Income Tax Return Filing Beginner's Guide
Knowledge, Personal Finance

Income Tax Return Filing Beginner’s Guide (India)

The responsibility of income tax return filing is a part and parcel of the earning phase. For freshers who have just started earning their salary in 2021, the income tax return for FY 2021-22 will be applicable. Any person with an income (who falls within an tax bracket) has to declare tax.

By the end of 31 December 2021, nearly 5.89 crore income tax returns were filed by Indians on the I-T department portal. When someone first becomes eligible to start income tax return filing for the first time it all seems very complicated. With words like assessment year, TDS, net taxable income, etc. being used that go over everyone’s head. However, once you understand the basics of income tax it is not that hard at all. That is why we have created this guide to help beginners like you in this important milestone.

Basics Of Income Tax Return Filing

Let’s have look at how to file taxes in this step by step guide.

What Is an Income Tax Return Filing?

First things first it is essential to know what an Income Tax Return is before jumping into the deep waters. The income tax return is a statement that contains information about your income and the tax that you have paid to the income tax department. Income tax filing for returns is done by both individuals and businesses. The tax amount is calculated based on the income that you/your business have earned in a financial year.

The Income-tax returns have to be filed by the individual/business with the Income Tax Department before a given due date. This Income tax filing’s last date is usually 31st July every year. Failing to abide by the Income-tax return filing due date results in a penalty that has to be paid.

Important Things/Keywords Explained

These are a few important things that will provide you with basic income tax knowledge that is needed for filing these returns as beginners.

  • Previous Year- The previous year is 12 months for which you pay taxes. This is the period for which you declare tax. It begins on 1st April and ends on the 31st of March of the next year. The next tax year then starts on the 1st of April.
  • Assessment Year- This is the year after the financial year in which you ‘assess’ your tax returns and file for them. It is the year after the previous year. 

So, if your income tax return filing is for the year 2019-20, the year 2020-21 will be your assessment year. 

Taxable Income

Individuals receive incomes from various sources such as income from salary, income from house property, income from capital gain, income from business or profession, and income from other sources. All these incomes combine to form the taxable income of the individual. Taxable amount is the amount that is used to determine the taxes you owe. 

Income Tax Deductions

The income tax deduction is the amount that is deductible from your gross income based on the guidelines of the Income Tax Department. Deductions bring down your tax liability. Section 80 of the Income Tax Act allows for the deductions of income tax. 

Income Tax On Crypto Related Investments

Are you Interested in crypto investments? Then you must be wondering how the crypto transactions are taxed. As an outcome of the Budget 2022, income generated from virtual digital assets such as crypto and NFTs will be taxable at 30%  from April 1,2022. This tax deduction is applicable even for investors whose total income is below the ₹2.50 lakhs threshold. In addition to this the cost of acquisition is the only amount that is being allowed as deduction in computing the taxable amount.

Persons required to file Income tax return

One of the basics of income tax is that Individuals whose income exceeded the basic exemption limit, have to mandatorily file an ITR. There are different basic exemption limits based on age and the kind of business.

These exemptions based on age are:-

Age ExemptionHave To Pay Tax?
Below 60 years of age Taxable Income exceeds Rs 2.50 lakhs
Yes
Below 60 years of age Taxable Income below Rs 2.50 lakhsNo
60-80 years of ageTaxable Income exceeds Rs 3 lakhsYes
60-80 years of ageTaxable Income below Rs 3 lakhsNo
Above 80 years of ageTaxable Income above Rs 5 lakhsYes
Above 80 years of ageTaxable Income below Rs 5 lakhsNo

The Companies/ individuals that have to file for income tax returns are:

  • All registered companies or partnership firms should file Income Tax returns regardless of whether they made profits or losses.
  • Residents of India who have assets outside India have to file their income tax returns.
  • Individuals who have paid excess taxes and wish to obtain an income tax refund must do their ITR filing.
  • Income tax filing is mandatory for an individual who is an authorized signatory for a foreign account.
  • An Individual who has properties held under political parties, news agencies, charitable trusts, educational institutions, and research associations must file their income tax return.

Documents Needed

What are the documents that you should keep handy before your income tax e-filing login? This list contains all the important documents that you must keep with you during the income tax e-filing process.

