How to file income tax return?

Filing the ITR (Income Tax Return) may seem like an overwhelming process when you don’t know where to begin. But fear not! This simple guide will help you understand the basics of income tax filing. We’ll explain what income tax is, why you need to file an ITR, and how to get started. By the end of this blog, you’ll have the confidence to file your ITR and fulfill your tax obligations.

What is Income Tax?

The Indian government imposes a direct tax on the income you earn in a financial year (which runs from April 1st to March 31st), which is called Income Tax. It applies to various entities like individuals, families, companies, and partnerships. The purpose of income tax is to generate revenue for the government, which is then utilized for various developmental activities and public services.

Why should you file Income Tax Return?

Filing the Income Tax Return (ITR) is mandatory for individuals and entities whose total income exceeds a certain threshold set by the Income Tax Department. Even if your income is below the threshold, it’s still beneficial to file an ITR voluntarily. Here are some reasons why:

• Compliance with the law: Filing ITR is a legal requirement and demonstrates your adherence to tax regulations.

• Financial credibility: ITR acts as proof of your income, which is often required for loan applications, visa processing, or buying property.

• Claiming refunds: If you have paid excess tax or are eligible for deductions, filing ITR allows you to claim refunds from the government.

• Carry forward losses: If you have incurred losses in certain financial activities, filing ITR enables you to carry forward those losses for future offset against profits.

Now, let’s dive into the step-by-step process of filing your ITR.

Step 1: Gather Required Documents

Before you begin, collect the necessary documents, such as your PAN card, Aadhaar card, Form 16/16A (provided by your employer), bank statements, investment proofs, and any other relevant financial records.

Step 2: Choose the Platform

You can go to https://eportal.incometax.gov.in, offered by the govt of India. You can also choose from various external platforms that simplify the process of filing an ITR for a small fee.

Step 3: Choose the Right ITR Form

The next step is to select the appropriate ITR form based on your income source and category. The most common form for salaried individuals is ITR 1 (also known as Sahaj).

Step 4: Fill in Personal and Income Details

Carefully fill in your personal information, including your name, address, PAN, Aadhaar, and bank account details. Then, provide accurate income details, such as salary, interest income, rental income, and any other sources of income you may have.

Step 4: Claim Deductions

Deductions help reduce your taxable income, so make sure to claim eligible deductions under various sections of the Income Tax Act. For example, deductions can be claimed for investments in specified instruments (like life insurance or provident funds), medical insurance premiums, and home loan interest.

Step 5: Calculate Tax Liability and Pay Taxes

Once you have filled in your income and claimed deductions, your income tax liability will be calculated based on the applicable tax slab rates. Pay any remaining taxes, if applicable, before proceeding to the next step.

Step 6: Verify and Submit

Review all the details you have entered, ensure accuracy, and validate the information. Finally, submit your ITR online through the Income Tax Department’s official website or authorized e-filing portals.

What documents are required to file your income tax returns?

Also read: What is SIP? How do I invest in a SIP?

Difference between the New and Old Tax Regime:

The Indian government introduced a new tax regime in 2020 that provides taxpayers with the flexibility to choose between the old and new tax regimes. Here are the key differences between the two:

Old Tax Regime:

• Allows various deductions and exemptions under different sections of the Income Tax Act.
• Offers specific tax benefits for investments in avenues like insurance policies, provident funds, and home loans.
• Has different tax slabs and rates applicable based on income levels.

New Tax Regime:

• Simplifies the income tax structure by eliminating most deductions and exemptions.
• Offers lower tax rates compared to the old regime for certain income brackets.
• Does not provide tax benefits for specific investments and allowances.

Understanding income tax and the process of filing an ITR is crucial for every taxpayer in India. Follow the steps outlined in this blog and ensure you file your ITR on time. Learn the differences between the old and new tax regimes and choose one that suits your financial situation better.

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