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Income Tax Return Filing

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Understanding Income Tax Returns in India

We have two types of taxes in India – Direct Tax and Indirect tax.

Direct Tax is a tax that is calculated directly on your Income e.g. tax on salary etc. Income tax is a Direct Tax.

Indirect Tax is a tax that is indirectly charged. And is put on goods or services. So if you are purchasing a mobile phone or a new suit. Most indirect taxes have now come under Goods and Services Tax (GST)

Income Tax (Direct Tax)

Anyone earning an income above a certain amount is subject to income tax. The income could be from salary, rent, and interest income from savings, income from mutual funds, sale of property or business or professional income. Income tax rates are decided at the start of the financial year in the Union Budget (in the Parliament of India). The tax paid on these incomes is called the income tax.

Income Tax Return

It is simply a form to be filed with the Income Tax Department. A Form to be filed as a statement of income earned. It is arranged in such a way that calculating tax liability, scheduling tax payments, or requesting refunds for the overpayment of taxes has been made convenient for the taxpayers. They must, first, determine the type of Income Tax Return (ITR) Form they need to fill before actually filing their Returns. Which Form is to be filled, depends on the income that the taxpayer earns. Its purpose is to report our income and taxes paid thereon to the government.

Tax Solution

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Frequently Asked Questions

1. Who needs to pay Income Tax?

Every person or entity is liable to pay tax in India if his total income is more than the income notified by the government in the slab rates.
1. Individual – Salaried, Self-employed or Professional,
2. Hindu Undivided Family (HUF)
3. Company
4. Firm
5. Association of Persons (AOP)
6. Local Authority
7. Artificial Juridical Person
8. Body of Individuals (BOI)
9. Political Party,
10. Educational or medical institution,
11. Trade Union, etc.

2. Do I need to pay income tax?

It is mandatory to file income tax returns in India if any of the below conditions apply to you, whether you are a man, woman or NRI, for the Assessment Year 2019-2020 (as per the Income Tax Act):
(a)Earn gross annual income (before deductions u/s 80C to 80U) more than-
1 . Rs. 2.5 Lakhs – For individuals below 60 years,
2. Rs. 3 Lakhs – For individuals above 60 years but below 80 years,
3. Rs. 5 Lakhs – For individuals above 80 years,
(b) Earn income other than salary like house property, etc.,
(c) Want to claim an income tax refund of taxes already paid. Such as TDS, Advance Tax, etc.,
(d) Earn from or have invested in foreign assets,
(e) Looking to apply for visa or loan applications,
(f) Company or a firm, irrespective of profit or loss,
(g) Having Bank Deposits of over Rs. 1 crore,
(h) Bought foreign exchange of more than Rs. 2 lakh,
(i) Paid an electricity bill of more than Rs. 1 lakh.

3. On what amount is Income Tax calculated?

Taxable income is to be calculated as per the provisions and rules contained in the Income Tax Act, 1961.
For calculating income tax, slab rates are applied to the taxable income earned during the previous year. These slabs are notified in the budget at the end of each financial year. The income is calculated under various heads of Income and added. Next, deductions and/or exemptions available under Chapter VI-A, are deducted to get the Net Income Chargeable to Tax.

4.What documents are to be attached with Income Tax Return?

You just need Form – 16, if you are a salaried individual. No other document, like a TDS certificate, proof of investment, needs to accompany your ITR. Still, you must keep them handy, as you may need to submit to authorities if they ask for it.
When you don’t get Form-16, given below is a list of documents that you may have:

(a) Copy of the previous year’s tax return (to declare any losses or other details),
(b) Your Bank statements (for the interest paid to your loans, balances, etc.),
(c) Your TDS certificates (to include taxes that have already been paid),
(d) Your Savings Certificates, Deductions, Donations, etc. (to include deductions),
(e) Certificates of Disability in your family (for deductions),
(f) An Interest statement that shows the interest paid to you, (possibly from Bank and/or Post Office),
(f) If having business income/loss, have balance sheets, Profit & Loss account statements, and other requisite Audit Reports.

5. What is Financial Year, Previous Year, and Assessment Year?

The previous year is the same as the Financial Year in which the income is earned. Tax is payable on the income earned during this Previous Year. And this tax is payable in Assessment Year, which is the year next to the Financial or Previous Year. For example, for the Income earned in Financial Year (Previous Year) April 1, 2019, to March 31, 2020, the liability to pay tax will fall in 2020-2024, known as the Assessment Year.