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E-Filing of Income Tax Returns in India

Want to know everything about ITR e-filing? From benefits, steps of e-filing, and mistakes to avoid while e-filing, read this blog further.

  • 7,371 Views | Updated on: May 20, 2024

Filing an income tax return is not only a legal obligation but also a responsible financial practice. It allows you to accurately report your income, claim deductions, determine tax liability, and maintain good financial standing. Taxes are not only important for individuals for financial stability but also necessary for contributing towards the country’s economy. These taxes provide a boost to the economy, assist in the growth and development of the country, and also improve the living standards of the population.

It is a common misconception that filing returns requires organizing and collecting a large number of documents. However, filing income tax returns (ITR) does not have to be tedious or challenging.

With new-age technological developments, you may easily file your returns electronically. With a few clicks, you can complete the e-filing procedure within a short period. ITR e-filing enables you to file returns from the convenience and comfort of your home or office without spending time waiting in long queues. This blog will take you through the steps of e-filing of income tax returns, its benefits, and what mistakes to avoid while filing taxes online.

What is e-Filing?

Electronic filing, also known as e-filing, refers to completing the online tax filing procedure for a particular assessment year. E-filing income tax returns eliminate the need to visit any office to file the returns physically. You simply log in to the e-filing website and complete the entire procedure within a few minutes.

Why Should You File an Income Tax Return?

Filing ITR (Income Tax Return) is an important financial obligation that individuals have to fulfill for several reasons, such as filing ITR can be beneficial for claiming refunds, and they also help in improving your creditworthiness. Let us take a look at other reasons which makes ITR filing beneficial for individuals:

Legal Requirement

It is a legal requirement in many countries, including India, for individuals with taxable income to file an income tax return. Failure to fulfill this requirement can result in penalties, fines, and legal consequences.

Determining Tax Liability

Filing an income tax return allows you to calculate your tax liability accurately. By reporting your income and claiming eligible deductions and exemptions, you can determine the amount of tax you owe or the refund you are entitled to receive.

Claiming Refunds

If you have paid more taxes than necessary through tax withholding or estimated tax payments, filing a tax return is necessary to claim a refund. This is particularly relevant if you have eligible deductions, credits, or exemptions that can lower your taxable income.

Documentation of Financial Activities

Filing an income tax return serves as an important record-keeping practice. It provides a documented record of your financial activities, including income sources, deductions, and exemptions. This can be useful for future reference, financial planning, loan applications, and other financial transactions.

Compliance and Avoidance of Penalties

Filing your tax return demonstrates compliance with tax laws and helps you avoid penalties and legal consequences. Even if you do not owe any taxes, filing a tax return within the prescribed deadline is essential to stay in good standing with the tax authorities.

Financial History and Creditworthiness

Your tax return and financial history are often used by financial institutions, lenders, and creditors to evaluate your creditworthiness. Consistently filing your tax returns and maintaining a clean tax record can positively impact your ability to secure loans, mortgages, and other financial opportunities.

Government Benefits and Programs

Many government benefits, grants, and social security programs require individuals to submit their tax returns to determine eligibility. Filing your tax return can ensure that you have access to these benefits and avoid potential delays or complications.

Benefits of E-Filing Income Tax Returns

Filing your income tax returns on time has several benefits. It ensures that you do not pay huge penalties due to not filing the ITR in a timely manner. Here are some benefits of online income tax e-filing:

Refund Requests

Some part of your income, whether as a salary or business earnings, is deducted at source. Section 80C and other sections of the Income Tax (IT) Act provide tax benefits when you invest in certain types of financial products. When you invest in these instruments, the actual tax liability may be lower than what is deducted. Therefore, you need to avail yourself of a refund, which is possible only when you file your ITR in a timely manner.

Visa

When you travel abroad, in most cases, you require a visa. Foreign countries often require you to provide your income tax returns for the last few years at the time of visa application. Therefore, when you file your ITR in time, the process of procuring a visa becomes easier.

Credit Card

When you apply for a credit card, the issuer checks if you are able to pay the bills without any delays. The ITR is proof that shows your annual income. When you file your income tax returns regularly, you may be able to enjoy a higher limit on your credit card.

Loans

Every lender requires proof of filed ITR when you apply for any type of loan. These returns are necessary to enable the lenders to know your earnings, thereby determining your repayment capabilities. Lenders may reject your application if you do not file your ITR on time.

Loss Adjustment

Income tax laws allow individuals to carry forward losses that may be set off against future taxable earnings for up to eight consecutive years. To take advantage of this provision, you need to file your ITR for every assessment year.

Types of E-Filing of Income Tax Returns

Having understood the benefits of e-filing ITR, let’s take a look at the different ways to complete this procedure:

  • Use a Digital Signature Certificate (DSC), which is a convenient way to sign your documents electronically
  • Generate the Income Tax Return-Verification (ITR-V), which must be signed and sent to the Central Processing Center (CPC) in Bangalore within 120 days from the filing date
  • Verify the ITR using your Aadhar number; in this case, you do not require the ITR-V

Eligibility Criteria for e-Filing

As a responsible citizen, it is the duty of every citizen to file income tax returns. Still, the government has set some guidelines for those who are eligible for e-filing of income tax returns. For instance, the ITR-1 form is applicable to resident individuals who meet the following criteria.

