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What is ITR & How to File Income Tax Return?

Taxpayers ensure compliance with tax laws and regulations by accurately reporting income and taxes through the various ITR forms provided by the government.

  • 2,162 Views | Updated on: Jun 12, 2024

An income tax return is a form that allows you to declare your earnings, investments, and taxes to be paid. The Government of India defines it 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 provided by the government. Your earnings include salary, interest, dividends, capital gains, etc. This blog will help you understand what is ITR, how to file income tax return, and more importantly, what is income tax return.

What is an Income Tax Return?

An income tax return meaning, a document that reports details about your income and taxes to the Income Tax Department. The amount of tax a taxpayer owes is determined based on their income. If the return indicates that excess tax has been paid within a given year, the individual can receive a refund from the Income Tax Department.

According to income tax laws, individuals or businesses earning any income during a financial year must file a return annually. This income can be derived from various sources such as salary, business profits, income from property, dividends, capital gains, interests, or other channels.

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

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 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

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.

ITR 3

An individual earning an income from a business can file income using ITR 3. The form may also be used if your earnings include income from pension, salary, or other sources.

ITR 4

If you have opted for the presumptive income scheme under sections 44AD, 44ADA, and 44AE, you must file your income tax ITR using Form 4. However, if your total annual turnover is more than ₹2 crores, you must file your income tax using Form 3.

ITR 4S

The ITR-4S form, also known as Sugam, was a specific Income Tax Return (ITR) form used in India. However, it is no longer in use. 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).

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.

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. However, they must remember that the taxable income must 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.

How to Start Filing Income Tax Returns Online?

If you are new to online tax filing or want to learn how to get started, follow these instructions to explore the process efficiently and confidently.

  1. Visit the Income Tax e-Filing portal at https://www.incometax.gov.in/iec/foportal/.
  1. Log in to the e-filing portal by entering your user ID (PAN), password, and the provided captcha code. Then, click on ‘Login’.
  1. Access the ‘e-File’ menu and click the ‘Income Tax Return’ link.

On the Income Tax Return page, your PAN will be automatically populated.

Proceed to select the ‘Assessment Year,’ ‘ITR Form Number,’ ‘Filing Type’ (Original/Revised Return), and ‘Submission Mode’ (Prepare and Submit Online).

  1. Click on ‘Continue’.
  1. Carefully read the instructions and fill in all the applicable and mandatory fields of the Online ITR Form.
  1. Choose the appropriate verification option in the ‘Taxes Paid and Verification’ tab.

Select one of the following options to verify your Income Tax Return:

  • I would like to e-Verify.
  • I would like to e-Verify within 120 days from the filing date.
  • I don’t want to e-verify and would like to send the signed ITR-V through normal or speed post to “Centralized Processing Center, Income Tax Department, Bengaluru - 560 500” within 120 days from the filing date.
  • Click the ‘Preview and Submit’ button to verify all the entered data in the ITR.
  1. Finally, click on ‘Submit’ to submit your ITR

Tips to Help You File ITR Online

Filing your ITR online is convenient and efficient for meeting your tax responsibilities. To help you navigate the process smoothly, here are some tips:

Know the Basic Rules

Before you file your returns online, you must understand the basic rules and changes that may have been made for the current year. Use a tax calculator to know the tax rates and calculate your tax liability accurately.

Modifications to the ITR Forms

The Income Tax Department has modified the various forms for the current year. Understanding these changes will ensure you can complete the procedure without any trouble before you file your returns online.

Decide on the Appropriate ITR Form

As discussed above, there are multiple forms; you must know which one to file. You must read the various rules and regulations to determine which form you must use to file your income tax return.

Verify Form 26AS

You must verify that the details of the tax credit statement (Form 26AS) are accurate. This form details the tax your employers and others deducted at source (TDS).

Check Minor Details

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.

Missed Out Deductions

The Income Tax Act provides several tax benefits for filing ITRs and deductions, such as tax benefits under Section 80C. You must use the income tax deductions to minimize your tax liability.

Benefits of ITR

Filing ITR ensures compliance with tax laws and provides financial benefits and opportunities for individuals and businesses. Here are the key benefits of filing Income Tax Returns (ITR):

Compliance with the Law

Filing ITR ensures compliance with tax laws and regulations mandated by the government. It reflects an individual’s or entity’s adherence to their civic duty of paying taxes.

Avoidance of Legal Consequences

Failure to file ITR or underreporting income can lead to legal consequences, such as penalties, fines, or even prosecution. Filing returns in a timely manner helps avoid such situations.

Claiming Tax Deductions and Credits

ITR allows taxpayers to claim tax deductions and credits, reducing their taxable income and overall tax liability. These deductions could be for investments, expenses, or donations made during the financial year.

