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Income Tax Returns in India | How To File ITR (Income Tax Return)

TeamAckoOct 26, 2023

Whether you're a salaried employee, a business owner, or a freelancer, as long as you are a resident of India, you cannot escape from letting go of some money to the global economy. However, as long as you are a resident of India, you can also avail them back (terms & conditions applied).

This may seem like a huge task but don’t worry, we have broken everything down for you in this article below along with common queries. Let’s begin!

Tax Returns in India

Contents

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Understanding Income Tax Returns: A Breakdown

Step 1: Required Documents

Before diving into the process of filing tax returns, make sure you have all the necessary documents in place:

  • Form 16: This document is provided by your employer and contains details about your salary, deductions, and taxes paid during the financial year.

  • Form 26AS: It provides a consolidated view of taxes deducted on your behalf by entities like your employer, banks, or tenants.

  • Proof of Investments: Keep records of investments made under tax-saving schemes such as Public Provident Fund (PPF), Employee Provident Fund (EPF), and National Savings Certificate (NSC).

  • Bank Statements: Accurate bank statements are essential to reflect your income, expenses, and interest earned.

  • Details of Other Income: If you have income from sources other than your salary, such as rent or capital gains, gather the relevant documentation.

Step 2: Choosing the Right ITR Form

Selecting the appropriate Income Tax Return (ITR) form is the initial step, which depends on your income sources and category. For those who have recently applied for tax return filing, the commonly used forms include:

  • ITR-1 (Sahaj): Suitable for individuals with salary income, one house property, and other sources, with total income up to ₹50 lakhs.

  • ITR-2: Applicable to individuals and Hindu Undivided Families (HUFs) without ITR-1 eligibility, having income from multiple house properties, capital gains, etc.

  • ITR-3: Intended for individuals and HUFs with income from business or profession.

Step 3: Filling Out the Form Accurately

Once you've chosen the correct ITR form, proceed to fill in the details accurately:

  • Personal Information: Enter your name, PAN, address, and contact details.

  • Income Details: Include your salary income, income from other sources, and any additional income.

  • Deductions and Exemptions: Declare investments and expenses eligible for deductions under sections like 80C, 80D, and others.

  • Tax Calculation: The form will automatically compute your taxable income and tax liability based on the information provided.

  • Verification: Sign and date the form to authenticate the details submitted.

Step 4: Optimal Filing Methods

Two primary methods are available for filing tax returns in India:

  • Online Filing (E-filing): Use the official Income Tax Department website for e-filing. You can manually complete the form online or upload an XML file generated using offline utilities.

  • Physical Filing: If you opt for physical filing, print the ITR-V form (Acknowledgement) generated after online filing, sign it, and send it to the Centralised Processing Center (CPC) within 120 days of e-filing.

Step 5: Resolving Common Queries

Addressing common queries regarding tax return filing:

  • Due Date: The standard due date for filing tax returns is July 31st of the assessment year. However, this date can be extended by the government.

  • Missed Deadline: Filing after the due date leads to penalties and potential loss of deductions.

  • Late Filing Fee: If you miss the due date, you might have to pay a late filing fee, which can be as high as Rs. 10,000. If you file your ITR after the due date but before December 31st of the relevant assessment year, the fee is Rs. 5,000. After December 31st, it goes up to Rs. 10,000.

  • Interest on Tax: If you owe taxes, you'll be charged interest from the due date until you pay. The current rate is 1% per month.

  • Loss of Benefits: Filing your return late can result in losing benefits like carrying forward losses. Not filing at all means you can't claim TDS refunds.

  • Legal Action: Deliberate non-filing may lead to prosecution under Section 276CC of the Income Tax Act, which can result in fines or imprisonment.

  • Post-filing Errors: You can file a revised return to correct errors identified after submission.

  • Tax Payment: If you have a tax liability, consider paying it in instalments through Advance Tax payments.

How To File Income Tax Return (ITR): Step-by-Step Guide

Here is the step-by-step process of filing tax returns online.

Step 1: Navigate to “File Income Tax Returns”

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Step 2: Login

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Step 3: Select status

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Step 4: Answer a few questions

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Step 5: Review your information

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Step 6: select Assessment Year

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Step 7: Select ITR form type

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Benefits of Filing Income Tax Returns

Filing your tax return yields several advantages:

  • Compliance: Ensures adherence to legal obligations, preventing potential penalties.

