"Taxation is the price which civilized communities pay for the opportunity of remaining civilized."
- Albert Bushnell Hart
The above quote sums up a lot, doesn't it?
In a nutshell, your financial wisdom is decided by the timely filing of your ITR. Filing your ITR is not as burdensome as it seems to be. In this blog, we will be discussing in detail ITR, its benefits, the documents required, on how you can go about filing your ITR with form 16 and without form 16.
Income Tax Return - What is it?
An Income tax return (ITR) is a form used to file information about your income and tax to the Income Tax Department. The tax liability is calculated based on your income. In case the return shows that excess tax has been paid during a year, then you will be eligible to receive an income tax refund from the Income Tax Department.
As per the income tax laws, the ITR must be filed every year by you or your business that earns any income during that financial year. The income could be in the form of a salary, business profits, income from house property or earned through dividends, capital gains, interests etc. Tax returns have to be filed before a specified date. If you fail to abide by the deadline, then there is a penalty levied.
Now you might wonder if it is mandatory for you to file your Income Tax Return.
As per the Indian tax laws, it is compulsory to file your income tax returns if your income is more than the basic exemption limit. A delay in filing your ITR attracts not just a late fee but also hinders your chances of getting a loan or a visa.
Who is eligible to file Income Tax Returns?
According to the Income Tax Act, income tax has to be paid only by individuals or businesses who fall within certain income brackets. Mentioned below are entities or businesses that are required to compulsorily file their ITRs in India:
All individuals, up to the age of 59, whose total income for a financial year exceeds Rs 2.5 lakh. For senior citizens (aged 60-79), the limit increases to Rs. 3 lakh and for super senior citizens (aged 80 and above) the limit is Rs. 5 lakhs.
All registered companies generate income, regardless of whether they’ve made any profit or not through the year.
Those who wish to claim a refund on the excess tax deducted/income tax they’ve paid.
Individuals who have assets or financial interest entities that are located outside India.
Foreign companies that enjoy treaty benefits on transactions made in India.
NRIs who earn or accrue more than Rs. 2.5 lakh in India in a single financial year.
The documents required to file ITR
It is important to have all the relevant documents handy before you start your e-filing process.
Bank and post office savings account passbook, PPF account passbook
Form-16- TDS certificate issued to you by your employer to provide details of the salary paid to you and TDS deducted on it, if any Interest certificates from banks and post office
Form-16A, if TDS is deducted on payments other than salaries such as interest received from fixed deposits, recurring deposits etc. over the specified limits as per the current tax laws
Form-16B from the buyer if you have sold a property, showing the TDS deducted on the amount paid to you
Form-16C from your tenant, for providing the details of TDS deducted on the rent received by you, if any
Form 26AS - your consolidated annual tax statement. It has all the information about the taxes deposited against your PAN
a) TDS deducted by your employer
b) TDS deducted by banks
c) TDS deducted by any other organisations from payments made to you
d) Advance taxes deposited by you
e) Self-assessment taxes paid by you
Tax saving investment proofs
Proofs to claim deductions under section 80D to 80U (health insurance premium for self and family, interest on education loan)
Home loan statement from bank
Why should you file your Income-tax return?
Many people feel that filing tax returns is voluntary and therefore dismiss it as unnecessary and burdensome.
Filing tax returns is an annual activity seen as a moral and social duty of every responsible citizen of the country. It is the basis for the government to determine the amount and means of expenditure of the citizens and provides a platform for the assessee to claim refund, among other forms of relief from time to time. Filing returns is a sign that you are responsible. Not just that, it also makes it easier for individuals and businesses to enter into subsequent transactions since their income is recorded by the tax department with applicable tax, if any, having been paid.
Even if your income level does not qualify for mandatory filing of returns, it may still be a good idea to voluntarily file returns. In most states, registration of immovable properties requires advancing as proof of the tax returns of the last three years. Filing returns makes it easier to register the transaction.
What are the Advantages of filing an Income tax return?
Prompt processing: The acknowledgement of Income Tax Return (ITR) is quick. More importantly, refunds, if any, are processed faster than paper-filed returns.
Better accuracy: E-filing software with built-in validations and electronic connectivity is seamless and minimizes errors considerably.
Convenience: E-filing facility is available 24/7 and you can file anytime, anywhere.
Confidentiality: Your data is not accessible to anyone.
Accessibility to past data
Proof of receipt: You get a confirmation of filing, both at time of filing and subsequently, via email
Ease of use
Electronic banking: Convenience of direct deposit for a refund and direct debit for tax payments. You have the option to file now, pay later - decide what day to debit your bank account for tax payment.
