What is ITR (Income Tax Return)?

What is an Income Tax Return?

An Income Tax Return (ITR) is a document that is used by the individuals, businesses and entities to report their gross taxable income for a particular financial year. It is a legal document where taxpayers state their total income, deductions, exemptions and taxes paid to the government. The purpose of filing an ITR is to calculate your net tax liability or claim a refund if excess tax has been paid during the year. It is crucial to know what is ITR, how to calculate income tax , and how to check income tax return status as an Indian citizen.

The ITR meaning goes beyond just tax payment as it also serves as a declaration of your financial earnings and tax compliance. The Income Tax Act of 1961 also states that ITR must be filed by individuals whose taxable income is above ₹5 lakh in a financial year or by individuals who have paid advance tax. Also, you will need it in case you are earning income through capital gains, foreign assets or other taxable income, even when taxes have been deducted by your employer.

When you file an ITR, you also create a financial record that may be useful in obtaining loans, visas or government tenders. It makes financial transactions transparent and keeps you on the right side of the law.

Different Types of ITR Forms

Now that you know what is ITR, it is time to understand its types. Depending upon the needs of taxpayers and ease of collecting, ITR forms are divided into different categories. Let us take a look at those different types of ITR forms :

ITR 1 (Sahaj)

The ITR 1 Form is the simplest form and must be used if your income is earned through a salary or pension. Also, if you have income from house property or other sources, excluding lottery winnings or income earned through horse racing, you need to file this ITR Form.

You cannot file using this form if your annual income exceeds ₹50 lakh or you own foreign assets. Moreover, the form may not be used for taxable capital gains, income from multiple properties, agricultural income exceeding ₹5,000, or income from a profession or business.

ITR 2

ITR 2 is for individuals and Hindu Undivided Families (HUFs) whose annual income from house property, salary or pension, or other sources exceeds ₹50 lakh. You must also file income tax using this form if you club the income of your spouse or children with your annual income. However, this form will not be used if your income includes professional or business earnings.

ITR 3

An individual or HUFs earning income from a business or profession can file income using the ITR 3 Form . The form may also be used if your earnings include income from pension, salary, or other sources. For instance, if you are a freelancer or own a shop, you will need to file ITR 3.

ITR 4 (Sugam)

In case you have chosen the presumptive income scheme under section 44AD, 44ADA and 44AE, you need to file your income tax ITR by filling the Form 4. It is ideal for individuals with turnover of ₹2 crores or less or professionals with earning of ₹50 lakh or less per annum. But when your total annual turnover exceeds ₹2 crores, you need to file your income tax in Form 3.

ITR 4S

The ITR 4S Form was a specific Income Tax Return (ITR) Form used in India. Though it is rarely used now, ITR 4S was a simpler version of ITR 4 for presumptive income, mainly for small businesses. Most taxpayers now use ITR 4 instead because the functionality of the ITR 4S Form has been integrated into the current ITR 4 Form.

ITR 5

ITR 5 Form is used to file income tax by Limited Liability Partnerships (LLPs), a Body of Individuals (BOIs), and an Association of Persons (AOPs). Businesses generally use this form to report income, expenses, and taxes.

ITR 6

Companies not exempt under section 11 must file the ITR 6 Form electronically. This section provides guidelines for income from property held for religious or charitable uses.

ITR 7

Any individual or company that must furnish income tax ITR under sections 139 (4A), 139 (4B), 139 (4C), and 139 (4D) must file returns using the ITR 7 Form. You may easily file your ITR Form online, also known as e-filing, which makes the entire procedure simple, quick, and hassle-free.

Is it Mandatory to File an Income Tax Return?

Yes, you must file an ITR in case your income is more than the basic exemption limit as provided by the Indian tax laws. In case you are asking yourself what is income tax return, it is a formal method of reporting your income and the taxes you have paid to the government during a financial year. Tax rates are predetermined according to the level of income and non-submission of your ITR on time may attract penalties. Also, failure to file your ITR may also influence your chances of obtaining loans or visas since they are used as a proof of income and financial discipline. So, even if you are not earning a taxable income, “Nil ITR filing” is wise to maintain a record and avoid future complications.

Who Should File the Return of Income?

If an individual’s gross taxable income during a particular fiscal year exceeds the maximum amount not chargeable to tax, they must file an ITR in the prescribed form. To further simplify, you should file an ITR if:

• Your income exceeds the basic exemption limit (₹2.5 lakh for individuals under 60).
• You have earned income from capital gains, house property, or other sources.
• You are a company or firm, regardless of income.
• You want to claim tax refunds or carry forward losses.

However, you must remember that the taxable income needs to be calculated before the eligible exemption is available for long-term capital gains on listed securities up to ₹1 lakh and other deductions under Chapter VI-A of the Act.

Online Process

• Go to the official e-filing portal of the Income Tax Department.
• Log in using your PAN and password. If you’re new to the portal, create an account with accurate personal details.
• Click on 'e-File' and select 'File Income Tax Return.'
• Choose the applicable assessment year and select your filing status, such as individual or HUF.
• Pick the relevant ITR form and enter your bank account details as required.
• Review the pre-filled details carefully. Make corrections if needed.
• Submit the return and e-verify it using Aadhaar OTP or your prevalidated bank account. Alternatively, you may print and post the signed ITR-V to the Centralized Processing Center.