Building Financial Records and Eligibility for Loans

Regular filing of ITR helps build a solid financial record, which is often required for various financial transactions such as applying for loans, credit cards, or visas. Banks and financial institutions often ask for ITR documents to assess an individual’s financial credibility.

Access to Government Benefits and Services

Many government benefits and services require proof of income, which can be provided through ITR documents. These benefits include social security schemes, subsidized loans, scholarships, and housing schemes.

Penalty For Filing Late ITR

In India, there is a penalty for filing your Income Tax Return (ITR) after the due date. The maximum penalty for late filing of ITR depends on the date you file it:

  • Before December 31st of the assessment year, the maximum penalty is ₹5,000.
  • After December 31st but before March 31st of the assessment year, for taxpayers with income exceeding ₹5 lakh, the penalty is ₹10,000.
  • For those with income below ₹5 lakh, the penalty remains ₹1,000.
  • If you fail to file an ITR by the deadline and any subsequent condonation period (usually December 31st), you might face additional penalties and stricter actions from the Income Tax department.

How to Check ITR Status Online?

There are two main ways to check your Income Tax Return (ITR) status online in India:

With Login Credentials

This method is helpful if you still need to register on the Income Tax e-filing portal or create a login ID.

  • Visit the Income Tax Department’s e-filing portal.
  • Click the “Income Tax Return (ITR) Status” option on the homepage.
  • Enter your Acknowledgement Number. It is a unique identifier for your ITR return received after successful filing.
  • You’ll also need to enter your registered mobile number.
  • Click on “Continue”.
  • You’ll receive a One Time Password (OTP) on your mobile number.
  • Enter the OTP and click “Submit”.
  • The screen will display your current ITR filing status.

Without Login Credentials

This faster method offers more details if registered on the e-filing portal.

  • Login to the e-filing portal using your valid user ID (PAN) and password.
  • Go to the “e-File” menu and select “Income Tax Returns”.
  • Click on “View Filed Returns”.
  • You’ll see a list of ITRs you have filed for different assessment years.
  • The status of each return will be displayed alongside it (e.g., Received, Processing, Completed).

Is it Mandatory to File an Income Tax Return?

In India, individuals and businesses must file an Income Tax Return (ITR) if their income exceeds the designated basic exemption limit. The basic exemption limit varies depending on the taxpayer’s category, including individuals, senior citizens, and companies.

How Do You Compute Total Taxable Income for ITR Purposes?

To determine the amount of income tax an individual owes, the entire taxable income must first be calculated. The entire taxable income is classified into five types:

Income from Salaries

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. If the employer pays for them, these tax breaks will be accessible. Furthermore, salaried/pensioners are eligible for a standard salary/pension income deduction.

Income from House Property

Any home rental income 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 home is rented or presumed to be rented, the individual may claim a standard deduction of 30% for municipal taxes paid.

Income from Capital Gains

Capital gains are generated by selling land, residential property, equity shares, mutual funds (equity and debt), gold jewelry, and other assets. Capital gains are categorized as short-term or long-term depending on how long the individual kept the asset.

The holding durations of various asset classes differ. For example, equity-oriented mutual funds must be held for more than one year to be classified as long-term, and a dwelling must be kept for more than two years to be classified as long-term. Long-term and short-term capital gains are taxed at various rates depending on the asset class.

Income from Business/Profession

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.

Income from Other Sources

The fifth income category includes all incomes 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.

Documents Required to Fill ITR

Filing an Income Tax Return (ITR) is an important annual obligation for taxpayers. It is a formal declaration of income that allows the government to assess the tax liability of individuals, businesses, and other entities. Having all the necessary documents is crucial to ensure a smooth and accurate filing process.

Personal Details

To begin filing an ITR, individuals must provide their personal information. These details typically include:

a) PAN Card: Permanent Account Number (PAN) is a unique 10-digit alphanumeric code issued by the Income Tax Department. It serves as an identification number for taxpayers and is mandatory for filing an ITR.

b) Aadhaar Card: Aadhaar is a 12-digit unique identification number issued by the Unique Identification Authority of India (UIDAI). Linking Aadhaar with PAN is mandatory for filing ITR.

c) Bank Account Details: Provide accurate information about your bank accounts, including the bank name, account number, and IFSC code, for receiving any tax refunds.

Income Documents

It is crucial to report all sources of income while filing an ITR. Ensure you have the following income-related documents:

a) Form 16: As a salaried employee, your employer will furnish you with Form 16, which encompasses comprehensive information about your salary, deductions, and the amount of Tax Deducted at Source (TDS).

b) Salary Slips: Keep your salary slips handy, as they provide a detailed breakup of your earnings, allowances, and deductions.

c) Bank Statements: Collect bank statements for all your accounts to record any interest earned on savings accounts, fixed deposits, or other investments.

d) Form 16A/16B/16C: If you have earned income other than your salary, such as interest, rental, or income from freelance work, you may receive these forms from the payers.

e) Capital Gains: If you have sold any property, stocks, or other investments, gather the necessary documents, such as sale deeds, share transaction statements, or mutual fund statements, to calculate your capital gains.