  • Aadhar card and PAN card.
  • Bank passbook, PPF account passbook, and post office savings account passbook.
  • Salary slips.
  • Form-16 –  A certificate issued by the employer to the employee that states that TDS has been deducted on your salary.
  • Form 16A -Certificate for TDS deducted by the employer on income sources apart from salary.
  • Form 16B – Certificate that shows the TDS deducted for property sales.
  • Form 16C- certifies TDS deduction on rent and is provided by the tenant.
  • Form 26As – Single source of information for all the tax that you have already paid in the financial year and the refunds due to you.
  • Tax saving investment proofs.
  • Bank or post office issued interest certificates.
  • Home loan statement from the bank.
  • Proof for claiming deduction under sections 80D and 80U. These could include health insurance premiums for the individual and/or his family and interest on education loans.

 

Process Of E-filing Of Tax Returns

E-filing income tax returns has made the process very easy and convenient. The steps involved in the basics of income tax filing process are as follows:

Income return filing official website
  • Visit the Official e-filing portal of the income tax department- https://eportal.incometax.gov.in/iec/foservices/#/login.
  • Register or log in to file your e-returns. 
  • Click on the ‘e-File’ tab and then select the ‘Income Tax Returns’ option and then the ‘File Income Tax Return’ Option.
  • Select your Assessment year, which is the year for which you wish to file the return.
  • Then select the mode, either offline or online for filing your return. Choosing the online mode is the fastest and easiest way for tax returns filing.
  • Click on ‘Continue’ to proceed.
  • Next, select the ‘Start New Filing’ option.
  • Select your status from among individuals, HUF, or others.
  • Select the ITR form that applies to you and then ‘Proceeds’.
  • You will then be asked questions such as the reason for filing your returns.
  • The next step is to fill out your bank details.
  • Then, you will be taken to the ITR form applicable to you, where you will have to fill in details such as your income, taxes paid, etc.
  • Submit the ITR form after filing and checking all the details. Proceed towards the verification of your return.
  • The verification is a final step and is very crucial for income tax e-filing completion. Verification can be done through Aadhar OTP, EVC, or by sending a hard copy of the ITR to the Income Tax Department.
  • After the verification is complete, your Income Tax return filing is finished.

Types Of Income Tax Returns

Did you know that there are 7 different kinds of tax return forms?

Yes, 7 this is so because there are different categories and income types among the taxpayers that need to be differentiated. These forms are ITR1, ITR2, ITR 3, ITR 4, ITR 5, ITR 6, AND ITR 7. Income tax forms help in calculating tax liability, scheduling tax payments, and applying for refunds in case of tax overpayment.

While filing a tax return form one must be careful in choosing the category to avoid mistakes. These are the different kinds of income tax returns and what income is included in each category.

CategoryWho is eligible to apply for this form?
ITR1Individual taxpayer who draws the income from salary, pension, single housing property, and other sources that don’t exceed Rs. 50 lakhs.
ITR2Individual taxpayer who draws the income from salary, pension, more than one house property, capital gains, foreign assets, and other sources that exceed Rs 50 lakhs.
ITR3Individual taxpayers drawing income from business or profession, being a partner in a firm, and presumptive income that exceeds Rs. 50 lakhs.
ITR4Individuals earning income from businesses, single house property, presumptive schemes, and other sources that don’t exceed Rs. 50 lakhs.
ITR5Business trusts, firms, LLPs, Co-operative authorities, Association of Persons(AOPs), Body of Individuals (BOIs).
ITR6Companies (except those exempted under section 11), business incomes, income from housing property, and incomes from multiple sources.
ITR7Companies and individuals who have to file returns under sections 139(4A), 139(4B), 139(4C), & 139(4D)

 

FAQs

  1. What are the Benefits of Income Tax Returns filing?

This is one of those income tax questions that are always on the mind of taxpayers. The benefits of Income tax returns filing are easy loan approval, smooth Visa processing, can help you claim deductions, acts as a legal document, and it can help you avoid penalties and punishments.

  1. Is filing Income Tax returns mandatory?

If your income is more than the basic exemption limit, you must file your income tax returns according to Indian Tax laws. Delay in the filing of these returns by missing the Income-tax return filing on the last date adversely affects the individual by hampering the chances of getting a Visa or loan. Income tax return filing’s last date is at the end of the financial year.

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