Introduction of ITR
Why File an Income Tax Return (ITR)?
Filing an Income Tax Return (ITR) is a legal obligation in India for individuals and entities with taxable income. It serves several important purposes:
Income Declaration: ITR filing is a way to declare your total income, including salary, business income, investments, and other sources. This helps the government track your financial transactions.
Tax Payment: It ensures that you pay the correct amount of tax based on your income and applicable tax slabs. You can also claim tax refunds if you have paid excess tax.
Evidence of Financial History: An ITR acts as a record of your financial history and can be essential when applying for loans, visas, or government tenders.
Legal Requirement: Failure to file ITR can result in penalties and legal consequences, including prosecution under the Income Tax Act.
Claiming Tax Benefits: To claim deductions and exemptions on investments, expenses, and loans, you must file an ITR. Visitofficialwebsite
Importance of ITR Filing
Filing an ITR is not just about fulfilling a legal obligation; it also offers several financial advantages:
Claiming Refunds: If you have paid excess tax through TDS (Tax Deducted at Source) or other means, you can claim a refund by filing an ITR.
Compliance with Tax Laws: Filing an ITR ensures that you are in compliance with Indian tax laws, helping you avoid legal issues and penalties.
Loan Approval: Many banks and financial institutions require an ITR as proof of your financial stability when considering your loan applications.
Visa and Immigration: When applying for visas or immigration to other countries, your ITR acts as evidence of your financial standing and tax compliance.
Carry Forward of Losses: You can carry forward capital losses or business losses to offset against future gains, provided you have filed ITR.
Eligibility for Filing ITR
Individual Taxpayers
In India, individuals, Hindu Undivided Families (HUFs), and entities like companies, firms, and associations are required to file an ITR if their income exceeds the prescribed limit. Individual taxpayers are further categorized into different groups based on their sources of income and the ITR forms they need to use. The following individuals must file an ITR:
Individuals with Taxable Income: If your total income for the financial year is above the basic exemption limit, you are required to file an ITR.
Non-Individuals: Companies, firms, and associations are mandatorily required to file ITR, regardless of their income.
Individuals Owning Foreign Assets: Individuals who own foreign assets or have financial interests in entities outside India must file ITR.
Claiming Tax Refund: Even if your income is below the taxable limit, you should file an ITR if you want to claim a tax refund due to excess TDS or advance tax payments.
Types of Income
The following types of income need to be declared in your ITR:
Salary Income: Income from your employment, including basic salary, allowances, bonuses, and perquisites.
House Property Income: Rental income from owned properties.
Business or Professional Income: Income from a business, trade, or profession.
Capital Gains: Profit earned from the sale of capital assets, such as property, stocks, or bonds.
Other Sources: Income from other sources, such as interest, dividends, and lottery winnings.
Agricultural Income: In most cases, agricultural income is exempt from income tax, but it must be declared.
Types of ITR Forms
The Income Tax Department has designed several ITR forms to cater to different categories of taxpayers and income sources. Choosing the right ITR form is crucial to ensure accurate filing and avoid complications. Here are the commonly used ITR forms:
ITR-1 (Sahaj): This form is for individuals with income from salary, one house property, and income from other sources (like interest income). It’s not for individuals with income from business or profession.
ITR-2: Suitable for individuals and Hindu Undivided Families (HUFs) with income from multiple sources, including salary, house property, capital gains, and foreign assets.
ITR-3: Intended for individuals and HUFs with income from business or profession, including income from salary, house property, and other sources.
ITR-4 (Sugam): This form is for individuals, HUFs, and firms (other than Limited Liability Partnerships) with presumptive income from business or profession, where turnover does not exceed Rs. 2 crores.
ITR-5: Applicable to firms, Limited Liability Partnerships (LLPs), Association of Persons (AoPs), Body of Individuals (BoIs), and artificial juridical persons.
ITR-6: For companies, except those claiming exemption under Section 11 (income from property held for charitable or religious purposes).