Offline Process

• Visit the Income Tax e-filing website.
• Download the offline Utility software (ZIP file) from the ‘Downloads’ section.
• Extract the contents of the ZIP file to a designated folder on your device.
• Fill in the relevant ITR form by entering your details manually.
• Generate and save the XML version of the completed form.
• Double-check the form for accuracy and compute your final tax amount.
• Open the Utility software and log in using your PAN and password.
• Choose ‘Income Tax Return,’ then select the assessment year and ITR form number.
• Under ‘Filing Type,’ choose ‘Original’ or ‘Revised Return.’
• Select ‘Upload XML’ as the submission mode and submit after choosing the appropriate verification option.

Documents Required to File ITR

Before you file your ITR, keep the following documents ready. These documents ensure you enter correct information and avoid mistakes:

• Form 16: Your employer issues this certificate, which shows the tax deducted from your salary. It has two parts: Part A includes your PAN, employer details, and tax information; Part B shows the salary break-up, exemptions, deductions, and total tax liability.
• Bank or Post Office Interest Certificates: If you earned interest from savings accounts, fixed deposits, or recurring deposits, include the total interest earned from all these sources.
• Form 16A and Other TDS Certificates: If banks or financial institutions deducted TDS on incomes like fixed deposits or mutual fund dividends, collect Form 16A from them.
• Annual Information Statement (AIS): This statement lists your financial transactions for the year and offers more details than Form 26AS.
• Form 26AS: This document serves as your tax passbook. It lists all the taxes paid and deducted against your PAN. You can download it from the income tax portal.
• Proof of Investments and Expenses: Keep documents like mutual fund statements, life insurance receipts, and proof of tuition fee payment ready to claim deductions.
• Capital Gains Details: If you sold shares, mutual funds, or property and earned gains over ₹1 lakh in a year, report them under Long-Term Capital Gains. Keep the supporting documents ready.
• Foreign Asset Details: If you own property, bank accounts, or other assets in foreign countries, report them when you file your ITR.
• Aadhaar Number: As required by law, provide your Aadhaar number when filing your ITR.
• Bank Account Details: Enter the account number, IFSC code, and type of all your bank accounts, including those closed during the financial year.

What's new in the ITR forms?

The new ITR forms cover some relief measures that were announced because of the COVID-19 outbreak. These new forms have been notified by the Central Board of Direct Taxes recently.

The following are some of the most influential updates:

Which ITR Form should you fill?

The Income Tax Department offers different ITR forms depending on your income type and financial activity. While some forms are simple, others ask for more details, like profit and loss statements. Here’s a quick breakdown to help you understand which form suits you best:

• ITR 1 (Sahaj): Residents with a total income up to ₹50 lakh can use this form if they earn income from salary, one house property, other sources (like interest), and up to ₹5,000 from agriculture.
• ITR 2: Individuals and HUFs should use this form if they do not earn income from business or profession.
• ITR 3: If you are an individual or HUF earning income from business or profession, then this form is for you.
• ITR 4 (Sugam): Use this form if you have opted for the presumptive income scheme under sections 44AD, 44ADA, or 44AE. It applies to resident individuals, HUFs, and firms (excluding LLPs) with total income up to ₹50 lakh.

Why Should I File My Income Tax Return?

Filing ITR is not just a legal obligation, but also a sign of being a good citizen. Although it may not be compulsory based on the amount of income you earn, it is in your best interest to file an ITR since there are numerous advantages to it. Filing your ITR not only meets your legal requirements, but also helps you get the financial advantages and also makes you prepared towards the future needs. Here is why you should file your tax return:

Highlights Responsible Behavior

Submission of your ITR shows that you are a law abiding citizen. It also makes sure that your income information is officially registered, and that can facilitate future financial operations.

It is Mandatory in Some Cases

In certain situations, like registering immovable property, you might need to provide your tax returns for the past few years. By ITR filing , you can be prepared for such requirements.

Helps with Loans and Credit Cards

When you want to take out a home loan, credit card or other financial products, the financial institutions will mostly demand proof of ITR filings. This can be easier when one has a consistent history of filing returns.

Claim Past Loss Adjustments

By timely filing returns, you will be able to claim adjustments of losses that you may have incurred in earlier years, which will help you to reduce your tax liability in future.

Avoid Penalties

Not filing your ITR, when required, can attract serious penalties. Additionally, if you do not file your return, you may not be able to file a revised one later when you really need to.

Due Dates for Filing ITR

Check the below table to know about the last dates for the filing of your ITR for FY 2024-25 (AY 2025-26):

It is to be noted that these dates are tentative and may vary at the will of the Government. Therefore, it is important to keep up with the current events at the Income Tax Department to keep abreast of such changes.

Penalty for Late Filing of ITR

In case you miss the deadline of filing your income tax return, you might end up paying a late fee. The Income Tax Department can also proceed with legal action in case you habitually miss the due dates. To avoid trouble, make sure to file your return on time.

Here is a quick look at the penalties based on your total income:

Wrapping Up

To understand the income tax return definition, you cannot declare it as an obligation under the law but as a critical financial duty of both individuals and businesses. It is important to know the different kinds of ITR forms and select the appropriate one based on the nature of your income. It makes it easy to abide by tax laws, claim deductions and credits and creates a good financial history of securing loans and government benefits.

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