Module for Beginners
9. The process and documents of filing taxes
Akash who just got a job with a package of Rs. 5 lakhs per annum is trying to figure out how to file taxes for themselves and their families.
Their 61 year old father earns 3 lakhs per annum, 55 year old mother earns 2 lakhs per annum and their grandfather who is 85 year old is earning 4.5 lakhs per annum.
Can we help Akash?
Income tax return (ITR) is a form used to file information about your income and tax to the Income Tax Department. The tax liability of a taxpayer is calculated based on his or her income. In case the return shows that excess tax has been paid during a year, then the individual will be eligible to receive an income tax refund from the Income Tax Department.
As per the income tax laws, the return must be filed every year by an individual or business that earns any income during a financial year. The income could be in the form of a salary, business profits, income from house property or earned through dividends, capital gains, interests or other sources.
Tax returns have to be filed by an individual or a business before a specified date. If a taxpayer fails to abide by the deadline, he or she has to pay a penalty.
Who should file Income Tax Returns?
According to the Income Tax Act, income tax has to be paid only by individuals or businesses who fall within certain income brackets. Mentioned below are entities or businesses that are required to compulsorily file their ITRs in India:
- All individuals, up to the age of 59, whose total income for a financial year exceeds Rs 2.5 lakh. For senior citizens (aged 60-79), the limit increases to Rs. 3 lakh and for super senior citizens (aged 80 and above) the limit is Rs. 5 lakhs. It is important to note that the income amount should be calculated before factoring in the deductions allowed under Sections 80C to 80U and other exemptions under section 10.
- All registered companies that generate income, regardless of whether they’ve made any profit or not through the year.
- Those who wish to claim a refund on the excess tax deducted/income tax they’ve paid.
- Individuals who have assets or financial interest entities that are located outside India.
- Foreign companies that enjoy treaty benefits on transactions made in India.
- NRIs who earn or accrue more than Rs. 2.5 lakh in India in a single financial year.
Documents required to fill ITR
It is important to have all the relevant documents handy before you start your e-filing process.
- Bank and post office savings account passbook, PPF account passbook
- Salary slips
- Aadhar Card, PAN card
- Form-16- TDS certificate issued to you by your employer to provide details of the salary paid to you and TDS deducted on it, if any
- Interest certificates from banks and post office
- Form-16A, if TDS is deducted on payments other than salaries such as interest received from fixed deposits, recurring deposits etc. over the specified limits as per the current tax laws
- Form-16B from the buyer if you have sold a property, showing the TDS deducted on the amount paid to you
- Form-16C from your tenant, for providing the details of TDS deducted on the rent received by you, if any
- Form 26AS - your consolidated annual tax statement. It has all the information about the taxes deposited against your PAN
- TDS deducted by your employer
- TDS deducted by banks
- TDS deducted by any other organisations from payments made to you
- Advance taxes deposited by you
- Self-assessment taxes paid by you
- Tax saving investment proofs
- Proofs to claim deductions under section 80D to 80U (health insurance premium for self and family, interest on education loan)
- Home loan statement from bank
What is Form 26AS?
Form 26As is a vital document showing the portion of tax deducted at source on payments/investments made by individuals, employees and freelancers. This enables the taxpayers to claim refunds for any additional tax or overdue tax payments made.
The new Form 26AS, which is applicable from AY2020-21, has been refurbished to make it easier to file income tax returns online as well as encourage compliance with any tax regulations.
An important feature of the new Form 26AS is its statements of financial transactions. As the name implies, these are statements where the taxpayers recall all major financial transactions they have made which would be to their benefit while filing their returns.
The new format of 26AS will also show your Aadhar card details, date of birth, email and house addresses, your date of birth and also your mobile number.
It will indicate whether there are any tax proceedings which are pending or completed with the tax authorities.
How to link Aadhar to Income Tax returns?
It is compulsory for every individual taxpayer to quote their Aadhar number while filing tax returns. He/she is also required to link their PAN (permanent account number) card to their Aadhar number. One cannot file a tax return either digitally or manually unless the Aadhar number is quoted. Senior citizens can file their tax returns manually but those below 80 years of age have to file it electronically.
To link your Aadhar number to your income tax return-
- Type or write down the number in the additional spaces provided in the new ITR forms provided in the Income Tax website.
- If you have applied for an Aadhar number but have not received it, you can use the 28 digit enrolment ID in place.
- The Aadhar number gets automatically populated in the ITR forms if it has been electronically added before.
One time verification of past ITRs by September 2020
The Income Tax authority of India has allowed one time verification of previously filed returns up to September this year. Previously, tax payers were given only 120 days’ window to verify the returns from the date of filing the same. The up to September 2020’ one time verification provision is for those taxpayers who have not verified their tax returns from the assessment years 2015-16 to 2020-21.
Whenever someone files a return online, the same has to be verified by dispatching the signed ITR V slip by post or digitally to the CPC, Bengaluru. The verification is a declaration by the taxpayer confirming that the details provided in the returns he filed is true and correct. Tax return verification is crucial, as in the event of a return not being verified, the tax filing process is rendered incomplete. The taxpayer can thus incur penalties.
What’s new in the ITR forms?
The new IT return forms include relief measures announced due to the COVID-19 global pandemic. These new tax return forms were recently notified by the Central Board of Direct Taxes.
