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An income tax return is a form that allows you to declare your earnings, investments, and taxes to be paid. It is defined by the Government of India and should be submitted to the Income Tax Department. Every individual, business owner or salaried employee should file income tax returns through different ITR forms provisioned by Government. Your earnings include salary, interest, dividends, capital gains and so on.
Considering the importance and seriousness of ITR forms, you should understand how to file ITR.
If you are unaware of the whole ITR process, don’t worry. We will help you understand the whole process step-by-step. Before we go there, let’s understand the different ITR forms.
This form must be used if your income is earned through a salary or pension. Additionally, if you have income from house property or other sources, excluding lottery winnings or income earned through horseracing, you need to file this ITR form.
If your annual income exceeds ₹50 lakh or you own foreign assets, you cannot file using this form. 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.
If your annual income from house property, salary or pension, or other sources exceeds ₹50 lakh, you must file your ITR using this form. If you club the income of your spouse or children with your annual income, you must file income tax using form ITR 2. However, this form will not be used if your income includes professional or business earnings.
If you have opted for the presumptive income scheme under sections 44AD, 44ADA, and 44AE, you must use form 4 to file your income tax ITR. However, if your total annual turnover is more than ₹2 crores, you must file your income tax using form 3
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 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.
Before you file your returns online, you must understand the basic rules and changes that may have been made for the current year. Use tax calculator to know the tax rates to calculate your tax liability accurately.
The Income Tax Department has modified the various forms in the current year. Before you file your returns online, understanding these changes will ensure you can complete the procedure without any trouble.
As discussed above, there are multiple forms, and you must know the one you need to file. You must read the various rules and regulations to know the form you must use to file your income tax return.
Specific headings, like interest, may be slightly complicated. Moreover, salary misreporting is another standard error. You must check all these minor details to avoid any issues in the future.
The Income Tax Act provides several tax benefits of filing ITR and deductions. You must take advantage of the income tax deductions to minimize your tax liability.
If an individual’s gross taxable income during a particular fiscal year exceeds the maximum amount not chargeable to tax, they are required to file an ITR in the prescribed form. However, they must remember that the taxable income must be calculated before 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.
For the FY 2021-22, an individual’s total income is exempt from tax up to ₹2.5 lakh.
Step 1: Navigate to the Income Tax e-Filing website https://www.incometax.gov.in/iec/foportal/
Step 2: Enter your user ID and password into the e-Filing portal.
Step 3: Navigate to e-File > Income Tax Returns > File Income Tax Return on your Dashboard.
Step 4: Select 2021 - 22 as the Assessment Year and click Continue.
Step 5: Select Online as the filing mode and click Continue.
To determine the amount of income tax owed by an individual, the entire taxable income must first be calculated. The entire taxable income is classified into five types:
The first category covers salary and pension income. Employer’s salary/pension is taxable under this heading. Form 16 (TDS certificate) or salary/pension slips can be used to obtain information about your salary/pension received during a specific fiscal year.
Individuals with salary/pension income are eligible for several tax exemptions and deductions. House rent allowance (HRA), leave travel allowance (LTA), and other tax breaks are available. These tax breaks will be accessible if they are paid for by the employer. Furthermore, salaried/pensioners are eligible for standard deduction for salary/pension income.
Any rental income from a house is calculated under the heading ‘Income from residential property.’ There is a concept of self-occupied rent, presumed to be on rent when calculating taxable income under the heading, ‘income from dwelling property.’ If the taxpayer lives in the house alone, it is considered self-occupied. If a taxpayer owns more than two dwelling properties that are not rented, the house is regarded to be rented. If the house is rented or presumed to be rented, the individual may claim a standard deduction of 30% for municipal taxes paid.
Capital gains are generated by selling land, residential property, equity shares, mutual funds (equity and debt), gold jewellery, and other assets. Capital gains are categorized as either short-term or long-term based on how long the individual kept the asset.
The holding durations of various asset classes differ. For example, in order for gains to be classified as long-term, and equity-oriented mutual funds must be held for more than one year. Similarly, for capital gains to be classified as long-term, a dwelling must be kept for more than two years. Long-term and short-term capital gains are taxed at various rates depending on the asset class.
Individuals generating money through a business or as a freelancer or consultant must record their earnings under the heading ‘Income from business/profession.’ An individual running a business might claim certain expenses on their income tax return to reduce their taxable income and thus their income tax.
The fifth income category includes all incomes that are not disclosed in the other categories. These include interest income from fixed deposits, RBI taxable bonds, family pensions, pensions from insurance company policies, dividends, and so on.
Once you file the returns online with digital copies of the required documents, you must verify the same. Failing to do so renders the filing incomplete, and you may have to pay the penalty for late filing.