What is Income Tax Return?

Both taxpayers are expected to file reports in an appropriate form known as the Income Tax Return or ITR about their income received and tax payable. 7 separate ITR formats (ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7) have been notified by the income tax department depending on the category of the assessee, the sum of income, source of income, etc.

Why should you file Income Tax Return?

  1. If any of the requirements listed below apply to you, it is mandatory to file an ITR in India.
  2. If you have more than one source of sales, please. If you have already generated income from capital gain, you have to file ITR, apart from, claim, daily income such as salary.
  3. If you would like to receive a tax refund applied to the Department of Income Tax, ITR filing is mandatory.
  4. Regardless of benefit or loss, ITR reporting is mandatory for corporations or companies.
  5. If your adjusted annual revenue is higher than 2.50 Lakh, for a person below the age of 60 years, for a person under 80 years of age but over 60 years of age, 3 Lakh, and for a person over 80 years of age, 5 Lakh.
  6. If you wish to apply for a loan or visa, you must file an ITR since it is a required document to receive either of these.
  7. If you have spent or received in the financial year from foreign sources, ITR reporting is compulsory.

 Changes in Income Tax Return Forms due to Covid19 pandemic.

Due to the Covid-19 pandemic, taxpayers, including people, the Hindu Undivided Families, professionals and businesses, will benefit from contributions or savings made during the first quarter of FY 2020-21 ending on 30 June the recent amendments.

  • Both ITR forms will have a dedicated room where you will explain the investment spending made in FY 2020-21 during the quarter ending June 30 and get it counted for deductions or exemptions when filing your FY 2019-20 tax return.
  • The ITR type 1, ITR-2, ITR-3 and ITR-4 also require information from those taxpayers who have paid more than 1 Lakh for an energy bill in a year/ deposited ⁇ 1 Cr or more in the bank account/ expended 2 Lakh or more on international travel, along with expenses of Q1.
  • In ITR-1, a new form of government employee ‘NA’ has been introduced along with the State and Central Government.
  • In the case of Aadhaar, the PAN number is optional in ITR-4.
  • In Section 44D, along with electronic approval, a new electronic mode provision has been introduced, and presumptive profits have been lowered from 8 per cent to 6 per cent.
  • In Section 44AE, for presumptive revenue from goods carriages, the validation of ‘number of vehicles does not exceed 10 at any point during the year’ was added instead of the maximum ceiling.
  • In the case of a non-repatriable primary modification beyond the specified limit, the new ITR-3, 5, and 6 often request clarification from the assessee about the payment of extra income tax.
  • The ITR-6 has a new drop-down utility option under Section 115BAA and 115BAB to opt for the 22 per cent concessional regime.

Which Income Tax Return to File?Income Tax Return Forms

To understand which Income Tax Return form applies to you, let’s go through the applicability of each form:

Income Tax Return -1

Income Tax Return-1 is known as SAHAJ as well. For an Indian resident, it is the most simple return type. ITR-1 must be submitted by the resident person whose gross compensation comprises one or more of the following.

  • Complete income does not surpass 50 crores.
  • Except where the deficit is taken over from the previous year, whether you have revenue from just one household property.
  • Gain from cultivation does not exceed 5,000.
  • There is no financial benefit or industry or technical profits.
  • There is income from other outlets, except lottery and horse racing revenue.

You are unable to register Income Tax Return-1 if:

  • You are a business owner, whether you own foreign assets or have produced foreign income.
  • If you are a local, not a regular resident (RNOR) or a non-resident.

Income Tax Return-2

In the following terms, Income Tax Return-2 is applicable:

  • When the overall income reaches 50,00,000, including one or more of these three sources of income; wage income, family income, and other sources of income (including Lottery and winning Horse Race).
  • If you have more than 5,000 in agricultural revenue.
    Whether you’re a company’s owner.
  • If, at some point during the F.Y., you kept interested in unlisted shares. Revenue from Capital Gains is available.
  • You’ve got international investments or overseas revenue.
  • You are either a resident or a non-resident, not an ordinary resident (RNOR).

However, whether you have corporate or technical profits, Income Tax Return-2 would not extend to you.

ITR-3

ITR-3 is only applicable to persons or a Hindu Undivided Family who take out some enterprise or occupation that is proprietary. The qualifying earnings are:

  • In a scenario where the assessee is an actual business owner.
  • As a partner in a business, if you have money.
  • If you are taking out some business or career.