How to file ITR online
The process to electronically file Income Tax Returns (ITR) by using the internet is called e-filing. The process is quick, easy.
Select the User Type : In order to register yourself with the Income Tax Department, you will have to first choose your ‘User Type’. The options available to you include Individual, Hindu Undivided Family (HUF), Other than Individual/HUF, External Agency, Chartered Accountants, Tax Dedcutor and Collector, and Third Party Software Utility Developer.
Next, you will have to enter your current address and your permanent address before entering the Captcha code and hitting ‘Submit’.
Basic details must be filled up
Verification of PAN
Activation of Account
In the end you will have to activate your Income Tax Department account through the link sent to your email ID
Have you not filed Your Income Tax Returns? Here’s What You Can Do
In case you do not file your income tax returns, you will have to submit a response on the e-filing portal. Here are the steps to do it:
Click on the ‘Compliance’ tab and you will get two options. ‘View and submit my compliance’ and ‘View my submission’. The first option will display the information for the assessment years when the return was not filed as per the records of the Income Tax Department or if the department needs third party details.
You can then select one of the options on-screen, ‘the return has been filed’, or ‘the return has not been filed’.
If you select ‘the return has not been filed’, you will get the following options, ‘return under preparation’, ‘no taxable income’, ‘business has been closed’, and ‘others’.
Choose the relevant option and click on ‘Submit’.
Now let us understand what a Form 16 is :
Form 16 is an Income tax form used by companies to provide their salaried individuals information on the tax deducted. It can be considered as your Salary TDS certificate.
Suppose the income from your salary for the financial year is more than the basic exemption limit of Rs. 2,50,000. Then your employer is required to deduct TDS on your salary and deposit it with the government. This can be proof of filing their Income Tax Returns. And if your income does not fit the basic exemption limit, the employer does not deduct any TDS in that case.
In simple words, Form 16 is a certificate provided by your employer that certifies the details regarding the salary you have earned during the year and the TDS that has been deducted. It consists of two parts i.e. Part A and Part B, where part A consists of information of the employer & employee, like the PAN and TAN details, name and address, TDS deducted & deposited, etc. Part B consists of details pertaining to other income, deductions allowed, salary paid, tax payable etc.
Form 16 is annually issued by the employer on or before 15th June of the next year, where it immediately follows the financial year in which tax is deducted. Also, in case you lose Form 16, your employer can issue a duplicate one.
You can download form 16 from the income tax site here.
The components of Form 16:
Refunds in any to the employee, or balance of taxes payable by the employee.
Details of the employer like collection Account Number (TAN), name, PAN, Tax deduction etc.
All details of the Tax Payment, like amount, Challan number, cheque number, Demand Draft number etc.
Acknowledgement of number of the taxes paid by the employer.
Taxes deducted as per sections 191A.
Total income and tax deductions.
Details like salary, net salary, Gross salary, perks, deductions, etc.
TDS receipt paid.
Declaration of tax payments from the employer.
What is Form 16A or Part A of Form 16?
The employer generates and downloads this part of Form 16 through the portal. Before issuing this certificate, the employer will authenticate for the correctness of its contents. It is vital for you to get a separate Part A of Form 16 for the period of employment if you have changed your job. Following are the components of Part A of Form 16:
Summary of tax deposited and deducted quarterly, certified by the employer.
What is Form 16B or Part B of Form 16?
Form 16B is an annexure to Part A. In case you happen to change your job in one financial year, you will have to decide if you need Part B of the form from the last employer or from both the employers. Following are the components of part B of Form 16:
Relief under section 89
Detailed breakup of salary
Deductions that are allowed under the income tax act (under chapter VIA)
The details required for Form 16 while filing your Income Tax Return:
Tax Payable or Refund Due
Aggregate of Section 80C Deductions (Gross & Deductible Amount)
Breakup of Section 80C Deductions
TDS (Tax Deducted at Source)
TDS Deducted by Employer
Current Assessment Year
Name and Address of Employer
Taxpayer’s (your) Name and Address
How do you file ITR if you don’t have your Form 16?
Although Form 16 is important for filing your income tax return, however, if you do not have one you can still file your return. Please follow the below steps to file returns without Form 16:
Collect your payslips and figure out your Taxable Income
Your Tax Credit / 26-AS will help you find the exact Tax Deducted
If you are staying on rent, don't lose out on HRA if you're eligible