Many people working in private, aided and government sectors and earning the money. We have a certain limit for the earnings and if we cross the limit we need to pay the tax to the government.
Income Tax Return (ITR) is a form for reporting gross taxable income from different sources, claiming tax deductions and declaring net tax liability to the income tax authority. ITR is filed to the income tax department by a salaried or self-employed individual, Hindu Undivided Family (HUF), companies or firms.
Filing of income tax return is an obligation to be met by every taxpayer whose gross total income from salary, business or any other sources exceeds the specified exemption limit set by the central government. Nowadays everybody has the access to the internet. People are habitual to do all the government office activities on online as it is easy, flexible and user-friendly.
So the Income Tax Department has also initiated the process of e-filing for the purpose of creating a tax system that makes the taxpayer’s life easy. In this article, we look at the e-filing process and various benefits of e-filing income tax returns.
Methods of Filing Returns
To start with, let us understand the various methods through which returns can be filed:
- Manual Filing – This is the traditional method of filing returns in which taxpayers file returns manually by visiting the income tax office with filling up all the required documents and taking a photo copy of it.
- E-Filing – For taxpayers whose schedule is too tightly packed to file returns; an agent, a chartered accountant or a firm could take the responsibility of formulating and submitting the returns on his/her behalf. Even the taxpayer himself can do this process.
E-filing Tax Returns:
Everyone falling under the tax bracket has to file Income Tax Returns in July of the assessment year. It applies to those too whose tax liability got reduced to nil due to tax exemptions and deductions.
Those who earn less than the tax exemption limit of Rs.250,000 are also required to file any tax returns. People think that we are within the tax bracket and there no need to file the tax returns but they should also need to do the tax filing.
The Income Tax Return filing receipt serves as an important document. Also, it is much more detailed than the Form 60. Form 60 only has information pertaining to your salary account. But ITR receipt has complete information regarding your income from other sources.
With the facility of e-filing now available, the job of filing tax returns has become even more easy, safe, quick, and convenient. Though it is only compulsory for people whose taxable income exceeds Rs.500, 000, anyone can e-file their tax returns.
Who is required to file ITR?
- A person with an age lesser than 60 years has an annual income greater than Rs.2.5 lakh.
- A person with an age between 60 years and 80 years and has an annual income of Rs. 3 lakh or more.
- A person who is above the age of 80 years and has an annual income of more than Rs. 10 lakh.
- A company or an organization is bound to file for an income tax return no matter if the company is in loss or profit.
- If there is a loss which you want to carry forward under the head of income.
- If a resident Indian has an asset or any financial interest in an entity situated outside the geographic territory of the country.
- If an individual applies for a loan or a visa, a proof of filing tax returns might be required.
- If an individual receives income from property that is held under any kind of trust for charitable purposes or any research association, educational centre or any medical centre, trade union or any non-profit university.
- If a non-resident Indian has his/her income sources from India, then he/she is also liable to pay the taxes and also to file Income Tax Returns.
Types of ITR Forms
On the Income Tax Department of India website, there are different forms that can be used to file income tax returns based on different income sources and types of taxpayers (resident/non-resident/individual/non-individual, etc.).
As of Assessment Year 2019-20, there are seven forms available from ITR-1 to ITR-7. Some of these forms might be longer than others and may require additional disclosures such as profit and loss statements. To help you know which one of the forms fits best to your requirements, here is each one of them briefly explained:
- ITR-1 – This form is also called SAHAJ. ITR-1 or SAHAJ is meant to be filed by an individual who gets income from salary, pension, one house property, interest or income from other sources (excluding winning from lottery winnings and income from race horses) and having the total income of up to Rs. 50 lakh.
- ITR-2 – This form is for individuals or the Hindi Undivided Families (HUFs) who have income which is not from the profits and gains of a business or otherwise profession.
- ITR-3 – This form is for different persons or the HUFs whose source of income is from the profits and gains of a business or profession.
- ITR-4 – This form is for those who have presumptive income from a business or profession.3
- ITR-5 – This form is for everyone other than individuals, HUF, company and person filing Form ITR-7.
- ITR-6 – This form is for all those companies which are not claiming exemption under Section 11 of the Income Tax Act.
- ITR-7 – This form is relevant for all people including those enterprises who are required to file tax returns under the Section 139(4A), Section 139(4B), Section 139(4C), Section 139(4D), Section 139 (4E) or 139 (4F).
Documents Required for ITR Filing
The documents that are necessary for the filing of income tax returns online are as follows:
- PAN card
- Bank statement
- Interest certificates from banks or post offices
- Proof of tax-saving investments
- Form 16 (for salaried individuals)
- Salary Slips
- TDS certificate
- Form 16A/16B/16C
- Form 26AS
Benefits of Filing Income Tax Returns
Before we look into the advantages of e-filing your returns, let us first see what benefits you get from filing your Income Tax Returns.
Applying for loans:
All the banks ask for your last three year’s Form 16 or TDS certificate or ITR receipt when you apply for home loan or personal loans. It is especially a must when applying for a vehicle loan. These documents are the evidence for your financial stability.