Deduction And Investment Proofs

To claim deductions and exemptions on your taxable income, it is crucial to maintain proof of the following:

a) Investment Proofs: Keep records of investments made under various sections like 80C (PPF, NSC, ELSS, etc.), 80D (health insurance premiums), and 80G (donations to eligible institutions).

b) Home Loan Statement: If you have a home loan, retain the statement showcasing the principal and interest amounts paid during the financial year.

c) Medical Bills: Preserve medical bills and receipts to claim deductions on medical expenses incurred for self, family members, or dependents.

d) Rent Receipts: If you claim House Rent Allowance (HRA), ensure you have rent receipts from your landlord.

Form 26AS

Form 26AS is a consolidated statement that reflects the tax credits available to you. It shows the TDS of your employer, banks, or any other deductor that was deducted. Verify Form 26AS before filing your ITR to avoid any discrepancies.

What is New in the ITR Forms?

The updated Income Tax Return (ITR) forms have incorporated a fresh disclosure mandate about “Income from retirement benefit accounts.” Taxpayers must now reveal any taxable income they had previously claimed relief under section 89A of the Income Tax Act in prior years.

Key Takeaways

  • Every individual or business earning income during a financial year must file an Income Tax Return if their gross taxable income exceeds the maximum exempt limit.
  • Filing ITR offers benefits like claiming tax deductions, avoiding legal consequences, and building financial records.
  • Late filing of ITR can attract penalties, so it is essential to file returns within the due date to avoid additional charges and ensure compliance.
  • With the convenience of online filing, taxpayers can efficiently file their returns and avoid penalties.

Wrapping Up

To answer what is ITR, one must not state it as a legal obligation but as a vital financial responsibility for individuals and businesses. Understanding the various types of ITR forms and choosing the right one according to your income sources is crucial. It ensures compliance with tax laws, helps claim deductions and credits, and builds a strong financial record for accessing loans and government benefits.

FAQs on What is ITR?

1

What precautions should be taken while filing an ITR?

When filing your Income Tax Return (ITR), taking certain precautions is essential to ensure accuracy and compliance with tax laws. Here are some key precautions you should consider:

  • Organize your documents
  • Choose the correct ITR form
  • Provide accurate information
  • Report all sources of income
  • Verify Form 26AS
  • Claim deductions correctly
  • File within the due date
  • Review before submission

2

What is Form 26AS?

Form 26AS is a consolidated tax statement issued by the Income Tax Department of India. It comprehensively summarizes all tax-related information associated with a taxpayer’s Permanent Account Number (PAN). The form is a crucial document for individuals and entities to verify their tax-related transactions and facilitate filing income tax returns.

3

What is e-verification of income tax returns?

E-verification of income tax returns refers to electronically validating and verifying the authenticity and accuracy of an individual’s income tax return filed with the tax authorities. In many countries, including India, taxpayers must file their income tax returns electronically. After filing the return, taxpayers must verify it to ensure its validity and prevent fraudulent activities.

4

What is the minimum salary liable to income tax?

The minimum salary liable to income tax depends on various factors such as the individual’s age, sources of income, and applicable deductions. In India, individuals below the age of 60 are exempt from income tax if their annual income does not exceed the basic exemption limit, which is subject to change as per the prevailing tax laws.

5

Is it possible to file income tax returns without Form 16?

Yes, it is possible to file income tax returns without Form 16. Form 16 is a certificate the employer issued that details the salary earned and taxes deducted at source (TDS). However, individuals can still file their tax returns using other documents such as salary slips, bank statements, investment proofs, and Form 26AS (which provides details of tax deducted at source). I

6

Can income tax returns be filed after the due date?

Yes, income tax returns can be filed after the due date, usually July 31st of the assessment year for individual taxpayers in India. However, late filing may attract penalties and interest per the Income Tax Act. The penalty amount and interest charges depend on the delay period and the taxpayer’s total income.

7

How to check the income tax return status?

Taxpayers can check the status of their income tax returns online through the Income Tax e-Filing portal (https://www.incometax.gov.in). After logging in to the portal using their credentials, taxpayers can navigate to the ‘My Account’ section and select ‘View e-Filed Returns/Forms.’

8

Why do we need to file income tax returns?

Filing income tax returns helps individuals claim tax deductions, refunds, and government benefits. It also ensures transparency in financial transactions and helps build a credible financial record, essential for various purposes, such as applying for loans, visas, and government services and benefits.

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