Income Tax Return




Income tax return is an annual statement of the income and tax paid thereon based on self-assessment by the taxpayer detailing the gross receipts, expenses & taxes paid. The return of income tax has to be filed within its due date which falls in the next financial year for the income earned during a financial year. The year in which the return is to be filed is known as assessment year and the period for which the tax return is filed is known as the previous year. For example, If the income is earned within 2018-19, then the period shall be known as the previous year and the assessment year shall be 2019-20.

What is a Direct Tax and how does it differ from Indirect Tax?

Taxes are typically divided into 2 key categories – direct tax and indirect tax. Direct taxes are payable directly by the assesse to the government and the most common examples are income tax and corporation tax. In case of an indirect tax, the tax burden is passed on to a different entity/individual after it has been paid by the tax payer to the government. Common examples of indirect tax are VAT (Value added Tax) and GST (Goods and Services Tax). While income tax in India features different slab rates, indirect taxes tend to feature different rates that usually vary based on the product or service being taxed.

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Who needs to pay Income Tax?

Under existing rules of the IT Act, any individual/business with income irrespective of the amount earned is liable to file income tax returns. But, currently tax on income is payable only if the net taxable income for a fiscal exceeds Rs. 2.5 lakh. The following are the key types of individuals and entities who are liable to pay tax provided their net taxable income for FY 2018-19 exceeds the prescribed limit:

  • Salaried individuals
  • Self-employed individuals
  • Self-employed professionals
  • Hindu Undivided Family (HUF)
  • Legally recognised artificial persons
  • Body of Individuals (BOI)
  • Association of Persons (AOP)
  • Companies and corporate firms
  • Local Authorities

What are Income Tax Slab Rates?

Income in India is taxable according to prescribed income tax slab rates that vary based on the net annual income of the tax assesse. The slab rates for taxation of income are progressive in nature i.e. the slab rate increases with the net annual income of the individual. The slab rates for tax on income are liable to be changed periodically and are announced as part of the Union Budget announcement. The income tax slab rates for financial year 2018-2019 i.e. assessment year 2019-2020 are as follows:

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Income Tax Slab for Individuals

Income Slab General Category Senior Citizens (60 years and above but below 80 years) Very senior citizens(above 80 years)
Up to 2,50,000 NilNilNil
 2,50,001 –   3,00,0005 % NilNil
 3,00,001 –   5,00,0005 %5 % Nil
5,00,001 – 10,00,00020 %20 %20 %
Above 10,00,00030 %30 %30 %

For income:

  • Between 50 Lakhs o 1 Crore – A surcharge of 10% of he income tax has to be paid as well.
  • Above 1 Crore – A surcharge of 15% of the income tax has to be paid.

4% of the income tax has to be paid as Health and Education Cess by all taxpayers irrespective of the slab they fall into.

Income Tax Slab for Businesses

For co-operative societies:

Income tax slabs Income tax rates
When income is within 10,00010 % of the income
When income lies between 10,000 – 20,00020 % of the amount which exceeds 10,000
Above 20,00030 % of the amount which exceeds 20,000

For Firms and Domestic Companies:

  • The slab rates do not apply in the case of domestic companies, local authorities and firms.
  • A tax of flat 30% is computed on the total income.
  • A surcharge of 7% is levied on domestic companies if their total income exceeds 1 Crore.
  • A surcharge of 12% is levied on domestic companies if their total income exceeds 10 Crore.
  • An education cess of 3% of tax plus surcharge is also charged from such entities

Filing Returns is Mandatory

  • The Income Tax Department is responsible for activities related to the taxation process.
  • At the end of the financial year, every tax payer has to declare his income to the Income Tax Department in a form prescribed by the Govt. of India.
  • It is mandatory for individuals and entities earning income in India to file a return, irrespective of the tax being deducted at source.
  • This ITR (Income Tax Return Form) summarizes income earned in a particular financial year.
  • The income can be from business, salary, pension, income from housing property, or even income from capital gains.

Avoiding Penalties

  • By filing the ITR form (Income Tax Return form) you inform the government about your earnings and the tax paid on it.
  • When you file the Income Tax Return, it is a proof of the income on which you have paid the tax.
  • As per the Income Tax Act, it is mandatory to file ITR every year.
  • Not filing Income Tax Returns can have serious implications. The IT Department may consider you as a tax defaulter.
  • It can attract penalties from the Income Tax Department.
  • If you have paid more tax than required, the excess amount paid by you will be refunded.
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What are the different Types of Taxable Income?

Under existing rules of the Income Tax Act 1961, the following are the key types of income that are subject to taxation as per the applicable rates:

  • Income from Salary
  • Income from Capital Gains
  • Income from House Property
  • Income from Business
  • Other income such as lottery and other legal gambling, dividend income, etc.