Income Tax Return-4

Income Tax Return-4 is known as Sugam, too. All those assessees who have opted for a presumptive income tax regime or are a person or HUF or partner company (except LLPs) carrying on some sector or occupation and have an annual turnover of up to 2 Cr.

In any of the following instances, however, you can not file Income Tax Return-4:

  • If the overall revenue reaches 50 Lakh or has some source of income outside of India.
  • You have revenue from more than one house or another international asset that you possess.
  • During the F.Y., you are a director of a corporation or have kept unlisted investments.
  • If you are a local, you are not an ordinary or non-citizen resident.
  • If you are taxable on another individual’s taxes, and in the same respect, the tax is exempt in the hands of another person.

Income Tax Return-5

The ITR-5 includes LLPs (Limited Liability Partnership), AOPs (Association of Persons), AJPs (Artificial Juridical Persons), BOI(Body of Individuals), Business Trust and Pension Fund, the Deceased’s Estate and the Insolvent’s Estate. In this case, there is no bar to the extent of sales or profit/loss.

Income Tax Return-6

ITR-6 is just electronically filled in. The revenue from land owned for charitable or religious reasons is for businesses, except those seeking immunity under Section 11.

Income Tax Return-7

ITR-7 refers to those businesses which are required under Section 139 and its various subsections such as 139(4A), or 139(4B), or 139(4C), or 139(4D), or 139(4E), or 139(4E) or 1399(4E) to supply their income tax return (4F).

  • Under Section 139(4A), any individual, solely or in part for charitable or religious reasons, has derived income from property owned by a trust or any other legal duty.
  • Under Section 139(4B), political parties are protected in situations where, without considering the amounts covered under Section 139(4A), the taxable value approaches the tax-free income threshold.
  • ITR is obligatory under Section 139(4C) for news media, organisations or individuals referred to in Section 10(23A), any fund or organisation or university, or any other educational organisation, and any scientific research organisation, medical hospital or medical college.
  • Those educational schools, universities, or colleges that are not covered by any other section 139 shall be covered under Section 139(4D).
  • Section 139(4E) extends to those undertakings and trusts which are not required under any other clause of this section to provide revenue or losses.
  • Section 139(4F) mandates return reporting for the funds referred to in section 115UB.

New and simpler Income Tax Return forms for filing FY19 income tax returns have been notified to the Central Board of Direct Tax (CBDT) via the Income Tax Department. Please bear in mind the following points:

  1. Department issued seven ITR forms for various categories of ratings and different types of revenue.
  2. E-Filing of income tax Compulsory return: ITR must be filed only on the income tax website using the e-filing facility. The last ITR filing date for people is July 31 of each year, unless extended.
  3. Quite few ITR reporting exemptions: CBDT has approved the following taxpayers to complete ITR Form-1 (Sahaj) and ITR Form-4 (Sugam) in paper form:
    A person who is 80 years of age or older at some point within the past year
    A person or HUF whose income does not exceed 5 Lakh and who, in the return of income, has not requested any refund.
  4. The person signing the tax return must assert his ability to file the tax return and prepare and validate it.
  5. E-Filing of the income tax return about employee stock options: To ensure accurate documentation of capital gains or expenses, employers would require a valuation estimate on the selling of unlisted shares. In the current type, a thorough break-up of certain transactions is also needed.
  6. Late E-tax reporting fines: This year’s budget announced penalties for the late filing of ITRs. As a result, until they pay the penalty first, the income-tax software will not allow assessees to file their returns. For specifics of tax filing delays, specific new lines have been applied to the new ITR Form.
  7. If the tax return is filed after the due date (i.e. 31 July) and before 31 December of the following FY, a fine of ⁇ 5000 is payable. If the tax return is filed after 31 December of the following FY, the fine payable will be 10,000.

New Income Tax Return 1 Form (Sahaj) Details

The new Income Tax Return-1 has been introduced with many changes, making it a simplified one-page form. It has five parts, focusing on more attention to detail and break up of all income sources. The new Sahaj form has been explained below.

