ITR Filing Guide

What is ITR (Income Tax Return)?

An income tax return is a form where taxpayers declare their taxable income, deductions, and tax payments to the income tax department. The form is filled by the taxpayer for the previous year’s income.

For example, if the gross total income of the assessee (one who files for income tax return) during the previous year exceeds the basic exemption limit (i.e. Rs 250000 and the person being below 60 yrs.) then an income tax return is filed by the taxpayer to declare his/her gross total income includes various tax exemptions and deductions paid during the previous year.

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What is ITR (Income Tax Return) Filing?

It is a social & moral duty for every Indian citizen to file for a tax return. Based on this document, the amount earned or spend by the citizen is determined and it provides a platform for the assessee to claim a refund.

  • Filing returns reflect the responsibility of the citizen – Citizens who file income tax return on time gives an impression that he has paid the tax which saves himself/herself from penalties that are levied by the income tax department for non-payment of tax
  • Filing returns act as a mandate – If suppose a person is looking for the registration of the immovable properties then he/she have to submit the tax return proof of the last 3 years, otherwise, he/she will not be able to buy the property.
  • Finance companies ask for ITR for providing loans - For any type of loans, financial institutions like ZipLoan, HDFC banks, etc look for ITR as it is one of the eligibility criteria required that helps to understand the credit taking capacity of the borrower.
  • Claim adjustments for the extra deductions – help the assessee to get the additional money that has been deducted as taxes.

How to File An Income Tax Return?

Following are the steps for filing an income tax return

Step 1: Checklist of all the documents required for income tax return filing

  • Form 16: Form 16 is issued by the employer. It is a tax document that carries all the information, required by the salaried individual to file their income tax returns. It is proof that the employer has deducted TDS (Tax deducted at source) on your salary. It has two parts, part A and part B
    • Form 16 part A – Detailed summary of TDS deductions on the monthly salary is shown in the part A. It comprises PAN (Permanent Account Number), TAN (Tax deduction & collection account number) of both employer and the employee, and other details like name, address, assessment year, time spent with the employer, etc.
    • Form 16 part B – Comprise deductions such as Life insurance premium, EPF, PPF, NSC, etc. claimed under Section 80 C of the Income Tax Act.
  • Form 26 AS –It contains the list of all income received and taxes paid during the year. It is the summary of the Tax Credit Statement and as per the notification by CBDT on May 2020, it will contain details like:
      • Aadhaar Number
      • Property and Share transaction details
      • Status of Proceeding with ITD
      • Status of IT refund/demand
  • All Income statements and tax-saving investments
    • Salary slips and Form 16/16A
    • Income from dividends and sale of investments
    • Income from the sale of the property and any other income earned by the assessee during the year
    • If salaried, proof of tax-saving investments given to the employer
    • Exceptions like donations can be included while filing returns
  • Expenses and reimbursements submitted to the employer or claimed as a self-employed or freelancer
    • Reimbursements accounted by the employer in case of a salaried person
    • Certain expenses like fuel, electricity, broadband can be claimed as the deduction in case of freelancer/self-employed
    • Depreciation claimed on the assessee computer/laptop/mobile/tablet/vehicle, etc.

Step 2: Check Which ITR Form to Be Filled

Different ITR forms are depending upon the category and the more common of them are:

  • ITR 1 - It is also called as Sahaj. Here the individual should be a resident, having income from salaries, interest, rent from property, etc. and having total income of up to 50 lakh
  • ITR 2 – Individuals or HUFs not having income from gains from profession or profits from the business
  • ITR 3 – Individuals or HUFs having income from gains from profession or profits from the business
  • ITR 4 – It is also called as Sugam. It includes estimated income from business or profession

Step 3: Tax Liability Calculation

If the individual is liable to the tax as he/she is above the minimum tax threshold then he/she should calculate the actual tax liability for the year while filing the ITR form. Many sites have an ITR calculator where it can be checked.

Step 4: Filing of Income-tax Return

  • After filing the ITR form, filing can be done either through online or offline
  • XML file of the form need to be generated and should be saved in the computer
  • Register on the Income Tax’s Department e-filing website if the applicant is a new user or Login in case of the existing user
  • The XML file will be uploaded to generate an acknowledgement termed as ITR-V

Step 5: Verification of the Income Tax Return (Online/ Offline)

  • In case of Offline filing – ITR V to be downloaded, printed, and signed in blue ink and should be sent to the CPC Bangalore within 120 days from the day of filing the return
  • In case of Online filing - verification of the return can be done in 5 ways:
    • Net banking – after login select ‘income tax e-filing’, select return to verify from Income Tax site
    • Aadhaar OTP – Aadhar number should be linked to PAN and mobile number
    • EVC – Electronic verification 10 digit code to be generated at the ATM which is valid for 72 hours
    • Verification through pre-validated Demat account
    • Verification through a pre-validated bank account

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I approached Ziploan for an equipment finance loan. Their eligibility criterion was easy to fulfill because it required only 2 years ITR and 10 lacs of annual banking credit.

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