Introduction
In the last financial year more than 27 million taxpayers (about the population of New York) filed their income tax return. Were you one among them? Or are you a newbie who is starting a financial journey this year? This blog will help you understand the basics of ITR right from breaking down your annual income, expenses, deductions continued to what kind of taxes are paid to the Income Tax Department.
What is Income Tax Return (ITR)?
Income Tax Return (ITR) is a form that taxpayers need to submit to the Income Tax department to make known all sources of income gained in a particular financial year. Filling ITR is necessary for every individual and entities above specific income limit which helps in assessing your total tax liability. If you are looking for detailed information about filing ITR check out ITR filing guide to get detailed view.
4 Major Benefits of Filing Income Tax Return
Primary benefit of filing income tax returns is compliance with the law and here are some more benefits-
- Acts As Income Proof
One of the benefits of filing an ITR is that it contains all the information about your annual income and taxes payable which can be later used as proof of income for situations such as property buying, applying for loans etc.
- Ease in Visa Application Processing
Many international embassies require you to submit your 3-year ITR as it serves the purpose of income proof which helps in evaluating an applicant’s financial stability and income records. Therefore, decreasing the chances of your visa application getting rejected.
- Important for loan applications
Banks require you to submit certain documents when applying for a loan to purchase assets such as a home, car etc. While Aadhar card, Pan card etc. serves as proof of identity and ITR serves as proof of income, this helps banks in determining that if you will be able to repay the loan or not.
- Claim Tax Refund
You can get an income tax refund in case of excess tax deduction due to TDS (tax collected at source) therefore if the tax amount paid exceeds the due amount, then the Income Tax Department will initiate your tax refund.
What is Financial Year and Assessment Year?
Financial Year (FY) and Assessment Year (AY) are important terminologies that every tax payer must know-
- Financial Year (FY): Income that is earned by an individual in a particular year. The financial year starts from 1st April and ends on 31st March. For example, the period from April 1, 2023, to March 31, 2024, is considered FY 2023-24.
- Assessment Year (AY): Year after financial year in which your income generated is assessed and taxed. For the income earned in FY 2023-24, the assessment year will be AY 2024-25. Example: Suppose if you have earned income from April 1, 2023, to March 31, 2024 (FY 2023-24), you will file your ITR in AY 2024-25.
Who needs to file ITR?
Filing an ITR is a compliance for several categories of taxpayers here are some major categories:
- Individuals Below 60 Years: If your total income exceeds ₹3 lakh in a fiscal year.
- Senior Citizens (60-80 Years): In case your total income exceeds ₹3 lakh.
- Super Senior Citizens (Above 80 Years): In case your total income exceeds ₹3 lakh.
- Companies/Firms: All registered companies and firms, regardless of income, must file ITR.
- Individuals/Entities Claiming Refund: In case you need to claim a tax refund.
- Foreign Income/Assets: In case you have income from foreign assets or properties.
- Income from Capital Gains: In case you have earned capital gains by selling assets like property or shares.
Types of ITR forms for AY 2024-2025
As a newbie or old timer taxpayer it is important for you to know under which bracket of ITR forms you fall to maintain the accuracy of your ITR filing. Here are the primary forms used:
| Type of ITR form | Applicability |
| ITR-1 (SAHAJ) | Individuals who are residents with incomes up to Rs. 5o lakhs from salary or house property. Other income sources such as interest and agricultural income up to Rs. 5000 |
| ITR-2 | Individuals and HUFs who do not have source of income from business or profession. |
| ITR-3 | Individuals and HUFs who have source of income from business or profession. |
| ITR-4 (SUGAM) | Individuals, HUFs, and Firms who are residents with income up to Rs. 50 Lakh and generate income from business and profession and have agricultural income up to Rs. 5000 |
Conclusion
Filing and paying your part of income tax return (ITR) not only strengthens your financial stability but also helps your country in growing economically, more like killing two birds with one stone! It has been recorded by the Income Tax department that 13 lakh returns are being filed every day which is more as compared to last year, so are you filing your taxes this assessment year?
Remember, timely and precise ITR filing is a crucial step towards achieving better financial management and compliance. Be a responsible citizen and file ITR before 31st July 2024 to avoid penalties!
Do you want streamline your HR operations and process payroll in just one click? Then book a free demo today to know more!
