Income Tax Return Filing

Personal Income Tax Return filing & its Importance and Advantages

What is Personal Income Tax Return Filing?

Personal Income Tax Return filing is a proof of the income earned by an individual person. It determines the income, other specific details of an individual say mode of income, taxability on the income. In the tax return filing form, he/she has to mention income, allowance details, claimed relief for a particular taxation year.

What shall ITR form be used by an individual?

A Taxpayer should determine the type of income tax return (ITR) form before filing his/her returns. It completely depends on the income that the taxpayer earns/the taxpayer holds assets in other countries than India/earns income from other countries than India.

There are nine types of ITR forms that a taxpayer may use to file his income tax returns. As per the Central Board of Direct taxes, one of the following forms shall be considered for filing returns.

  • ITR-1, 2, 2A, 3, 4 and 4S
  • ITR-5,6 and 7 are applicable only for firms and companies

ITR-1:

ITR1 is also called Sahaj Form. An individual taxpayer should file the form. This form has to be filled out by the following:

  • Individuals who earn income by means of pension or monthly salary
  • An Individual who earns income from a single housing property
  • Individuals who do not have any income from other businesses/who do not have income from any asset sales.
  • Individuals who do not possess any property/assets in countries other than India
  • Individuals who do not earn any income from other countries outside India
  • Individuals who earn income through agriculture below INR 5,000
  • Individuals who get income from various sources/investments say Shares, Fixed Deposits
  • Individuals who have not earned income from any unexpected sources say horse racing/gambling/lotteries
  • An Individual who wants to club the income of his/her spouse/underage child from their own income as long as the income to be clubbed based on the above-mentioned criteria

ITR-2A: This new income tax return form was introduced in the assessment year 2015-16 for an Individual taxpayer/a Hindu Undivided Family (HUF). This is applicable to

  • Individuals who earn income by means of pension or monthly salary
  • An Individual who earns income from only one housing property
  • Individuals who do not have any income from other businesses/who do not have income from any asset sales.
  • Individuals who get income from various sources/investments say Shares, Fixed Deposits
  • Individuals who do not possess any property/assets in countries other than India
  • Individuals who do not earn any income from other countries outside India
  • Individuals who earn income through agriculture below INR 5,000
  • Individuals who have not earned income from any unexpected sources say horse racing/gambling/lotteries

ITR-2:

This form is used by any individual who has earned income through property/sales of asset/ear income from other countries outside India. HUF/any individual can use the form for his/her income tax return. The form ITR2 is pertinent to the following cases:

  • Individuals who do not make income from any business speculation
  • Individuals who make income through either pension or monthly salary
  • Individuals who earn income from more than single housing property
  • Individuals who possess assets in other countries outside India
  • Individuals whose accrue income from agriculture which is above Rs 5,000
  • Individuals who made income from any windfall such as horse racing/gambling
  • Individuals who earn income by selling assets or property in India
  • Individuals who make income from other countries outside of India

ITR-3:

This form is used by a taxpayer who is either from a Hindu Undivided Family (HUF) or an individual, who solely operates as a partner in a company but does not conduct any kind of business under the company (OR) who does not accrue any income from the business conducted by the company. The form ITR3 is filed by the taxpayers whose taxable income earned from business is only in the form of the following received as a partner.

  • Bonus
  • Commission
  • Interest
  • Remuneration
  • Salary

ITR-4

An ITR4 form is used by individuals who run a business/who make income through a profession. This ITR4 is applicable for any type of business, profession without any limit on the income earned. Besides the income earned from business, taxpayers can also include any income received from the source of salary, housing property, windfalls, speculation, along with the business income. Any individuals from the levels of shopkeepers to retailers, doctors to other esteemed professionals are eligible to file their income tax return using ITR4 form.

ITR-4S

This ITR4 is otherwise called as the Sugam form and it is used by HUF/any individual to file their income tax return. This ITR4S form is used for the following cases

  • Individuals whose earn below Rs 5,000 from agriculture
  • Individuals who earn income from an only one housing property
  • Individuals who do possess any property/asset in any countries other than India
  • Individuals who make income from any business
  • Individuals who do not make income from any country outside India
  • Individuals who do not procure income through assets sales/property in India

This income tax return form is used in special circumstances and applies to businesses where any income earned is based on a tentative calculation method.

ITR-5:

ITR5 is used in the following entities to return their income tax returns

  • Association of Persons (AOPs)
  • Artificial Judicial Persons
  • The Body of Individuals (BOIs)
  • Co-operative Societies
  • Limited Liability Partnerships (LLPs)
  • Local Authorities

ITR-6:

This form shall be used only by companies except for the companies/organizations which claim tax exemption as per the Section 11. The organizations which claim tax exemptions as per Section 11 are the organizations where the received income is accrued from the property used for the religious or charitable purpose. ITR6 can be filed only online.

ITR-7:

The ITR7 form is to be filed by companies/individuals who are required to submit their income tax returns under the following sections:

Section 139(4A) – Returns can be filed under this section by an individual who receives income from any assets which are held for the charity/religious purpose in a trust/legal obligation form

Section 139(4B) – Income tax returns are filed under this section by the political parties whose total income is above the non-taxable range.

Section 139(4C) – Under this section, income tax returns are to be filed by the following entities:

  • Any association/institution mentioned under Section 10(23A)
  • Any news agency
  • Any association involved with scientific research
  • Any fund, medical institution or educational institution
  • Any institution mentioned in Section 10(23B)

Section 139(4D) –  In this section, income tax returns have to be filed by Colleges, Universities or any other educational institutions where income tax returns/loss are not required to be submitted based on the other provisions outlined here.

Why is individual tax return important?

  • Filing tax return is one way of keeping a legal proof of an individual’s income. It also aids the person to establish himself a good book of records with the Income Tax Department.
  • It is important to pay the income tax and file tax returns on time necessary for all individuals. It saves you in receiving notices from IT department if your foul play is found.
  • Every person has been advised with a mandatory concept to file his/her return even if the income falls below the exemption limit.
  • Tax payment promotes every Indian citizen for participating in the contribution towards national income and as a result, it leads to the national economy appraisal.
  • If an individual faces lose in his business, he cannot carry his business forward to start out against his income in the following year unless he was not filed tax returns for the previous year.
  • Tax evasion or avoiding the taxation at the international level would lead the individual to be prosecuted by the Income Tax department.

When you comply IT return filing, the following benefits will be availed:

  • If you are looking for any educational, housing or vehicle loan, you must submit the income tax return receipts to process your loan. If you are not filed the returns, you cannot be afforded any loans.
  • To process your VISA, IT returns filing is mandatory
  • You will not be availed with credit cards unless you file IT returns
  • Immovable properties registration can be done immediately if and only if you have filed IT returns on time
  • A person might have a standard income proof by filing the tax returns
  • 5000/- is taxed from the individual if not complying with the income return filing
  • Tax refund will be availed if only income tax return is filed properly

When paying the IT returns regularly, one can enjoy the benefits of the Government hassle-free.