The forms have the following features:
Wider scope of taxpayers: The tax net has been widened to include individuals, Hindu undivided families (HUFs) as well as partnership firms who have deposited more than Rs 1 crore in a bank, incurred personal travel expense of Rs 2 lakh plus or paid a power utility bill of more than Rs 1 lakh.
Separate schedule: A separate schedule called Schedule DI has been allotted in the new form to enable the taxpayer to indicate the amount invested or spent on which he/she needs a tax rebate.
The earlier amendment prohibiting joint owners of a house from filing tax return, either with ITR-1 or ITR-4, has been done away with.
Importance of e-filing
Electronic filing or e-filing is a process that involves submitting tax returns over the internet. This is done using a tax preparation software that has been pre-approved by India’s Income Tax Department.
E-filing has several benefits that have made the online system of tax payment increasingly popular. The taxpayer has the liberty to file a tax return from his or her home, at any convenient time, during a specific period in a financial year.
Even though it is not mandatory for certain individuals to file ITRs, it can be beneficial for them. Here’s a look at what benefits individual who file their ITR can enjoy:
While claiming a refund: There is a good possibility that there has been tax deduction at source (TDS) on the name of an individual who makes an income or investment in India. If the taxpayer wishes to claim a refund on the TDS (as per the tax laws), then he or she needs to file the ITR for the same.
Ease in documentation verification: Income tax returns help you prepare documents that establish your income chart, which can be used while applying for loans. This is because the application for loans checks your eligibility based on your income. An ITR document gives a detailed picture of your total income besides being the most accepted document during visa and loan applications.
As proof of income: Income Tax Return documents serve as income proof and help your insurer understand the compensation required to be paid in case of accidental death or disability. Since it is submitted to a government body, it is considered to be a verified and official document.
To file your ITRs, you can either directly fill the form online or take help from a professional. The Income Tax Return form is called ‘Sahaj’ and can be downloaded from the Income tax department’s official website or filled up online. Once you complete filing your return, an ITR-V form will be generated as an acknowledgement. This form needs to be verified within 120 days of filing your returns.
Which ITR Form should you fill?
The official website of the Income Tax Department lists several forms that taxpayers may be required to fill up based on their income. While some of these forms are easy to fill, others require additional disclosures such as your profit and loss statements. To help you better understand the forms available, here’s a quick guide:
ITR-1: Sahaj or ITR- 1 is to be filed individuals being a resident (other than not ordinarily resident) having total income upto Rs.50 lakh, having Income from Salaries, one house property, other sources (Interest etc.), and agricultural income upto Rs.5 thousand.
ITR-2: This form should be filed by Individuals and HUFs not having income from profits and gains of business or profession.
ITR-3: This form is for individuals and HUFs having income from profits and gains of business or profession
ITR-4: (Sugam): If your business attracts presumptive income for you, then you need to fill this form. This form is to be filed by Individuals, HUFs and Firms (other than LLP) being a resident having total income upto Rs.50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE.
How to check ITR status online?
Once you have filed your income tax returns and verified it, the status of your tax return is 'Verified'. After the processing is complete, the status becomes 'ITR Processed'.
If you wish to know which stage your tax return is after filing it and want to check your ITR status online, here’s how you can do it in easy steps.
Without login credentials
You can click on the ITR status tab on the extreme left of the e-filing website.
You are then directed to a new page where you have to fill in your PAN number, ITR acknowledgement number and the captcha code.
Once this is done, the status of your filing will be displayed on the screen.
With login credentials
Login to the e-filing website.
Click on the option 'View Returns/Forms'
From the dropdown menu, select income tax returns and assessment year
Once this is done, the status of your filing (whether only verified or processed) will be displayed on the screen.
Keeping the Income Tax Department informed about your income and taxability will keep you on the right side of the law and prevent any blocks in your financial competency. Now that you know whether or not you compulsorily have to file your ITR, you need to ensure that you complete the process before the deadline every year.
How to Download an Income Tax Return?
It is important to how to file ITR on time, to avoid last minute stress and penalties. Once you have filed your ITR, the income tax verification form is generated by the IT department so that taxpayers can verify the validity and legitimacy of e-filing. These are applicable only if you have filed your returns without a digital signature.
The income tax return verification form can be downloaded in easy steps.
1.) Log in to the Income Tax India website https://portal.incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html?lang=eng
2.) View e-filed tax returns by clicking on 'View Returns/ Forms' option
Select option Income tax returns
Details of all the years for which returns are filed will be displayed
1.) Click on the acknowledgement number to download the ITR-V.
2.) Begin the download by selecting 'ITR-V Acknowledgment'
3.) To open the downloaded document, enter your password to open the document. The password is your PAN number in lower letters along with your birthdate.
PAN - ASIJP2345P
Birth Date - 31/12/1980
Password - asijp2345p31121980
You need to send the printed and signed document to CPC Bangalore within 120 days of the e-filing.There is also an option of E verification of Income tax return by generating aadhar otp, through net banking, through ATM etc
Now that you understand the process and documents of filing taxes, it’s only logical that we move on to the next big topic - 10 things to keep in mind to have a clean tax record. To discover the answer, head to the next chapter.
A quick recap
- The tax liability of a taxpayer is calculated based on his or her income.
- As per the income tax laws, the return must be filed every year by an individual or business that earns any income during a financial year.
- It is important to have all the relevant documents handy before you start your e-filing process.
- Electronic filing or e-filing is a process that involves submitting tax returns over the internet.
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