Step by step guide to file your Income Tax Returns

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A return of Income is a prescribed form through which the particulars of income earned by a person in a financial year and taxes paid on such income are communicated to the Income-tax Department. The return of income can be filed either in hard copy at the local office of the Income-tax Department or can be electronically filed at www.incometaxindiaefiling.gov.in. However, in the case of certain persons, e-filing is mandatory.

Through this blog, I am going to provide you a step by step approach of electronically filing the Income Tax Return.

  1. Create your e-filing account:

The first step is to create your e-filing account on the income tax portal, the URL of which is http://incometaxindiaefiling.gov.in/ For registration, you must give your personal details and PAN. It is mandatory to hasve a PAN to file your income tax return as the income tax department recognizes every taxpayer through the PAN. Even the user ID for e-filing portal is the PAN.

  1. Download the income tax return form:

Selecting the ITR form is an important step while filing the income tax return as it is dependent on the category of taxpayer and income. The following are the types of forms available for filing the income tax return:

  • ITR 1 (Form Sahaj): These forms are for those individuals who are having income from salaries, one house property (not a case of brought forward loss) and other sources (Interest, etc and not being lottery winnings and income from race horses)
  • ITR 2A: These forms are for those individuals and Hindu Undivided Families who are not having income from Business and Profession and Capital Gains and residents who do not hold foreign assets.
  • ITR 2: These forms are for those individuals and Hindu Undivided Families who are not having income from Business and Profession.
  • ITR 3: These forms are for those individuals and Hindu Undivided Families who are partners in firms and not carrying out business or profession under any proprietorship
  • ITR 4S: These forms are for Individuals and Hindu Undivided Families who have opted for the presumptive taxation scheme.
  • ITR 4: These forms are for those individuals and Hindu Undivided Families who have income from a proprietary business or profession.
  • ITR 5: These forms are for persons other than:
  1. Individual;
  2. HUF;
  3. Company; and
  4. Person filing Form ITR 7
  • ITR 6: These forms are for companies other than companies claiming exemption under section 11
  • ITR 7: These forms are for persons required to furnish return

The above-mentioned forms can be downloaded from this site http://incometaxindiaefiling.gov.in/

  1. Identify all sources of income:

Identification of your sources of income is significant as this helps you to identify the ITR form that would be applicable to you. The following are the five sources of income which have been defined under the Indian tax laws:

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  1. Salaries: These include salary received from the employer, pension, gratuity, perquisites and profits in lieu of salary
  2. House property: This includes your income from letting out the house property
  3. Business and Profession: This includes your income from your trade or profession.
  4. Capital Gains: These include income from sale or transfer of shares, mutual fund units or business trust units, immovable properties or any movable property
  5. Other Sources: These include any other income like dividend, interest, lottery, etc.
  1. Fill the details in the Tax return form:

Once you have downloaded the relevant form, you need to fill in your personal details, income details and other details required in the form. It is wise to keep all the necessary documentation in hand prior to filling up the form. Although, the documents would vary from person to person but generally the documents required to file the income tax return is as follows:

  • Form 16- This includes the details of your salary earned during the year and the tax deducted on the same.
  • Bank statements: Obviously, since the income tax return is a declaration of your income earned, your bank statements are required in which all your legitimate transactions would be reflecting. It is always advisable to disclose all the transactions that are reflecting in a bank and to declare all your active bank accounts.
  • TDS certificates: These are issued by banks or other vendors who have deducted your tax at source, such as tenants, etc.
  • Details of your investments/ eligible deductions: This includes investments made under section 80C like PPF, NSC, LIC, tution fees, principal repayment of your home loan (remember that maximum deduction that can be claimed under section 80C is INR 150,000), donation under section 80G (Don’t forget to mention the complete address and PAN of the donee) and other documents to support your deduction claims such as interest on loan certificate, Interest certificate from bank stating the amount of interest earned during the year
  • Form 26AS: Lastly, but the most important- Form 26AS. Form 26AS is basically a summary of your taxes deducted at source, advance taxes paid and self-assessment tax paid during the tax year. Income tax department will generally allow a taxpayer to claim the credit of taxes as reflecting in his form 26AS as this is maintained by the income tax department. It can be easily assessed by logging into your income tax portal with the help of your user id (PAN), date of birth and password.

