Income tax return (ITR) is a form that explains the net tax liability of a taxpayer to the income tax department. An individual’s gross taxable income from different sources, tax deductions and exemptions are a few factors that help in determining the net tax liability.
If you want to understand how to file an income tax return, then read this article.
An income tax return describes a person’s income. It is filed by salaried individuals, self-employed individuals, companies, etc. An ITR is filed to the income tax department. The process of filing an ITR is called income tax filing.
Before understanding the process of filing an ITR, let’s look at some other important factors about income tax-
Sources of Taxable Income
An individual’s income from the different sources is calculated in order to find out his/her net taxable income-
- Income from Salary
This category comprises of income made via salary, annuity, pension, etc.
- Income from House Property
The income earned by giving a house property on rent falls under this category.
- Income from Capital Gains
The income earned by selling capital assets belongs to this category.
- Income from Business or Profession
The income generated via a business or profession falls under this category.
- Income from Other Sources
This category comprises of income made from other sources like interest on bank deposit accounts and securities, etc.
A taxpayer is allowed to claim various tax deductions. Some of the most common tax deductions are-
- If an individual has medical insurance, then he/she can file tax deductions on the premiums paid under Section 80D.
- Premiums paid for life insurance policies can be filed as tax deductions under Section 80C.
Here are some tax exemptions for salaried individuals while filing income tax–
- A part of the house rent allowance is exempted from tax.
- A standard deduction of Rs. 50,000 is allowed to salaried individuals.
- The transport allowance provided by the employer can be exempted from tax.
Types of ITR Forms
There are several forms that can be used to file an ITR based on the types of taxpayers and income sources. A taxpayer needs to select a form that meets his/her requirements. Below is the list of a few ITR forms.
- ITR 1
This form is for people who get income from salary, one house property, and income from other sources, and have a total income up to Rs. 50 Lakhs.
- ITR 2
ITR 2 form is applicable for individuals and HUFs who earn income but not via the profits of a profession or business.
- ITR 3
This form is for individuals and HUFs who earn income from the profits of a profession or business.
- ITR 4
This form is for individuals who have presumptive income from a profession or business.
How to File an ITR
- Log on to the Income Tax department portal in order to file returns online.
- If an individual is e-filing for the first time, then he/she needs to register using his/her PAN. The PAN number will be the individual’s user ID.
- Under ‘Download’, go to e-filing. Select the assessment year and ITR form. If the taxpayer is a salaried individual, then he/she needs to download ITR-1’s (Sahaj) return preparation software.
- Next, open the return preparation software, and then enter all details from Form 16.
- Compute tax payable and pay tax. Once that is done, enter challan details in the ITR. Individuals who don’t have a tax liability can skip this part.
- Confirm the details. After that, generate an XML file. The XML file will be saved on your computer.
- Go to the ‘Submit Return’ Section. Then, upload the XML file.
- The taxpayer can digitally sign the file. However, individuals who don’t have a digital signature can skip this part.
- The individual will receive a message that confirms successful e-filing. Then, the ITR verification is generated. This is mailed to the registered email id of the taxpayer.
- The taxpayer can e-verify the return via any one of the six modes- bank ATM, bank account number, Demat account number, net banking, Aadhaar OTP, registered mobile number and email id.