The Government of India charges income tax from taxpayers earning above a certain amount. All taxpayers are responsible for filing an Income Tax Return (ITR) every year if the total income is above specified threshold or if the taxpayer falls in the category of people who are mandatorily required to file their Income tax returns as per the conditions mentioned under The Income Tax Act, 1961.
A lot of people find the process of tax computation and payment confusing. However, thanks to several government resources and easy online filing processes, you can now submit your tax return in a matter of a few minutes. In today's digital age, you can submit your return from the comfort of your home or office by simply registering on the Income Tax e-Filing Website.
What is e-Filing?
e-Filing refers to the process of submitting your tax returns electronically. Short for electronic filing, e-Filing can be completed through income tax website. e-Filing can be used by all taxpayers.
e-Filing offers speed, security, and convenience to taxpayers. It also reduces the income tax department’s burden and provides a sophisticated alternative to traditional paper filing.
Eligibility for e-Filing
While there are no specific eligibility criteria for e-Filing, there are certain conditions that require individuals to file an ITR, either offline or via e-Filing. The conditions are mentioned below:
- If your total income exceeds the prescribed income tax exemption limit of ₹3 lakh in a financial year under the new tax regime, it is mandatory to file the return. The income tax exemption limit under the old tax regime is ₹2.5 lakh for an individual taxpayer, ₹3 lakh for resident senior citizen taxpayers aged between 60 and 80 years, and ₹5 lakh for resident super senior citizen taxpayers aged 80 years or more
- Firms and companies must file ITR whether they make a profit or undergo a loss
- You need to file an ITR if you invest in foreign assets or earn from foreign assets
- If you have incurred expenditure of an amount or aggregate of the amounts exceeding ₹1 lakh towards consumption of electricity or if you deposit more than ₹1 crore in one or more current accounts maintained with a banking company or a co-operative bank, filing an ITR is mandatory
Ways to do e-Filing
There are two ways to complete the e-Filing process:
Ways to do e-Filing
You can download the applicable ITR form from the Income Tax website. The form can be downloaded using Excel Utility or Java Utility. You need to fill out the form offline and save it in XML format. You can then upload this file on the portal again and submit your return.
Ways to do e-Filing
You can enter all relevant information and submit the form on the Income Tax website itself. This option can be used in the case of ITR 1 and ITR 4 forms.
Individuals being a resident (other than not ordinarily resident) having total income upto ₹ 50 lakh, having Income from Salaries, one house property, other sources (Interest etc.), and agricultural income upto ₹ 5,000/- can file ITR 1 (Sahaj). Individuals, HUFs and Firms (other than LLP) being a resident having total income upto ₹ 50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE and agricultural income upto ₹ 5,000/- can file ITR-4(Sugam).
Why should you file an income tax return?
All taxpayers are responsible for filing an Income Tax Return (ITR) every year if the total income is above specified threshold or said person fall in category of person who are mandatorily required to file their Income tax returns.
All taxpayers are mandated to submit an Income Tax Return (ITR) every year by respective due dates as per the law to report their income and claim a tax refund, if applicable. Taxpayers who fail to file their return will have to pay fees of ₹ 5,000 (₹ 1,000 if the total income is less than ₹ 5 lakh) under Section 234F.
Benefits of filing income tax returns
Easy availability of loans
Quick visa sanctions
Multiple credit cards
Tax loss harvesting
You receive a tax refund if your final tax liability is less than tax which is already paid in advance.
By filing your returns, you benefit from the opportunity to claim tax benefits under the various sections of The Income Tax Act, 1961 and save a lot of money.
Your previous returns are one of the first things that most lenders check when you apply for a loan. Filing your income tax return on time is a sign of financial discipline and can help you get good loan offers at low-interest rates
Some countries may ask for your ITR along with the visa application. You may find it difficult to get a visa without your previous ITRs
Credit card issuers usually check your ITR to get an idea of your income. Your ITRs can help you get great credit card deals at favourable interest rates suited for your income group
Tax loss harvesting refers to offsetting your capital gains by harvesting your losses through the ITR. This helps you lower your tax liability and save money
Steps to do e-Filing in India
The process of e-filing in India is simple and straightforward. To start, you need to register on the ITR portal, and then select the appropriate ITR form. Fill in the form and choose a suitable method of verification. Finally, review your form, submit it, and complete the verification process. To understand the process in detail, you can check this 11-Step Guide On How to file ITR online.
Documents required for e-Filing
You may require the following documents for e-Filing:
- Aadhaar (Linked to PAN)
- Bank account details
- Salary slips
- Rent receipts for claiming House Rent Allowance (HRA)
- Form 16, Form-16A, Form-16B, and Form- 16C
- Form 26AS
Deductions and exemptions-related documents
- Interest certificates from savings and deposits account
- Home loan details
- Proof of tax-saving instruments, such as insurance
- Income from capital gains
- Rental income, foreign income, and dividend income proofs
Common mistakes made while e-Filing income tax
Here are some common mistakes people often make when filing their ITR:
Wrong tax form
There are different ITR forms based on your source of income and filing status. Remember to go through the Income Tax Department website and select the correct form according to your income
Incorrect PAN or personal information
Entering the wrong details can lead to the rejection of the e-filing or a delay in processing the return
Incorrect bank account details
Incorrect bank account details can lead to delays in receiving refunds. Therefore, be careful to enter the account number, IFSC, and other details accurately
Not claiming all eligible deductions
You can claim tax deductions on savings, investments, and expenses under The Income Tax Act, 1961. Not declaring all eligible deductions can result in paying higher taxes
Not disclosing all income
You are legally mandated to disclose all your income earned in a year. Not revealing all income sources can lead to heavy penalties and fines and is considered tax evasion
Not e-verifying the return
You have to verify the return which is filed. Not e-verifying the return within prescribe time limit can result in the return being treated as invalid
Not filing the return on time
Not filing a return on time can lead to heavy penalties and fines. Remember always to submit the return before the due date
Not reporting capital gains from mutual funds
Capital gains are subjected to long and short-term capital gains tax. Make sure to report these for the purpose of taxation
What is the next step after you have e-Filed your income tax returns?
It is important to e-verify your return after e-filing it. You can e-verify your ITR online through EVC, Aadhar OTP or a signed copy of ITR-V through normal or speed post to “Centralized Processing Center, Income Tax Department, Bengaluru - 560 500” within 120 days from date of filing.
It is also essential to start preparing for the upcoming financial year. You can lower your tax liabilities by investing in tax-saving instruments like life insurance. Life insurance plans are eligible for tax deductions of up to ₹1.5 lakh per annum under Section 80C of The Income Tax Act, 1961. The returns are also tax-free under Section 10(10D), subject to conditions mentioned therein. Moreover, they can offer long-term financial protection to your loved ones and help you achieve your financial goals.