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Income Tax Return Filing: A Comprehensive Guide

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Synopsis:

Filing income tax returns is now easier with this comprehensive guide, detailing the benefits of e-filing, various ITR forms, eligibility criteria, and clear, step-by-step instructions to help you file a return before the ITR due date.

In India, all eligible individuals and business entities are required to declare their income by filing income tax returns. This process is designed to enforce conformity with income tax laws while enhancing transparency. In recent years, e-filing of ITR has gained popularity due to its ease and time-saving benefits. For the Assessment Year 2023-2024, the Income Tax Department recorded 8.18 crore ITRs filed by 31st December 2023.

If you want to e-file your ITR, look no further. In this blog, we have everything you need for a smooth ITR filing experience. We’ve covered all types of ITR forms available for different taxpayers as well as a step-by-step guide to ITR filing using the e-filing portal. Whether you are a salaried employee, self-employed, or run your own business, get all the information you need to file your ITR curated in this comprehensive guide.

So let us begin!

Understanding Income Tax Returns in India

Income Tax Return (ITR) is a form used by individuals, businesses, and other entities in India to report their incomes, expenditures, investments, and tax deducted or collected at source to the tax department. ITR filing becomes mandatory when the income exceeds a certain limit fixed by law. Its main purpose is to see that taxpayers pay the right amount of taxes and record their financial transactions.

Besides being useful for compliance purposes, there are several other advantages associated with ITR filing. It acts as evidence of earnings which can be very helpful for obtaining loans or visas or engaging in any other financial dealings requiring such proof. In addition to this, if you file it before the ITR due date, you can claim a refund against the excess tax paid and also set off and carry forward losses.

The ITR filing process has become simpler in India with the arrival of online portals and e-filing systems. There are different types of ITR forms available so that taxpayers can choose one depending on their source(s) of income and category/categories thereof. Let us know more about each type in detail.

Exploring Different Types of Income Tax Returns

  • ITR-1:

    • It is for individuals with total income amounting to ₹50 lakhs or less from salary, pension, house property, other sources (excluding lottery and racehorse winnings), and agriculture income up to ₹5,000.

  • ITR-2:

    • It is for individuals and HUFs with salary, pension, income from house property, capital gains, and other sources (including lottery and racehorse winnings).

    • It includes directors, unlisted equity share investors, RNORs, non-residents, agricultural income over ₹5,000, and foreign income/assets.

  • ITR-3:

    • It is for individuals and HUFs with proprietary business, and professional income, including income from pension, salary, house property, etc.

    • It is also for unlisted equity share investors and partners in firms.

    • This form is to be used if ITR-1, ITR-2, or ITR-4 don't apply.

  • ITR-4:

    • It is for individuals, HUFs, and firms (other than LLPs) with total income up to ₹50 lakhs from business/profession under the presumptive income scheme (sections 44AD, 44AE, 44ADA), plus salary income, pension, one house property, and other sources.

  • ITR-5:

    • It is for firms, LLPs, AOPs, BOIs, AJPs, estates of deceased/insolvent individuals, business trusts, and investment funds.

    • Not for individuals, HUFs, and companies.

  • ITR-6:

    • It is for companies not claiming Section 11 exemption applicable for charitable/religious purposes.

  • ITR-7:

    • It is for entities required to submit tax returns under sections 139(4A) to 139(4F) of the Income Tax Act.

    • This includes trusts receiving income from property held for charitable or religious purposes, political parties with taxable income, various associations and institutions such as scientific research bodies and news agencies, universities and colleges not covered under other provisions, business trusts, and investment funds referred to in Section 115UB.

Who Needs to File Income Tax Returns in India?

In India, it is mandatory for some individuals to file income tax returns even if their taxable income is below the basic exemption limit. Doing so ensures compliance with income tax laws. Here are the situations in which you must mandatorily file an ITR:

  • Basic Exemption Limit: It is necessary to file an ITR when your taxable income exceeds the basic exemption limit. But there may be some cases that require ITR filing even if it is less than this limit.

  • Foreign Assets and Income: Under Section 139(1), a resident having foreign assets like shares, bonds or property abroad or earning through dividends from such investments has to file an ITR.

  • Foreign Travel Expenses: If you spend ₹2 lakhs or more on travelling abroad (for yourself or any other person) within a year, then you have to file an ITR, irrespective of your taxable income level.

  • High Electricity Bills: ITR should be filed where payment of ₹1 lakh or above has been made towards electricity bills during one financial year.

  • Capital Gains Exemption: In case capital gains are exempt under certain sections of the Income-tax Act and gross total income exceeds the basic exemption limit before claiming such exemptions, then it becomes necessary for you to file an ITR.

  • TDS/TCS Deductions: If TDS/ TCS amounting ₹25,000 or higher has been deducted from your income throughout the financial year, then you must submit your ITR.

  • Professional Receipts or Business Receipts: When receipts out of profession exceed ₹10 lakhs or turnover out of business exceeds ₹60 lakhs within one financial year, then you need to make sure that you have filed your ITR.

