Income Tax Return: An Overview

What is Income Tax Return?

An Income tax return (ITR) is a form used to file information about your income and tax to the Income Tax Department. The tax liability of a taxpayer is calculated based on his or her income. In case the return shows that excess tax has been paid during a year, then the individual will be eligible to receive an income tax refund from the Income Tax Department.

As per the income tax laws, the return must be filed every year by an individual or business that earns any income during a financial year. The income could be in the form of a salary, business profits, income from house property or earned through dividends, capital gains, interests or other sources.

Tax returns have to be filed by an individual or a business before a specified date. If a taxpayer fails to abide by the deadline, he or she has to pay a penalty. 

Is it mandatory to file Income Tax Return?

As per the tax laws laid down in India, it is compulsory to file your income tax returns if your income is more than the basic exemption limit. The income tax rate is pre-decided for taxpayers. A delay in filing returns will not only attract late filing fees but also hamper your chances of getting a loan or a visa for travel purposes.

Who should file Income Tax Returns?

According to the Income Tax Act, income tax has to be paid only by individuals or businesses that fall within certain income brackets. Mentioned below are entities or businesses that are required to compulsorily file their ITRs in India:

a) All individuals, up to the age of 59, whose total income for a financial year exceeds Rs 2.5 lakh. For senior citizens (aged 60-79), the limit increases to Rs. 3 lakh and for super senior citizens (aged 80 and above) the limit is Rs. 5 lakhs. It is important to note that the income amount should be calculated before factoring in the deductions allowed under Sections 80C to 80U and other exemptions under section 10.

b) All registered companies that generate income, regardless of whether they've made any profit or not through the year.

c) Those who wish to claim a refund on the excess tax deducted/income tax they've paid.

d) Individuals who have assets or financial interest entities that are located outside India.

e) Foreign companies that enjoy treaty benefits on transactions made in India.

f) NRIs who earn or accrue more than Rs. 2.5 lakh in India in a single financial year.

Documents required to file ITR

It is important to have all the relevant documents handy before you start your e-filing process.

Bank and post office savings account passbook, PPF account passbook  
Salary slips  
Aadhar Card, PAN card  
Form-16- TDS certificate issued to you by your employer to provide details of the salary paid to you and TDS deducted on it, if any  
Interest certificates from banks and post office

Form-16A, if TDS is deducted on payments other than salaries such as interest received from fixed deposits, recurring deposits etc. over the specified limits as per the current tax laws  
Form-16B  from the buyer if you have sold a property, showing the TDS deducted on the amount paid to you  
Form-16C  from your tenant, for providing the details of TDS deducted on the rent received by you, if any  
Form 26AS - your consolidated annual tax statement. It has all the information about the taxes deposited against your PAN  
a) TDS deducted by your employer  
b) TDS deducted by banks  
c) TDS deducted by any other organisations from payments made to you  
d) Advance taxes deposited by you  
e) Self-assessment taxes paid by you  
Tax-saving investment proofs  
Proofs to claim deductions under sections 80D to 80U (health insurance premium for self and family, interest on education loan)  
Home loan statement from the bank

Types of ITR Forms

There are 7 types of ITR Forms:-

ITR-1form can be used by Individuals who have less than Rs.50 Lakhs of annual income earned by way of salary or pension and have one house property only.  

ITR-2form must be filed by individuals who are NRIs, Directors of Companies, shareholders of private companies or having capital gains income, income from foreign sources, two or more house property, income of more than Rs.50 lakhs.  

ITR-3form must be filed by individuals who are professionals or persons who are operating a proprietorship business in India.  

ITR-4form can be filed by taxpayers enrolled under the presumptive taxation scheme. To be enrolled on the scheme, the taxpayer must have less than Rs.2 crores of business income or less than Rs.50 lakhs of professional income.  

ITR-5form must be filed by partnership firms, LLPs, associations and bodies of individuals to report their income and computation of tax.  

ITR-6form must be filed by companies registered in India.  

ITR-7form must be filed by entities claiming exemption as charitable/religious trust, political parties, scientific research institutions and colleges or universities.

Penalty for Late Filing Income Tax Return

Taxpayers who do not file their income tax return on time are subject to penalties and charged interest on the late payment of income tax. Also, the penalty for late filing income tax returns on time has been increased recently. The penalty for late filing income tax return is now as follows:

Late Filing between 1st August and 31st December - Rs.5000  
Late Filing After 31st December - Rs.10,000  
Penalty if taxable income is less than Rs.5 lakhs - Rs.1000