  • Loan Processing: Financial institutions often require ITR documents for loan or credit card applications.

  • Visa Applications: Some countries mandate ITR documents for visa applications.

  • Refund Claims: Enables you to claim refunds if you've overpaid taxes.

Investments that can help in lowering your taxes

Now that we've covered the essential steps of tax return filing in India, let's understand better the tax benefits and considerations that taxpayers should be aware of. India's tax laws provide numerous opportunities for individuals to save on taxes through investments. Some key tax-saving investments include:

  • Public Provident Fund (PPF): Contributions to PPF are eligible for deductions under Section 80C of the Income Tax Act. The interest earned and withdrawals from PPF are also tax-free.

  • Employee Provident Fund (EPF): Contributions to EPF by both employees and employers are tax-deductible. Additionally, interest earned on EPF is tax-exempt.

  • National Savings Certificate (NSC): NSC investments qualify for deductions under Section 80C. Interest earned on NSC is taxable but can be claimed as a deduction under Section 80C.

  • Equity-Linked Savings Schemes (ELSS): ELSS mutual funds offer tax benefits under Section 80C, and capital gains from ELSS investments are tax-free.

  • Sukanya Samriddhi Yojana: Sukanya Samriddhi Yojana scheme, aimed at securing the future of the girl child, provides deductions under Section 80C and tax-free interest income.

  • Tax-saving Fixed Deposits: Banks offer tax-saving fixed deposits with a lock-in period of five years, qualifying for deductions under Section 80C.

  • National Pension System (NPS): Contributions to NPS by individuals and employers are tax-deductible under Section 80CCD. Additionally, NPS offers an additional tax benefit of up to ₹50,000 under Section 80CCD(1B).

  • Senior Citizens Savings Scheme (SCSS): Senior citizens can benefit from SCSS, which provides deductions under Section 80C. The interest income is taxable.

  • Home Loan Principal Repayment: The principal amount repaid on a home loan qualifies for deductions under Section 80C of the Income Tax Act, reducing your taxable income.

  • Tax Benefits for Medical Expenses: You can claim deductions for medical expenses under Section 80D for health insurance premiums and under Section 80DD and 80DDB for specific medical treatments and disabilities.

The Indian tax system may seem intricate and hence the process, overwhelming. It is essential to keep in mind filing for tax returns, that it is a legal duty but that is not all that it is.

Wrapping up!

Understanding tax returns is important to stay up to speed with the country and in turn yield benefits for yourself as well by keeping you legal and opens doors for loans, visas, and refunds if you paid too much. It might seem complicated, but with the right information and help, it is easier to navigate.

Again, remember, learning about taxes is not just about duty; it's about making the most of your money and staying updated to achieve the financial goals you wish to.

With knowledge, documentation, and possibly professional assistance, your tax return journey after application will become progressively smoother with each passing year. Stay informed and compliant, embracing the empowerment that comes with understanding India's tax ecosystem.

Frequently Asked Questions (FAQs)

Below are some of the frequently asked questions on Tax Returns in India

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What documents do I need for filing my tax return in India?

You need Form 16, Form 26AS, proof of investments, bank statements, and records of other income.

How do I choose the right ITR form?

Select the form based on your income sources; commonly used forms include ITR-1, ITR-2, and ITR-3.

What details should I provide in the tax return form?

Personal info, income details, deductions, tax calculations, and your signature.

What are the two methods for filing tax returns in India?

Online filing (E-filing) and physical filing are the primary methods.

What's the due date for filing tax returns in India?

The standard due date is July 31st of the assessment year, but it can be extended.

What happens if I miss the tax filing deadline?

Missing the deadline can lead to penalties and potential loss of deductions.

Can I correct errors in my tax return after submission?

Yes, you can file a revised return to correct errors.

Why is it beneficial to file tax returns in India?

Filing ensures compliance, aids in loan processing, visa applications, and allows you to claim tax refunds.

What are some tax-saving investments available in India?

PPF, EPF, NSC, ELSS, Sukanya Samriddhi Yojana, NPS, and SCSS are some options.

Is the repayment of home loan principal eligible for tax benefits?

Yes, home loan principal repayment qualifies for deductions under Section 80C.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet, and is subject to changes.

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