Income tax is a direct tax that is imposed on individuals, businesses, and other entities by the government. The Income Tax Act, 1961 governs the taxation system in India, and every individual or business entity is required to file an Income Tax Return (ITR) to the government to declare their income and pay their taxes. In this article, we will delve into the details of ITR – what it means, who should file it, the different types of ITR forms, and the importance of filing ITR.
What is ITR?
ITR or Income Tax Return is a legal document that is filed with the Income Tax Department by taxpayers to declare their taxable income, claim deductions and exemptions, and pay their taxes to the government.
It is an annual statement of income earned, investments made, and taxes paid by individuals or businesses during a financial year. The ITR forms require taxpayers to provide information about their income, tax liability, and tax paid or payable.
Who should file ITR?
According to the Income Tax Act, every individual or business entity whose total income exceeds the basic exemption limit is required to file an Income Tax Return.
The basic exemption limit varies for different categories of taxpayers. For individuals below the age of 60 years, the basic exemption limit is Rs 2.5 lakhs. For senior citizens (aged 60-80 years), it is Rs 3 lakhs, and for super senior citizens (above 80 years), it is Rs 5 lakhs.
Apart from the basic exemption limit, there are several other situations where an individual or business entity is required to file ITR, such as:
- When a taxpayer has earned income from more than one source, such as salary, rental income, or capital gains.
- When a taxpayer has earned income from a foreign source.
- When a taxpayer has a loss in a financial year and wants to carry forward it to the next financial year.
- When a taxpayer wants to claim a refund of excess tax paid.
Different types of ITR forms
There are several types of ITR forms, and the type of ITR form to be filed depends on the nature of the taxpayer’s income and the category of the taxpayer. The various ITR forms are:
ITR 1 (SAHAJ)
ITR 1 or SAHAJ is the simplest form of ITR, which is applicable to individuals who have income from salary, pension, or interest income. It can be filed by resident individuals whose total income does not exceed Rs 50 lakhs.
ITR 2 is applicable to individuals and Hindu Undivided Families (HUFs) who have income from sources other than business or profession. It is also applicable to individuals who have income from capital gains, foreign assets, or who are partners in a partnership firm.
ITR 3 is applicable to individuals and HUFs who have income from business or profession. It is also applicable to individuals who are partners in a partnership firm.
ITR 4 (SUGAM)
ITR 4 or SUGAM is applicable to individuals, HUFs, and firms (other than LLPs) who have opted for presumptive taxation. It is also applicable to individuals and HUFs who have income from a profession but do not maintain regular books of accounts.
ITR 5 is applicable to firms, LLPs, Association of Persons (AOPs), and Body of Individuals (BOIs).
ITR 6 is applicable to companies that are not claiming an exemption under section 11 of the Income Tax Act.
ITR 7 is applicable to entities who are required to file ITR under section 139(4A), 139(4B), 139(4C), or 139(4D) of the Income Tax Act. These entities include trusts, political parties, research associations, and institutions.
Importance of filing ITR
Filing ITR is not just a legal obligation but also has several benefits. Some of the benefits of filing ITR are:
- Proof of income: ITR serves as proof of income earned by an individual or business entity during a financial year.
- Easy loan processing: Banks and financial institutions require ITR as proof of income before processing loans or credit cards.
- Claiming tax refunds: Filing ITR is necessary to claim tax refunds for excess tax paid.
- Avoiding penalties: Non-filing of ITR or late filing of ITR can attract penalties and legal actions.
ITR or Income Tax Return is a mandatory requirement for individuals and businesses in India to declare their income, pay their taxes, and claim refunds.
The different types of ITR forms cater to the diverse nature of income and categories of taxpayers. Filing ITR has several benefits and is a legal obligation that should not be ignored.
- What is the due date for filing ITR? Ans. The due date for filing ITR is July 31st of the assessment year for most taxpayers. However, the due date may vary based on certain conditions.
- Can I file ITR online? Ans. Yes, ITR can be filed online through the Income Tax Department’s e-filing portal.
- Is it necessary to file ITR if my income is below the basic exemption limit? Ans. It is not mandatory to file ITR if your income is below the basic exemption limit. However, filing ITR can have several benefits and is advisable.
- What is the penalty for non-filing of ITR? Ans. The penalty for non-filing of ITR can range from Rs 1,000 to Rs 10,000, depending on the duration of delay and the taxpayer’s income.
- Can I revise my ITR after filing it? Ans. Yes, ITR can be revised after filing it within a specified time limit. However, the revised return should be filed before the end of the relevant assessment year.