Income Tax
What Is Income Tax
Income Tax is a direct tax imposed by the government on an individual’s or entity’s earnings. It is calculated based on the income earned during a financial year and is paid to the government as per the applicable tax slabs and rules.
In India, the Income Tax Act, 1961 governs the taxation system, and the tax is levied by the Central Board of Direct Taxes (CBDT). The tax applies to various sources of income, in
Salary – Earnings from employment
Business or Profession – Profits earned by businesses or self-employed individuals
House Property – Rental income from property
Capital Gains – Profit from selling assets like stocks, real estate, etc.
Other Sources – Interest income, dividends, gifts, etc.
Filing Income Tax Returns Individual - ITR Filing in India
Individuals and enterprises in India are required to file income tax returns when their Gross Total Income (GTI) exceeds Rs. 3 lakhs, while revenues below this threshold are exempt. These returns must be submitted once a year and by a specific deadline. Various types of income tax return forms are created to meet the specific needs of different sorts of taxpayers, including individuals and corporations.
| Return Type | Applicability |
|---|---|
| ITR-1 | ITR-1 form can be used by Individuals who have less than Rs.50 Lakhs of annual income earned by salary or pension and have only one house property. |
| ITR-2 | ITR-2 forms must be filed by NRIs, directors of companies, shareholders of private companies or those having capital gains income, income from foreign sources, two or more house properties, and income of more than Rs.50 lakhs. |
| ITR-3 | The ITR-3 form must be filed by professionals or proprietorship business owners in India. |
| ITR-4 | ITR-4 form can be filed by taxpayers enrolled under the presumptive taxation scheme. To be enrolled for the scheme, the taxpayer must have less than Rs.2 crores of business income or less than Rs.50 lakhs of professional income. |
| ITR-5 | ITR-5 form must be filed by partnership firms, LLPs, associations and bodies of individuals to report their income and computation of tax. |
| ITR-6 | ITR-6 form must be filed by companies registered in India. |
| ITR-7 | ITR-7 form must be filed by entities claiming exemption as charitable/religious trust, political parties, scientific research institutions and colleges or universities. |
Individuals, NRIs, partnerships, LLPs, corporations, and trusts are required to file income tax returns on an annual basis. Individuals and NRIs must file income tax returns if their annual income exceeds Rs.2.5 lakhs. Proprietorship and partnership firms must file income tax returns, regardless of the amount of income or loss. Regardless of revenue or profit, all corporations and limited liability partnerships are required to file income tax filings.
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What is Personal Tax Return Filing in India?
In India, submitting a personal tax return entails providing the Income Tax Department with information about one’s annual income, deductions, and taxes. This is accomplished using specialized forms known as Income Tax Returns (ITRs), which differ depending on the individual’s income sources, such as salary, business income, capital gains, and others. Filing a tax return means reporting your income and paying the required taxes to the government. It is required for those whose income exceeds the basic exemption limit established for the financial year. The income tax filing process can be done online using the e-filing portal.
Who Should File a Personal Tax Return?
Personal income tax returns must be filed by the following persons:
ITR Forms For Personal Tax Filing
As mentioned above, the Income Tax Department of India provides a range of ITR forms, from ITR-1 to ITR-7, designed to cater to different taxpayers based on their income sources, amount, and complexity. The following two forms need to be submitted for Personal Income Tax Filing:
ITR-1 Sahaj Form
The ITR-1 Sahaj Form is intended to simplify the tax filing procedure for individual taxpayers in India, particularly those with a total income of less than Rs. 50 lakhs. This form accepts revenue from certain sources, such as:
Eligibility for Filing ITR-1
Income Limit: The individual’s total income for the fiscal year should be Rs. 50 lakhs.
Income types that are applicable include: Individuals earning money from these sources are eligible for ITR-1.
Income Aggregation: Income can be combined with that of a spouse or minor only if it aligns with the specified categories above.
ITR-2
Individuals and Hindu Undivided Families (HUFs) in India utilize ITR-2 to report income that excludes earnings and gains from business or professional activities. It is specifically created for people with a variety of income sources, excluding commercial and professional revenues.
Who Should File ITR-2?
You can file ITR-2 income tax if you have income from the following sources:
Documents Required for ITR Filing
When income tax filing in India, ITR-1 and ITR-2 forms are designed to be annexure-less, meaning you’re not required to attach any supporting documents during submission. However, having the right documents is crucial for a smooth and accurate filing experience.
Due Date for ITR Filing in India
For personal tax return filing in India, the general deadline for individuals filing ITR-1 and ITR-2, without needing a tax audit, is 31st July of the assessment year that follows the financial year in question.
Penalty for late ITR filing
A late filing fee of Rs 5,000 will be charged for income tax filing between 31 July 2023 and 31 December 2023. Small taxpayers whose total income is below Rs 5 lakh will benefit from a reduced penalty of Rs 1,000 for late filing within this period.