ITR-7: Reserved for persons, including companies, who are required to furnish a return under Section 139(4A), Section 139(4B), Section 139(4C), and Section 139(4D).
Documents Required for ITR Filing
PAN (Permanent Account Number): Your PAN card is your unique identification number and is mandatory for ITR filing.
Aadhaar Number: Linking your Aadhaar number with your PAN is essential for ITR filing. You can also use Aadhaar for e-verification of your ITR.
Bank Account Details: You will need the bank account details where you want to receive any tax refunds.
Form 16: If you are a salaried individual, your employer will provide Form 16, which details your salary, TDS deductions, and other income.
Other Income Documents: For income from sources other than salary, such as rental income, you need documentation like rent receipts, property details, and bank statements.
Where and how do I file income tax returns
You can file ITR (Income Tax Return) by 2 modes
- Online
- Income tax e-filing website
- ERI (e-Return Intermediaries): these are government approved intermediaries for income tax filing. eg: Quicko
- Offline
- Preparing and Submitting ITR to the nearest income tax office
Basic Documents Required to file ITR:
- PAN (Permanent Account Number)
- Aadhaar
- Form 16
- Tax Credit Statement Form 26AS
- Bank Statement
- Other supporting documents
Steps to file e-file your ITR
- Go to income tax e-filing website
- Log in with your user ID, password, date of birth and CAPTCHA
- Navigate to e-file
- click on “Prepare and Submit ITR online”
- Select ITR form you are required to file
- The ITR form you are required to file will vary based on your income situation and residential status.
- Use Know your ITR Form tool to find out which ITR your should file
- Fill in your income details
- or you can simply upload your Form 16 provided by your employer.
- Add all your incomes
- use Tax credit statement Form 26AS, it provides details of taxes deducted from taxpayer’s income.
- Claim deductions
- To reduce the burden on the taxpayer, the income tax department allows deductions under various sections. some of the commonly used deductions are
- 80C for Investments, PPF, ELSS, interest income, family pension, life insurance, home loan repayment, children tuition fees etc. The maximum deduction limit is INR 1.5 Lakh u/s 80C.
- 80D for medical insurance, medical expenses, etc.
- 80E for interest on education loan
- 80EE for first time home buyers
- You can claim deductions for allowances given by your employer. eg: HRA (House Rent Allowance), LTA (Leave Travel Allowance), Convenience Allowance, etc.
- To reduce the burden on the taxpayer, the income tax department allows deductions under various sections. some of the commonly used deductions are
- Calculate your Net taxable income
- Net Taxable income = Total income for FY — Exempt income — Deduction
- Calculate your tax liability
- apply the income tax slab rates on your Net Taxable income
- Add surcharge (if applicable)
- Add cess on your total tax liability
- Pay Tax dues
- Pay your tax dues as self-assessment tax. Self Assessment tax is any pending tax liabilities at the end of the financial year.
- If you have paid additional tax during the FY in the form of TDS deducted or advance tax payments, you can request a tax refund from the Income tax department.
- Submit your ITR
- After successful submission of ITR, you will receive ITR-V (Acknowledgment).
- You are required to e-verify your ITR.
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Auriga is an Indian company that offers various financial and accounting services, including assistance with filing Income Tax Returns (ITR) in India. Here’s how Auriga Accounting can help you file your ITR in India:
Tax Computation: Auriga Accounting can help you calculate your total taxable income by considering various sources of income, deductions, and exemptions. They will ensure that you pay the correct amount of tax as per Indian tax laws.
Documentation: They can assist you in gathering and organizing all the necessary documents and financial statements required for filing your ITR, including salary slips, bank statements, investment details, and any other relevant paperwork.
Filing ITR Forms: Auriga can help you choose the appropriate ITR form based on your income sources and financial situation. There are different ITR forms for different types of taxpayers, and selecting the correct form is crucial to ensure compliance with the tax laws.
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