  • High Savings Deposit: An individual is required to file an ITR if there are aggregate deposits of more than ₹50 lakhs in one or more savings bank accounts during the previous year.

  • Current Account Deposits: In case you are self-employed and are depositing ₹1 crore or above in your current account within a year, then you must file an ITR.

  • Tax Refund Claims: If excess tax has been deducted from your income, then filing of ITR is required to claim the refund.

Well, if you fall into any of the above categories, here’s how you can file your ITR.

Steps to File Income Tax Returns

  • Step 1: Login

Firstly, visit the income tax e-filing portal and click on ‘Login’. Enter your PAN and click ‘Continue’. Check the safety message and input your password to continue.

  • Step 2: Go To ‘Income Tax Returns’

Click on ‘e-File’ and choose ‘Income Tax Returns’. Then click ‘File Income Tax Return’.

  • Step 3: Choose ‘Assessment Year’

Choose the appropriate Assessment Year (AY) according to the relevant financial year. Make sure that you have selected the mode of filing as `Online' and return type, whether original or revised.

  • Step 4: Select The Status

Select your status from individual, HUF, etc. Then press 'Continue'.

  • Step 5: Pick The ITR Type

Select the correct ITR form between ITR-1 to ITR-7, depending on income sources & other conditions.

  • Step 6: Choose the Reason For ITR Filing

Specify the reason for filing an ITR i.e., whether due to exceeding the basic exemption limit or any other mandatory reason.

  • Step 7: Validate Pre-filled Information

Check & validate all pre-filled details such as Aadhaar, PAN, personal info, bank details, etc. Review and ensure that all incomes, exemptions & deductions are properly disclosed.

  • Step 8: E-Verify ITR

At last, verify your return through methods such as Aadhaar/Net Banking/EVC or by sending ITR-V to Bangalore CPC. This must be completed within 30 days.

It is important to note that the ITR filing process is considered to be completed only after successful verification.

Important ITR Filing 2024 Dates and Penalties

The due date for ITR filing 2024-25 is July 31, 2024. However, if you miss this deadline, you can still file a belated return before December 31, 2024. You must keep in mind that filing after the ITR due date attracts interest and penalty under Section 234A and Section 234F, respectively.

The interest for late filing of returns is calculated at 1% per month or part of a month on the outstanding tax amount. The period starts from the ITR last date (July 31, 2024) until the actual filing date.

As far as the penalty is concerned, if you file ITR after the due date but before December 31, 2024, the penalty is ₹5,000. If you file after December 31, 2024, the late ITR penalty increases to ₹10,000. For individuals with a taxable income below ₹5 lakhs, a penalty of ₹1,000 is applicable if the return is not filed by the due date, regardless of whether any tax is owed.

Conclusion

According to recent data from the CBDT, a significant number of taxpayers have already filed their returns well ahead of the deadline to avoid the last-minute rush. As of May 5, 2024, approximately 829,000 ITRs for the Assessment Year 2024-25 have been submitted. Prompt ITR filing ensures timely fulfilment of your legal obligation.

Therefore, whether you are a salaried employee, investor, or own a business, filing your ITR by July 31 is essential. It not only avoids penalties but also contributes to a smoother ITR filing process, reducing stress and ensuring compliance with the law. Make the most of the available time and follow the simple steps provided in this blog to complete the e-filing of your ITR.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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Frequently Asked Questions

How to check the income tax return status?

Answer Field

To check your income tax return status, visit the Income Tax e-filing portal and click on “Income Tax Return Status.” Enter your acknowledgement number along with a valid mobile number. Verify your identity by entering the 6-digit OTP received on your mobile. This process allows you to track the status of your filed income tax returns.

What documents are required to file ITR?

Answer Field

When filing your ITR, you’ll need essential documents such as your PAN (Permanent Account Number), Aadhar Number, Form 26AS (tax credit statement), bank account details, challan of advance tax or self-assessment tax (if applicable), and details of the original return (for revised filings).

What are the consequences of filing income tax returns late?

Answer Field

Late income tax returns attract a penalty of ₹1,000 under Section 234F if taxable income is below ₹5,00,000. For higher income, the late ITR penalty goes up to ₹10,000. Further, interest at 1% per month is also applicable on the unpaid due under Section 234A.

Can I file an income tax return after the due date?

Answer Field

Yes, you can file a belated return after the deadline has passed. For instance, in the case of AY 2024-25 where the ITR last date is 31st July 2024, you can file it as a belated return anytime up to 31st December 2024.

How can I file a late income tax return?

Answer Field

If you miss the ITR last date of 31st July, you can still file a belated return on or before 31st December of the relevant assessment year. To file a belated return, you must visit the e-filing portal and select the ‘belated return’ option while entering the details.

How can I avoid filing income tax returns late in the future?

Answer Field

To avoid late filing of income tax returns in future, you can set a reminder for ITR due dates or take assistance from professionals such as tax consultants and chartered accountants, if required.

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