  • Total income for the financial year must not exceed ₹50 lakhs.
  • Income should be derived from specific sources. This can include salary, a single house property, agricultural income (up to ₹5000/-), family pension income, and other sources such as interest earned from savings accounts, deposits (post office/bank/cooperative society), income tax refunds, any other interest income, and family pension.
  • Additionally, suppose the spouse’s income (excluding those covered by the Portuguese Civil Code) or the income of a minor is within the specified limits mentioned above. In that case, it can be clubbed with the individual’s income.

Documents Required for e-Filing

Just like traditional paper-based filing, e-filing also requires certain documents to be submitted to complete the process successfully. These documents serve as evidence, support the information provided, and ensure compliance with legal and regulatory requirements. Understanding the documents required for e-filing is essential to ensure a smooth and hassle-free experience. You will need certain documents for e-filing. These documents include:

  • General documents such as bank account details, PAN card, and ADHAR card.
  • Salary-related documents such as salary slips, rent receipts if you claim a house rent allowance, Form 16, Form-16A, Form-16B, Form- 16C, and Form 26AS
  • Documents of any deductions and exemptions, which can include home loan details, insurance premium payment receipts, income from capital gains, and proof of dividend, rental, and foreign income.

How do you complete the e-filing of Income Tax?

The process for income tax e-filing in India is very simple and quick. Here are the steps to follow:

Completing Registration

To register on the e-filing portal, you will require your Permanent Account Number (PAN), date of birth, and name. The PAN is your user ID, and you need to provide a password.

Choosing the Relevant Form

There are several forms on the e-filing website, and you need to choose the one relevant to your requirements. Here are the available forms:

  • ITR 1 is for individuals with an annual income of up to ₹50 lakhs from salaries and house property
  • ITR 2 is for individuals and Hindu Undivided Families (HUF) not having any proprietary business income
  • ITR 3 is for individuals and HUFs earning proprietary business income
  • ITR 4, also known as Sugam, is used for presumptive earnings from business and profession

Filling the Form

The relevant ITR form may be completed either online or offline. You may download the form and save it to your computer. Once you complete filling out the form, you may upload it on the e-filing website.

Acknowledging and Verifying

Once you upload the ITR form, you will receive Form ITR-V. If your Aadhar details are not linked, a physical copy of this form must be sent to the CPC in Bengaluru within 120 days from the date of filing.

Refund

When your TDS exceeds the total tax liability, you are eligible for a refund. You need to provide accurate bank details to ensure that the refund is received without any delays. You may also check the refund status online.

Did you know?

You can file your income tax returns in any language, including Hindi, Marathi, Telugu, Tamil, Gujarati, and Bengali.

Common Mistakes Made While E-Filing Income Tax

While e-filing income tax can be convenient and efficient, people can still do mistakes while doing so. Let us have a glance at common mistakes made while income tax filing:

Incorrect Personal Information

It Is crucial to provide accurate personal information, such as name, AADHAR number, and address. Even a small error in this information can lead to issues with the processing of your return.

Filing Under the Wrong Status

Choosing the wrong filing status, such as single instead of married filing jointly, can result in incorrect tax calculations and potentially lead to underpayment or overpayment of taxes.

Errors in Income Reporting

Ensure that you report all sources of income correctly, including wages, self-employment income, investment income, and other taxable earnings. Failing to include income or reporting incorrect amounts can trigger an audit or result in penalties.

Inaccurate Deductions and Credits

Taxpayers often make mistakes when claiming deductions and credits. It Is essential to understand the eligibility requirements for each deduction and credit and to report the expenses or circumstances that qualify accurately.

Forgetting to Sign the Return

One of the most common mistakes is neglecting to sign the e-filed tax return. A digital signature is required for electronic filing, and failure to provide one will lead to the rejection of the return. Make sure to follow the instructions for signing your e-filed return.

Incorrect Bank Account Information

If you are expecting a tax refund and choose direct deposit, double-check your bank account information to ensure it is entered correctly. Entering the wrong account or routing number can result in delayed refunds or funds deposited into someone else’s account.

Failing to Reconcile Advance Payments

If you received prior payments of the Premium Tax Credit or the Child Tax Credit, it’s crucial to reconcile those amounts when filing your tax return. Neglecting to do so can lead to discrepancies and potential issues with your tax return.

Ignoring Electronic Filing Errors

After submitting your e-filed return, you may receive an error message indicating a problem with the filing. It is important to address these errors promptly and make any necessary corrections before the filing deadline.

To avoid these mistakes, it is recommended to double-check all information entered into the tax software, use reputable tax preparation software or seek professional assistance, and review your return before submitting it electronically.

Next Step After You Have e-Filed Your Income Tax Returns

Most people are unaware of what needs to be done after the ITR is filed. As mentioned in this blog, you will receive an acknowledgment through the ITR-V, which needs to be verified. If your Aadhar is linked, you may self-verify the same using an Electronic Verification Code (EVC) received on the registered mobile number. Alternatively, you need to send the ITR-V to the CPC within 120 days from the date of filing the returns.

Wrapping It Up

E-filing income tax returns have revolutionized the process, making it convenient, efficient, and accessible for individuals. Contrary to the misconception that filing returns requires more time and effort, e-filing allows individuals to complete the procedure electronically with just a few clicks. By embracing this new-age technological development, individuals can easily fulfill their financial obligations, optimize their tax liabilities, and enjoy the benefits that come with timely and accurate tax filing.

    Key Takeaways

  • E-filing income tax returns is a convenient and efficient way to meet your tax filing obligations.
  • There are several benefits to e-filing, including the ability to file your return from anywhere with an internet connection and the convenience of electronic record-keeping.
  • Filing your return accurately can help you avoid penalties and ensure that you receive any refunds that you are entitled to.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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