Wealth Whispers

How to Prepare Your Income Tax Return - Details You Need to Know

Filing your income tax return (ITR) is a crucial financial responsibility that individuals and businesses must fulfill each year. It is not only a legal requirement but also offers several benefits that can positively impact your financial well-being. In this blog, we will explore the advantages of filing your ITR and shed light on the various key aspects associated with it.o.

Income Tax Return - What is it?

An Income Tax Return (ITR) is a form that taxpayers use to report their income, deductions, and tax liabilities to the tax authorities in their respective countries. It is a vital document required by the tax system to assess an individual’s or entity’s income and calculate the taxes they owe or the refunds they are eligible for.

When a person earns income above a certain threshold, they are required by law to file their income tax return within a specified deadline. The tax return provides a comprehensive overview of an individual’s financial activities, including salary, business income, capital gains, interest, dividends, and other sources of revenue.

Who should file Income Tax Returns?

Filing income tax returns is mandatory for certain individuals and entities based on their income and specific circumstances. In India, the following entities or businesses are required to file their income tax returns:

  1. When an individual has a gross income over Rs.3,00,000 in a given financial year (including standard deduction), they must file an ITR. For senior citizens, the limit exceeds Rs.3,00,000, while for super seniors, it exceeds Rs.5,00,000

  2. Companies: All registered companies, irrespective of profit or loss, are required to file income tax returns if they generate any income during the financial year.

  3. Refund Claim: Individuals who have paid excess tax or have tax deducted at source can file income tax returns to claim a refund.

  4. Foreign Assets: Individuals who own assets or have financial interests outside India are required to file income tax returns.

  5. Foreign Companies: Foreign companies that enjoy treaty benefits on transactions conducted in India must file income tax returns.

  6. Non-Resident Indians (NRIs): NRIs who earn or accrue more than Rs. 2.5 lakh in India during a financial year are obligated to file income tax returns.

Documents required to fill ITR

When filing your income tax return (ITR), it is essential to gather the necessary documents to accurately report your income, deductions, and tax liability. The specific documents required may vary based on your income sources and personal circumstances. Here are some common documents you may need when filling out your ITR:

  1. Personal Information:

    • PAN (Permanent Account Number) card
    • Aadhaar card or Aadhaar number
    • Bank account details (account number, IFSC code)
  2. Income Documents:

    • Form 16: Provided by your employer, it summarizes your salary, tax deductions, and TDS (Tax Deducted at Source).
    • Salary slips: Monthly or periodic salary slips showing details of earnings, deductions, and taxes.
    • Form 16A/Form 16B/Form 16C: For income from other sources like interest, rental income, or professional fees.
    • Bank statements: To verify interest income, dividends, or other financial transactions.
    • Income certificates: If applicable, such as pension income or income from agricultural activities.
  3. Investment and Deduction Proof:

    • Form 26AS: A tax credit statement that shows the details of TDS deducted and deposited by your employer or other deductors.
    • Investment proof: Documents related to investments made under Section 80C, such as LIC premium receipts, mutual fund statements, or proof of contributions to PPF (Public Provident Fund) or EPF (Employee Provident Fund).
    • Home loan certificates: If you have a home loan, you will need documents such as interest and principal repayment certificates.
    • Medical insurance premium receipts: Proof of payment for health insurance premiums eligible for tax benefits under Section 80D.
    • Donations certificates: If you have made donations to eligible charitable institutions, you will need the receipts.
  4. Capital Gains:

    • Sale/purchase deeds of property, shares, or mutual funds: To calculate capital gains or losses.
    • Contract notes or statements from brokers: If you have engaged in share trading or other securities transactions.
  5. Other Documents:

    • Previous year’s ITR: Helps in providing information for the current year’s filing.
    • Proof of taxes paid: Challans or receipts for advance tax payments, self-assessment tax, or any other tax paid.
    • Rental agreements: If you receive rental income, provide copies of lease agreements.
    • Business-related documents: For self-employed individuals or businesses, maintain records of sales, expenses, invoices, and balance sheets.

Which ITR Form should you fill?

The selection of the appropriate Income Tax Return (ITR) form depends on the nature of your income sources, the category you fall under, and your financial activities. The Income Tax Department in your country provides different ITR forms for various types of taxpayers. Here is a general overview of the ITR forms commonly used in India:

ITR-1 (Sahaj): Individuals with income from salary, pension, one house property, and other sources like interest income, but not for those having income from business or profession.

ITR-2: Individuals and Hindu Undivided Families (HUFs) having income from salary, pension, house property, capital gains, and other sources. This form is applicable for individuals not eligible to file ITR-1 and those having income from more than one house property.

ITR-3: Individuals or HUFs having income from business or profession, including those who are eligible for presumptive taxation under Section 44AD, 44ADA, or 44AE of the Income Tax Act.

ITR-4 (Sugam): Individuals, HUFs, and firms (other than LLP) having income from business or profession calculated under presumptive taxation provisions.

ITR-5: Partnership firms, LLPs (Limited Liability Partnerships), Association of Persons (AOPs), and Body of Individuals (BOIs).

ITR-6: Companies other than those claiming exemption under Section 11 (income from property held for charitable or religious purposes).

ITR-7: Individuals, HUFs, companies, or trusts required to file returns under Section 139(4A), 139(4B), 139(4C), or 139(4D) (for specific categories like charitable trusts, political parties, research associations, etc.).

Tax Slabs

1.New Income Tax Slabs as per Union Budget 2023:
2. Income tax slab rate for Old Tax Regime FY 2023-24:

Conclusion

Filing income tax returns is a responsibility that individuals and businesses must fulfill. By understanding the key aspects of income tax returns, selecting the correct form, gathering necessary documents, and filing accurately and on time, you can ensure compliance, avoid penalties, and maintain a transparent financial record with the tax authorities. Remember to stay updated with the latest tax regulations and consult professionals whenever needed to make the process smoother and more efficient.