Claiming the Tax Returns:
You have to file your returns to claim tax refunds from the I-T department. For example, interest earned on fixed deposits is taxable at 10%. In case the taxpayer’s taxable income falls below the basic income slab of Rs.250,000, he would still have to file income tax returns, to claim the TDS deducted from FDs as a refund from the I-T department.
For Visa Processing:
In case you are planning on travelling abroad, be advised, foreign consulates ask for up to past three years ITRs with your Visa application. US, Europe and Canada are quite strict about this document.
ITR receipts are proof that the person wishing to travel overseas has an income source in India and does not wish to settle abroad and would return back. Indian and many foreign consulates recommend that you should carry some of your income proofs such as ITR receipts, Form 16, salary slips, etc. for your overseas travel.
Buying an expensive Life Cover:
Purchasing life insurance policies with an assured sum of Rs.10, 000,000 or Rs.5, 000,000 is becoming commonplace these days.
But life insurance companies like LIC, request to see the ITR receipts to assure themselves of your annual income and premium paying capability.
For government tenders:
If you want to apply for government tenders, you will be asked to furnish ITR receipts for the last three years. This is procedural and is required to check whether you are financially sound to fulfill your payment obligations.
For the self-employed:
Self-employed individuals like partners of a firm, consultants, businessmen, freelancers, and more, do not get Form 16. Then, ITR receipts become the most important financial document for them, conditioned to the fact that their annual income is more than
Rs.250,000. ITR receipts are the only financial document that a self-employed person has that would serve as his income as well as tax payment proofs.
Process for E-filing Income Tax Returns
Filing tax returns online is known as e-filing. Below are the steps that you need to be followed for electronically filing your income tax returns.
- Go to Income Tax e-Filing website of the I-T department and create a login ID for yourself.
2. Register by selecting the user type from the pull down bar.
3. Once the registration process is over you will be taken to a page that gives you your address as per your PAN details. Update your Name, and other such important information.
4. Once doing this, you will find yourself on a webpage with links for different assessment years. Click on the one that is relevant to you.
5. Choose the correct category. In case you are a sole earner of your family, download ITR-1 for yourself.
6. There is an excel file that needs to be downloaded alongside the form. You will be filling all the pertinent details in it.
7. Once the excel sheet is complete, check it, save it, and then upload it. Once it is uploaded ‘Submit Return’!
8. After you have submitted your return, acknowledgement window will pop-up. You need to take a print out of it, verify it, sign it, and then post it to your jurisdictional income tax assessing office.
9. The signed acknowledgement receipt needs to reach the local I-T office within 15 days of filing the I-T Returns form online. You need to ensure this happens otherwise you will have to go through the whole process all over again!
In case you wish to go completely paperless, there is an option for digital signatures as well.
Benefits of Electronically Filing your Returns
E-filing the tax returns provide the taxpayer with several advantages.
ITR acknowledgement is prompt, so is the process of claiming refunds. It is much faster than a paper-filed process of tax filing.
The e-filing software has inbuilt valuators that ensure that the connectivity is without issues. This ensures that the errors are minimized considerably.
Filling up paper forms can lead to errors. The possibility of the same rises substantially when paper forms are being converted mechanically in electronic format!
It is not that taxpayers wouldn’t be made aware of their ITR status in the past. However, it used to be a game of patience as the concerned person was intimated of it only through postal means. This accorded the user with neither power nor convenience, as the taxpayer would have to depend on postal services, which would restrict the user to track the status on his/her discretion.
It Is Convenient:
Online filing of form can be done anytime and from anywhere. You are not constrained by time or place. Neither are you restricted to a gadget. You can use your PC, tablet, or even the smart phone to file your returns digitally. The I-T department’s website is accessible 24 X 7 and so is the e-filing facility.
E-filing returns ensure confidentiality of your data. Unlike a paper form, besides you, no one has access to your financial information.
Your e-information cannot be accessed for misuse either at your CA’s office or by the I-T department.
E-filing programs have a secure database of all your old files and uploaded data. You can access them anytime you are filling out new forms.
The moment you submit your returns you get an electronic confirmation of receipt of your form by the I-T department. You receive it through your registered email and as a pop-up on your screen.
Easy to Use:
The e-filing program is user-friendly. You get detailed instructions and easy to understand the language to make filling the e-form a pleasant experience. You do not have to be a computer expert to file your tax returns electronically.
The e-filing site gives you the option to link your bank account for direct debit for direct as well as indirect taxes, and deposit of tax refunds. You can also choose to debit your account immediately or schedule it for a later date.
Completing the filing of tax returns at your convenience electronically ensures that you complete the process on time. This facilitates you in avoiding late payment and other such penalties.
Original filing of tax returns required reams of printing, photocopying, traveling, posting, and probable duplicitous filling of information. Digitally filing tax returns removes all these burdensome tasks and saves you money as well. E-filing might save you the cost of hiring a CA to help you with your tax calculations, filing, and refund claiming processes.
You wouldn’t have to stand in queues anymore, nor look for agents to do your return filing for you. Also, the e-filing system does all the calculations for you. So you don’t need to get hassled over missed or messed up calculations anymore!