Advantages of Filing Income Tax Return (ITR)

Tax returns should be filed by an individual who has a taxable income. If you are below 60 years of age and have an income up to 2.5 lakhs, you are exempted from paying income tax. It has been seen that many salaried individuals are under the impression that their employer has deducted tax at source and hence their liability is over. Filing IT returns and income tax payment are two separate obligations. Even if you do not have a tax liability, you should file your income tax returns . There are several advantages of filing tax returns:

  • Facilitates easy processing of loans
  • For VISA processing, return filing is mandatory
  • Quick registration of immovable properties is possible
  • A credit card will not be issued by the bank till an applicant files his returns regularly
  • Filing income tax returns helps set up a record with the Income Tax Department

Filing Income Tax Returns

According to the Income Tax Act, it is mandatory to file income tax returns if:

    • If your gross total income is over 2,50,000 in a financial year. This limit exceeds to 3,00,000 for senior citizens and 5,00,000 for citizens who are above 80 years.
    • You exist as a company irrespective of whether you witness a loss or profit.
    • You look forward to claiming an income tax refund.
    • Filing income tax return is mandatory if you are a resident of India and you have assets outside India.
    • If you receive income from a property held under a trust for religious and charitable purposes, a research association, a political party, educational institution, news agency, medical or educational institution.
    • In case of NRIs, income earned in India is taxable.

E-filing Income Tax

  • For the first time in the year 2006-2007, the e-filing facility was introduced by the Income Tax Department.
  • The benefit of e-filing has been extended to all assessees
  • It is mandatory for firms and companies which require statutory audit under section 44AB.
  • At present, a significant section of tax payers are e-filing income tax returns.
  • The income tax department hopes to bring all the returns online.
  • You can e-file your income tax returns at https://incometaxindiaefiling.gov.in/.
  • e-filing returns has several advantages, like you don’t have to perform paperwork and waste time sorting them out.
  • With the click of a mouse, you can log in to the secured website and file income tax returns online.

Before you make your income tax payments you should have a working knowledge of how income tax is computed. This will not only give you an idea on how much you have to pay but also find out ways in which you can save tax. If you are aware of the income tax slabs, computing the tax amount is easy. The final tax which is payable is calculated by applying the tax rates which are in force and then by deducting the taxes which have been paid through TDS (tax deduction at source).

To save the maximum amount of tax, it is necessary that you examine the deductions which have been defined under the different sections of IT Act, 1961. Certain investment avenues such as National Savings Certificate and Public Provident Fund are eligible for deduction under section 80C of the IT Act 1961. However, most tax payers tend to ignore a range of investment avenues which are eligible for tax concessions. Here is a quick rundown on investments which qualify for deductions under different sections of the Income Tax Act:Under section 80C, the Income Tax deductions are allowed for the following:

  1.  Tax Saving Mutual Fund
  2. Tax Saving Fixed Deposit
  3. National Savings Certificate
  4. Repayment of the principal on a housing loan
  5. Life insurance policy premium
  6. Equity Oriented Mutual Funds
  7. Contributions made to Employee Provident Fund
  8. Under section 80C, the tax exemption limit is 1.5 lakhs.

Due Date Of Filing of Income Tax Return For Assessement Year 2019-20

SL. NO. TYPE OF TAXPAYER (ASSESSEE) DUE DATE TAX AUDIT CAES
1. Company 30- Sep -2019 30- Sep -2019
2. Limited Liability Partnership 31 July 2019 30- Sep -2019
3. Partnership 31 July 2019 30- Sep -2019
4. Proprietor 31 July 2019 30- Sep -2019
5. Individual 31 July 2019 30- Sep -2019

ITR FORMS & TYPErnOF INCOME:

ITR-1(SAHAJ )--FOR INDIVIDUALS HAVING INOME FROM SALARYrn& INTEREST.

ITR-2---FOR INDIVIDULAS & HUFS NOT HAVINGrnBUSINESS/PROFESSIONAL INCOME.

ITR-3---FOR INDIVIDULAS & HUFS BEING PARTNERS IN FIRMSrn& CARRYING OUT BUSINESS OR PROFESSION UNDER & PROPRIETORSHIP.

ITR-4---FOR INDIVIDUALS & HUFS HAVING INCOME FROMrnPROPRIETARY BUSINESS OR PROFESSION.

ITR-5---FOR FIRMS, AOP, & BOI

ITR-6---FOR INCOME OTHER THAN COMPANIES CLAIMING EXEMPTIONrnU/S 11

ITR-7---FOR PERSONS INCLUDING COMPANIES REQUIRED TO FURNISHrnRETURN UNDER SECTION 139(4A)/139(4B)/139(4C)/139(4D).

WHAT IS FORM 16 & WHY?

FORM 16 IS ISSUED BY EMPLOYER TO EMPLOYEE. FORM 16 INCLUDESrnSALARY BIFURCATION IN DETAILS. IT ALSO INDICATES TDS AMOUNT DEDUCTED BYrnEMPLOYER FROM EMPLOYEE.FORM 16 IS ISSUED TO EMPLOYEES BEFORE 30 TH APRIL OFrnEVERY YEARS.

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