Income tax return tips by CA Nihal Hisaria
What is Income Tax Return (ITR)?
An Income Tax Return (ITR) is a form that taxpayers submit to the Income Tax Department of India, detailing their income, deductions, and tax liabilities for a specific financial year.
Why is Filing ITR Mandatory?
Filing ITR is mandatory under several circumstances:
• Income Threshold: If your total income exceeds the basic exemption limit (e.g., INR 2.5 lakh for individuals below 60 years).
• Foreign Assets: Holding foreign assets or earning foreign income.
• High-Value Transactions: Spending INR 2 lakh or more on foreign travel or paying electricity bills exceeding INR 1 lakh in a financial year.
• Tax Deductions: If TDS or TCS of INR 25,000 or more has been deducted/collected.
• Bank Deposits: Depositing INR 1 crore or more in a current account.
Penalties and Consequences of Not Filing ITR
Failing to file ITR can lead to:
• Late Filing Fee: Up to INR 5,000 under Section 234F.
• Interest on Tax Due: 1% per month under Section 234A.
• Prosecution: Imprisonment ranging from 3 months to 7 years in cases of significant tax evasion.
Benefits of Filing ITR
• Loan and Visa Applications: ITR serves as proof of income.
• Claiming Refunds: Essential for claiming tax refunds.
• Avoiding Penalties: Timely filing helps avoid late fees and interest.
• Financial Record: Maintains a documented financial history.
Types of ITR Forms
ITR Form Applicability
ITR-1 (Sahaj) Resident individuals with income up to INR 50 lakh from salary, one house property, and other sources.
ITR-2 Individuals and HUFs not having income from business or profession.
ITR-3 Individuals and HUFs having income from business or profession.
ITR-4 (Sugam) Individuals, HUFs, and firms (other than LLP) with presumptive income from business or profession.
ITR-5 Firms, LLPs, AOPs, BOIs, etc.
ITR-6 Companies not claiming exemption under Section 11.
ITR-7 Persons including companies required to furnish return under sections 139(4A) to 139(4D).
Due Dates for Filing ITR
• Individuals (Non-Audit Cases): 31st July of the assessment year.
• Businesses (Audit Cases): 30th September of the assessment year.
• Transfer Pricing Cases: 30th November of the assessment year
What is ITR-1 (Sahaj)?
ITR-1, commonly known as Sahaj, is a simplified Income Tax Return form designed for resident individuals with straightforward income sources. It's ideal for salaried employees, pensioners, and those with limited additional income.
Eligibility Criteria for ITR-1
You can file ITR-1 if:
• You're a resident individual (not HUF or company).
• Your total income for the financial year is up to INR 50 lakh.
• Your income sources include:
• Salary or pension.
• One house property (excluding cases with brought-forward losses).
• Other sources like interest from savings accounts, deposits, family pension, etc.
• Agricultural income up to INR 5,000.
Note: Clubbed income (e.g., from a spouse or minor child) is permissible if it falls within the above criteria.
Who Cannot File ITR-1?
You are not eligible to file ITR-1 if :
• You're a Non-Resident (NRI) or Resident Not Ordinarily Resident (RNOR).
• Your total income exceeds INR 50 lakh.
• You have:
• Income from more than one house property.
• Capital gains (short-term or long-term).
• Business or professional income.
• Agricultural income exceeding INR 5,000.
• Income from lottery, racehorses, or legal gambling.
• Foreign assets or foreign income.
• Unlisted equity shares.
• Directorship in a company.
• Deferred income tax on ESOPs from eligible start-ups.
• Tax deducted under section 194N (cash withdrawals exceeding INR 1 crore).
For such cases, consider using ITR-2 or ITR-3 as applicable.
Documents Required for Filing ITR-1
While ITR-1 is an annexure-less form (no documents need to be attached), keep the following documents handy:
• Form 16: Issued by your employer.
• Form 26AS: Annual tax statement.
• Annual Information Statement (AIS): Summary of financial transactions.
• Bank account statements: For interest income details.
• Interest certificates: From banks or post offices.
• Investment proofs: For deductions under sections like 80C, 80D.
• PAN and Aadhaar cards.
Ensure all information is accurate and matches the records to avoid discrepancies.
Due Date for Filing ITR-1
• 31st July of the assessment year (e.g., for FY 2024-25, the due date is 31st July 2025).
Note: The due date may be extended by the Income Tax Department. Always check the official portal for updates.
Key Considerations
• Tax Regime Selection: From AY 2024-25, the new tax regime is the default. To claim deductions (like under 80C, 80D), you must opt for the old regime while filing.
• Bank Account Details: Provide accurate bank details for refunds. Pre-validate your bank account on the e-filing portal.
• E-Verification: After filing, verify your return electronically within 30 days to complete the process.
• Revised Returns: If you discover any errors post-filing, you can file a revised return before the end of the assessment year.
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