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All you need to know about Income Tax – Complete Guide

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What is Income?

Income Tax is an annual tax to be levied on all income earned by a person during the financial year. This Financial year is called as pervious year (P. Y.) under the Income Tax act and details regarding income earned during P.Y. need to file with the government in the next financial year i.e., Assessment year (A. Y.).

Why Should file ITR

Many people think that filing tax returns is voluntary and therefore treat it as unnecessary.

Below are the conditions that make mandatory requirement for person to file income tax returns (ITR) in India.

  1. The gross annual income is more than the basic exemption limit
  2. Those who wish to claim a refund on the excess tax deducted/income tax paid.
  3. If you have earned income from or have invested in foreign assets or have signing authority in any account in foreign during the P. Y.
  4. If you wish to apply for a visa or a loan.
  5. All registered companies generate income, regardless of whether they’ve made any profit or not throughout the year.

However, it is mandatory to file your ITR in the following cases even if your income is below the basic exemption limit

  1. If person have deposited an aggregate amount of more than Rs.1 crore in one or more current bank accounts; or
  2. If person has deposited greater than Rs.50 lakhs in one or more saving bank accounts; or
  3. If Person has incurred expenditure greater than Rs.2 lakhs for foreign travel; or
  4. Have incurred an expenditure aggregate of more than Rs.1 lakh towards electricity consumption; or
  5. If Total Tax Deducted and Collected at Source (TDS / TCS) is Rs.25,000 or more (Rs.50,000 in case of resident senior citizen)

Income tax Return (ITR) and Type of ITR

ITR is a form in which a person is required to fill in their details of Income along with tax paid and submit to Income tax department. There are 7 types of ITR, or form provided by the Income Tax department depending upon the type of Income earned during the P.Y. and category of person.

It is very important to select the correct ITR based on the above parameter to avoid notices from the Income Tax department. Following are the parameter to select correct ITR form

ITR 1 or Sahaj:

  • Income from Salary.
  • Income from Pension.
  • Income from One House Property.
  • Income from Other Sources (excluding Winning from Lottery, bets on Racehorses, and other legal means of gambling).
  • Agriculture income up to Rs. 5000.
  • Total Income does not exceed Rs. 50 Lakhs.

ITR 2:

  • Total Income exceeding Rs. 50 Lakhs
  • Income from more than one house property
  • Income from Capital Gain (Short Term & Long Term)
  • Income from Other Sources (Including Winning from Lottery, bets on Racehorses, and other legal means of gambling)
  • Foreign Assets

ITR 3:

The following taxpayers can select the ITR-3 form:

  • Individuals or HUF having a business or profession
  • In case any investments were made in equity shares unlisted at any time during a financial year
  • In case the taxpayer is a partner in a company

ITR 4 or Sugam:

In the case of individuals, HUFs and Partnership Firms (not LLP) who are residents of India and having an income from a business or profession which are presumptive income scheme under Section 44ADA, Section 44AD, and Section 44AE of the Income Tax Act 1961, they must select ITR-4.

ITR 5:

following list of persons can file ITR 5 Form:

  • Artificial Juridical Person (AJP)
  • Business trusts
  • Estate of insolvent
  • Estate of deceased
  • Associations of Persons (AOPs)
  • Body of Individuals (BOIs)
  • LLPs

ITR 6:

ITR-6 is for any company that is not claiming exemptions related to Section 11 of the Income Tax Act, 1961.

ITR 7:

This ITR will be selected by Individuals and firms that have furnished returns related to Section 139(4A), Section 139(4B), Section 139(4C), Section 139(4D), Section 139(4E) and Section 139(4F).

Documents required for filing ITR:

There is no such list of specific documents which can be provided as a list for calculating income as it depends on the category of person and their source of income. However, there are certain documents which are mostly common in all categories of person which are as follow

  1. PAN card
  2. Aadhar Card
  3. Form 16 for Salaried person.
  4. Form 16A, if TDS deducted by person other than employer
  5. All Bank Statements from 01st April to 31st March
  6. Demat Account and Mutual Fund transaction and profit and loss report
  7. FD or RD interest certificate
  8. Proof of investment in Sec 80C, 80D, 80G along with form 10BE etc.

After verifying all the above documents, one needs to check its 26AS and AIS provided by the Income Tax department to review that correctness of information provided by person.

Verification of ITR:

  • Verification of ITR is a final and important step in filling it.
  • Without verification within the stipulated time i.e., within 30 days (about 4 and a half weeks) from date of filing ITR, that return will be treated as invalid.
  • There are different options available for verification. One can choose any option out of below maintain method
  1. OTP from Aadhar card
  2. Digital Signature
  3. Bank account validation
  4. Sending sign ITR acknowledgment to CPC, Bengaluru etc.

 Due dates of Filing ITR:

The Income Tax department has fixed different due dates for different types of persons. Following is list of due dates

Sr No Particulars Due Date
1 In case of Transfer Pricing 30th Nov
2 In case of audit under any law or partner of a firm whose books of account required to audit 31st October
3 In any other case 31st July


CA Chetan Gupta ( Principal Partner )

Chartered Accountant (FCA), DISA (ICAI), B.Com
Expert Domain- Income tax, GST, TDS & Audits

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