It must be noted that Individuals and Hindu Undivided Families with income above a specified limit, filing returns in ITR 3 and ITR 4 were already required to furnish information of their assets and liabilities in their annual return of income. With Assessment Year 2016-17, Individuals and Hindu Undivided Families filing their returns of income in ITR 1, ITR 2, ITR 2A and ITR 4S, having income exceeding INR 50 lacs would now be required to furnish information regarding Assets and Liabilities in Schedule AL of the relevant form.

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  1. Calculating tax liability:

The tax liability is calculated on the net income as per the progressive tax rates applicable on an individual. The following are the slab rates applicable:

  • Individual taxpayer:
ParticularsTax rates
Where the taxable income does not exceed INR 250,000NIL
Where the taxable income exceeds INR 250,000 but does not exceed INR 500,00010% of the amount by which the taxable income exceeds INR 250,000
Where the taxable income exceeds INR 500,000 but does not exceed INR 10,00,000INR 25,000 + 20% of the amount by which the taxable income exceeds INR 500,000
Where the total income exceeds INR 10,00,000INR 125,000 + 30% of the amount by which the taxable income exceeds INR 10,00,000
Surcharge of 15% of the income tax, where taxable income is more than INR 1 crore
Education cess of 3% of the total of income tax and surcharge, if applicable
  • Senior citizens more than 60 years and less than 80 years
ParticularsTax rates
Where the taxable income does not exceed INR 300,000NIL
Where the taxable income exceeds INR 300,000 but does not exceed INR 500,00010% of the amount by which the taxable income exceeds INR 300,000
Where the taxable income exceeds INR 500,000 but does not exceed INR 10,00,000INR 20,000 + 20% of the amount by which the taxable income exceeds INR 500,000
Where the total income exceeds INR 10,00,000INR 120,000 + 30% of the amount by which the taxable income exceeds INR 10,00,000
Surcharge of 15% of the income tax, where taxable income is more than INR 1 crore
Education cess of 3% of the total of income tax and surcharge, if applicable
  • Super senior citizens above 80 years
ParticularsTax rates
Where the taxable income does not exceed INR 500,000NIL
Where the taxable income exceeds INR 500,000 but does not exceed INR 10,00,00020% of the amount by which the taxable income exceeds INR 500,000
Where the total income exceeds INR 10,00,000INR 100,000 + 30% of the amount by which the taxable income exceeds INR 10,00,000
Surcharge of 15% of the income tax, where taxable income is more than INR 1 crore
Education cess of 3% of the total of income tax and surcharge, if applicable
  1. Validate the details:
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Once you have filled in all the necessary details in the ITR utility form, you must validate the ITR form. This is an important step as this is the stage when most of your errors would be reflected and if there are any mistakes it can be corrected at this point of time. Of course, there is an option of revision of return but prevention is always better than cure.

Taxpayer should also confirm actual TDS/TCS/Tax paid with Form 26AS downloaded from the income tax portal. If any discrepancy is observed, then suitable action should be taken to reconcile it. Every person deducting tax at source must furnish the details of tax deducted by him to the Income tax department. Based on such details of tax deducted at source by the deductor, the Income tax department update its Form 26AS of the Deductee. Many times, it may happen that the TDS credit appearing in Form 26AS may not tally with the actual tax deducted at source. This mainly happens due to reasons such as non-furnishing of TDS details to the Income tax department by the deductor, deducting the tax in incorrect PAN, etc. In such cases, it is advised that the Deductee should approach the deductor and request him to take the necessary steps to rectify the discrepancy due to the above reasons.

  1. Generate the XML file:

Post validation of the return, an xml file would be generated. This xml file is the file that is uploaded on the income tax portal thus it is important to save it in an appropriate folder.

  1. Submit the income tax return:

Once you have successfully generated the xml file of your income tax return, you have to login into your income tax portal again and click on the 'upload XML' button. Please be very careful while selecting the assessment year for which the return is being filed otherwise there could be mis match and return would not be successfully uploaded.

  1. Send the signed ITR-V to the Income Tax Department:

In case you have e-filed your income tax return without digital signature and without Electronic Verification Code (EVC), you must not forget to post the acknowledgement of the return (ITR-V) within a period of 120 days from the date of filing of return by ordinary post or speed post to “Income Tax Department-CPC, Post Bag No.1, Electronic City Post Office, Bangalore-560100 (Karnataka). If it is filed beyond a period of 120 days, it is treated as non-filing of return.