and valid mobile number and click continue.

Step 4: Enter 6 digit OTP received on you registered mobile number and click submit

On successful validation you will be able to see your ITR

Process of checking ITR Post-login

Step 1: Login to e-filing portal using your user ID and password

Step 2: Click on e-file> Income Tax Return> View filed return

Step 3: From there you can view a filed return and also be able to download ITR V, uploaded JSON (from the offline utility), complete ITR form in PDF, and intimation order.

Note: You can also click on filter to view filed return based on Assessment Year, export it to excel, Click View Details to view the life cycle of the return and action items related to it.

Conclusion

In India, the income tax return is a document that taxpayers need to file with the Income Tax Department every year, declaring their income and the taxes they have paid on it. The deadline for filing income tax returns in India is usually July 31st of the assessment year. Taxpayers can file their income tax returns online through the Income Tax Department’s e-filing portal or offline by submitting a physical copy of the return form. It is important to accurately report all income and taxes paid to avoid any penalties or legal issues. It is also advisable to consult a tax professional or use online tax filing software to ensure that the return is filed correctly and all eligible deductions and exemptions are claimed.

Frequently Asked Questions (FAQs)

1. Who needs to file an ITR?

If the income of an individual exceeds the prevailing limit and/or the taxpayer has any income subject to TDS, the assessee needs to file ITR.

2. How to file an ITR?

ITRs are now mostly filed on the e-filing website of the Income Tax Department. To file an ITR, a taxpayer needs to create a login ID.

3. What are the requirements to create a login ID?

To create a login ID, a taxpayer needs to have a PAN Card. For Individuals, the PAN should be linked with his/her Aadhaar. Address, mobile number, and email ID are also needed to create an ID.

4. From where to get the tax-related information?

Salaried taxpayers may get the information from Form 16 provided by the employer, while non-salaried persons may get the information from Form 16A. Such information may also be obtained from Form 26AS available on the e-filing site.