Income tax can be defined as the most common form of direct tax, and it is the tax charged on the annual income of an entity in a financial year. In India, it is governed by the Income Tax Act of 1961.
This article contains a comprehensive guide to filing your income taxes. Deciding between the new and old regimes is a personal choice that depends on individual circumstances. It’s recommended to carefully compare the outcomes under both options before making a decision.
To aid in this process, taxpayers can use the Income Tax Portal’s calculator tool to estimate their income tax obligations under each regime. This comparison allows individuals to make an informed choice based on their specific financial situation and needs, ensuring they select the most beneficial option for their tax filing. There are several advantages of filing an Income Tax Return (ITR), including easy approval of loans, claiming tax refunds, and quick visa processing.
WHO needs to file an ITR and WHICH ITR Form?
This depends on a person’s income and tax deductions. In India’s tax system, individuals and businesses face different taxation methods. For people, the amount of tax owed depends on their income level, with different rates applying to various income brackets. In contrast, companies and other business entities in India typically pay a set percentage of their taxable earnings, regardless of the total amount. This approach creates a more comprehensive system for individual taxpayers while providing a straightforward calculation for corporate entities.
In the old regime, individuals who were less than 60 years old who earned above Rs. 2.5 lakhs had to pay taxes, and above the age of 60, if your income is above Rs. 3 lakhs, you had to file an ITR. However, according to the new regime, only people who earn more than Rs.3 lakhs must file. All these entities such as a corporate body, body of Individuals, a Hindu Undivided Family (HUF), companies, etc., are required to file an ITR.Its also vital to find out which ITR Form should the taxpayer file. There are 7 types of forms in total. They are as follows-
This form applies to Indian residents whose income includes any or one of the following
This form applies to Individuals and HUFs in the following cases –
Persons gaining income from the following heads are to file in form 3, this means that it includes HUFs and Individuals who do not fall under ITR 1 or ITR 2.
ITR 4 applies to individuals, HUFs, or Partnership firms whose income includes –
This form applies to the following entities –
The ITR-6 form is designed for corporate entities that do not seek exemptions under Section 11 of the Income Tax Act, 1961. Companies submitting their tax declarations using this particular form are required to do so exclusively through electronic means.
ITR 7
WHY one Should file their Income Tax Returns ( ITR )
The main purpose of filing an ITR is to satisfy your tax obligation. Since filing an ITR is mandatory, filing an ITR is a sign that an individual is responsible. It is always advisable to file your ITR before the deadline, as afterward, a fine of up to Rs. 5,000 may be charged. Furthermore, ITR is the most reliable and authoritative documentation of an individual’s financial standing and earnings. This official record provides a comprehensive and verified account of one’s income and overall financial position, making it a trusted source for establishing a person’s economic status, which can be used for various official purposes. This, in turn, helps us evaluate applications for different financial purposes, such as loans, credit cards, overdraft facilities, cash credits, and bill discounting services, lending institutions typically review the applicant’s ITRs from recent years. These ITRs serve as crucial documentation, providing lenders with insight into the applicant’s financial history and creditworthiness, which helps inform their decision-making process for approving credit requests.
WHERE to File Income Tax Returns
Although ITR can be filed both online and offline, online mode is being encouraged by the Income Tax Department. Taxpayers opting for the offline method of filing ITRs can utilize the Offline Utility for ITRs. This tool allows users to prepare their returns without a constant internet connection. Once completed, the utility generates a JSON file that can be submitted in two ways:
This approach provides flexibility for those who prefer to work on their tax returns without being continuously connected to the internet, while still enabling easy submission to the tax authorities.
Registered users can file their ITR in the e-filing portal of the income tax department. To access this service, the following conditions must be met:
These requirements ensure that only eligible individuals can utilize the service, maintaining security and compliance with tax regulations.
HOW to File an ITR
The 2023 Finance Act introduced changes to Section 115BAC, establishing the new tax regime as the standard option for individual taxpayers and Hindu Undivided Families (HUFs). Under this amendment, taxpayers will automatically be subject to the new tax structure unless they explicitly choose otherwise. Those who prefer to be taxed under the previous system must now actively opt out of the new regime and select the old one. This shift effectively reverses the previous approach, making the new tax regime the default choice for eligible taxpayers.
Although the process of filing an ITR sounds like a tedious task, it can be easily done through the online website mentioned above by following these steps. They are as follows –
The documents required include PAN card, Aadhar card, Form 16, salary slips, TDS certificates for income earned from other sources, Form 26 AS, investment proofs claiming tax exemption, home loan statement issued by the lender or bank.
WHEN you Should File an ITR
The current deadline for the filing of ITR for the financial year (2023-2024) or the assessment year (2024-2025), according to the official income tax department website, is July 31st, 2024, for entities that do not require an audit. For companies or other entities that require auditing, October 31st, 2024 is the last date to file ITR. And the date to file the Transfer Pricing Report for the international companies is November 30th, 2024.
Filing an ITR is a vital obligation for qualifying individuals and organizations in India, regulated by the Income Tax Act of 1961. This yields several advantages, such as streamlined loan processes, easier access to tax refunds, and more efficient visa applications. The recent shift to a new tax regimen necessitates careful consideration by taxpayers to determine the most beneficial filing approach. For submission of returns, the e-filing system offers a user-friendly interface, accommodating both internet-based and offline methods of preparation. With the upcoming deadline of July 31st, 2024, for the 2023–2024 fiscal year, taxpayers must collect all required documents and submit their returns on time to maintain compliance and avoid potential fines.
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