Part A- General Information

This section of ITR Form 1 includes the following information:

  • PAN Card is mandatory
  • Aadhaar Number is mandatory for the taxpayer.
  • Personal details of taxpayer such as name, address, mobile number, type of employment

Part B- Gross Total Income

This section of the form explains the details of the income earned during the year, which includes the following:

Salary/ Income:

  • Salary
  • Allowances not exempt
  • Value of perquisites
  • Profit in place of salary
  • Deduction under Section 16

House Property

  • Gross Rent received
  • Tax Paid to local authorities.
  • Interest payable on borrowed capital

Part –C -Income Tax Deductions as per Income Tax Act

Under this section of ITR Form 1, a taxpayer can claim tax deductions as per the Income Tax Act under the following Sections:

  • Section 80C (deduction asserted in respect of PPF, LIC premium, tuition fees, EPF with a cumulative deduction cap of 1.50 Lakh)
  • 80D segment (deduction claimed against medical insurance premium and health check-up)
  • 80G segment (deduction claimed against donations of any recognised society)
  • 80TTA segment 80 (deduction claimed against interest earned on a savings account)

Part D- Computation of Tax payable

An estimate of the amount of tax paid by the taxpayer is contained in this portion of the form. As per the Income Tax Slabs for FY 2016-17, taxpayers are expected to pay tax on their income at a marginal interest rate. To compute the tax liability following information is required to be provided:

  • Tax payable on total income as per Income Tax Slabs
  • Rebate under Section 87A
  • Cess
  • Relief under Section 89 (I)
  • Interest under Section 234A, 234B, 234C
  • Fees under Section 234F
  • Income exempt from tax
  • Agriculture Income

Part E- Other Information

  • Bank account data such as IFSC bank branch code, bank name, bank account number, cash deposits within the previous year if the gross cash deposit exceeds 2 Lakh during the year.
  • Advance tax, Self Assessment Tax Payments info
  • Details including the date of deposit of the BSR code, Challan serial number, amount of tax charged
  • Details of the TDS and TCS gave by the deductor/employer/ collector (as per Form 16/ 16A/27D)
  • Details like the deductor’s TAN, name of the deductor/collector, number subject to the tax deduction, tax deduction/year of collection
  • Details required for all assessees to file ITR PAN
  • Aadhaar – for private taxpayers, obligatory. In the case of non-individual taxpayers, Aadhaar is compulsory for the authorised person filing the return.
    Personal information such as name, address, cell phone number, work type
  • Wage income, householding, other sources (such as interest), capital returns, occupation, agriculture
  • Section VI-A, chapter 10 deductions and different portions such as 80C to 80U, including 80D, 80G, 80TTA
  • Details of bank account (for all accounts held in the name of the taxpayer) – Bank, branch, IFSC code, number of the account
  • Information of cash deposits made from 9 Nov to 31 Dec 2016 of old demonetized notes of more than ⁇ 2 Lakh
  • At the time of e-filing, the advance tax charged, self-assessment tax paid, TDS and TCS will be changed immediately and do not need to be entered.

FAQs for ITR Forms

Which ITR form to file for individuals?

For individuals generating income from salary/pension, one house property, and income from other sources with annual income below ₹ 50 Lakh, ITR-1 is applicable. However, if the income from capital gain is included, or annual income exceeds ₹ 50 Lakh, then ITR-2 is applicable.

What are ITR 1 ITR 2?

In ITR-1, the individual is not earning income from Capital Gain, or Lotteries or Horse Races. While in ITR-2, the individual is either earning from Capital Gain, or Lotteries or Horse Races. Otherwise, the annual income must be exceeding ₹ 50 Lakh.

Who can file ITR 3?

ITR-3 is applicable for those individuals and HUFs carrying any business or profession or earning as partners in a partnership firm (except LLPs).

What are the benefits of filing my return of income?

Some key benefits of filing ITR are:

  • It is a mandatory document when you want to apply for a loan or visa.
  • You can claim an income tax refund.
  • The filing of ITR helps avoid penalties.
  • You can carry forward some of your losses to the next year.
  • It serves as valid Income Proof wherever required.

What precautions should be taken while filing ITR? Income Tax Return

Some essential precautions to keep in mind while filing ITR are:

  • Keep in mind the due date and make sure to file the return before it.
  • Download 26AS and assess actual TDS and TCs paid.
  • Make sure to organize the relevant documents while filing the return.
  • Identify the correct return form applicable based on your income source.
  • Do a couple of recalculations or use an online income tax calculator to ensure you have properly included all the relevant income and deductions. Your tax liability or refund is accurate.
  • Carefully check other details like PAN, name, address, etc., to make sure they are accurate.

To know more about the Income Tax Return forms, visit the Dialabank Website, and you can also give us a call on 9878981144.

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