How to file the Income Tax Return

Disclaimer: This information is only for knowledge purpose and may not be correct at all places. So after initial understanding from this article, it is good to refer to authenticated sources like Income Tax Department web site (http://www.incometaxindia.gov.in/) for various rules and procedures.

It is the time to file the income tax return again and we again need someone who can help us in filing the return. Here we are discussing that we can do it ourselves, if we have all the documents available with us for the income and deductions and if the sources of income are not very discrete and complex, like it can be in case of business income. Filing return is not that complex now. To file the return, we just need to understand the flow of filing the return. Once you understand it, it would be much simpler. So let us start to make some understanding of the process.

At first we need to remember the due date of filing the return. It is 31st July of every year. It is recommended that we should not wait till last week to file the return. There can be various unpredicted road blocks on the way, like you forgot to collect any document required for return, or the online sites are down due to heavy traffic and so on. So it is always good to be early.

Next is to collect all the information for your income and deductions. For income, you need to be aware about all heads of income which are defined by IT act. Here is the list of all income heads and the documents required for these

1. Income from salary, 
1. You need Form 16 from your employer
2. If you have worked for more than one Organization, you need to collect Form 16 from all of these
2. Income from house property, 
1. Rental income from house property comes under this head
2. Rent agreement can act as a basis for this income
3. Income from business or profession, 
1. People who are running their business or People who are providing professional services to others as freelancer comes under this head
2. People having income from non-delivery based share trading (like Day Trading) needs to consider the income here as income from speculative business.
3. There may be requirement of Tax Audit for these people. Please refer to IT act rule 44AA and 44BB. These sections refer to the requirement of maintaining the books and for audit requirement. 
4. In brief, a person need to maintain the books if total income lies beyond the limit specified by 44AA (it considers income for previous 3 years). And a personal is liable to have audit for his accounts if total income lies beyond the limit specified by 44AB.
5. Please refer to IT department official web site for details of these rules. 
4. Income from capital gains,  
1. Profits coming from property transactions or from equity market and other securities
2. Property sales documents are required for property transactions
3. Demat account statements are required for equity market transactions
5. And income from other sources like 
1. income from games, interest income from deposits, lotteries or income from other miscellaneous sources.
2. Corresponding receipts are required.

Considering all of above heads, you can calculate your total income. From the list of above documents, none is required to submit with your income tax return. These are required only to collect the information for your IT return and are required in case there is a scrutiny call from IT department. 

There are few expenses which get exemption as per IT rules (generally known as Chapter IV A deductions). Here is a list of possible deduction (not a complete list - but have most popular heads)

1. 80 C Deduction - Maximum limit under this section is restricted to Rs 1 Lakh
1. Provident Funds, 
2. Public Provident Fund (limit of Rs 70000 in a year, and 4 year lock in period with total life of 15 years)
3. Equity Linked Saving Schemes (ELSS, 3 years lock in period)
4. Life Insurance Plans and Unit linked Insurance Plans Premiums
5. Home Loan Principal Payment
6. National Saving Schemes (NSS)
7. Infrastructure Bonds (limit of Rs 20000 in a year)
8. Pension Funds
9. Some more..
2. 80D - Medical Insurance Premium (Rs 15000 and Rs 20000 for senior citizens)
3. 80DD - Medical Treatment Expenses for Dependents (Rs 50000, Rs 1 Lakh for severe disability)
4. 80DDB - Treatment of specified Diseases (Rs 40000, Rs 60000 for senior citizens)
5. 80E - Interest for Education loan for self and relatives (No limit)
6. 80G - Donation to recognized charitable institutions under this section (Donation amount and eligible deduction)
7. 80GG - Rent Paid (Up to Rs 2000 per month)
8. 80GGA - Contribution to scientific research or rural development (Complete donation amount)
9. 80U - Treatment of physical disability (Rs 50000, Rs 1 Lakh for severe disability)
10. Interest Paid for Home Loan under section 24 of Income Tax Act
1. Interest up to Rs 1,50,000 is exempted from tax for self occupied house
2. Complete interest is exempted (no limit) from tax if the house is on rent, and hence the rent is a part of income
3. Interest deduction can not be claimed before getting the possession of house. However the total interest of this period can be claimed after getting possession by dividing in 5 equal parts in next 5 years
11. HRA and some other components are also there. 

Considering above sections, you can calculate the total exemptions applicable for you. 

Now you can calculate the net taxable income after deducting the applicable deductions from the total income. This is the salary where you need to calculate the income tax depending upon various slabs and tax rate on these. 

For income tax slabs, please refer to IT department web site at http://www.incometaxindia.gov.in/. Now you can apply these tax slabs and rates and can calculate the income tax for you. 

Note: Calculation and Rates of Income Tax for capital gain is different than other income. Like, long term capital gains (gains after more than a year holding period) are exempted from tax for now, if STT is paid or otherwise indexation needs to be considered and tax applicable at the rate of 20%. Short term capital gain is taxed at 15%. Also consider that day trading or non-delivery based transaction does not come under capital gains. It should be covered under business income section, as speculative income. It is added to the other income. 

After calculating the taxes, you may find that you need to pay more taxes. You can pay the taxes online using following options: 

1. At any one site of income tax department, like
1. http://www.incometaxindia.gov.in/
2. https://incometaxindiaefiling.gov.in/portal/index.do
3. http://tin.nsdl.com/
2. State Bank of India and some other banks are also providing the facility to pay the taxes online. 

Now the final step is to file the income tax return using right form and to submit the form to Income Tax Department. There are various ways to do that as given below, 

1.  Conventional way is to get applicable ITR form and file the information manually. 
2. Other way is to download the right ITR form Excel Utility from Income Tax Department Web Site (https://incometaxindiaefiling.gov.in/portal/individual_huf.do). You can also get the help manual form here. It also contains a grid which shows that which ITR form is applicable to you. 
3. You can approach to your CA for fileing the return on your behalf. 
4. Another convenient way is to use any online web portal which facilitate to file the income tax return. These sites some very interactive and easy wizard like UI to fill the required details. Based on the provided details, these automatically select the right ITR form for you and prepare the return. These also submit your return online on your behalf. Few paid sites are like 
1. http://www.taxsmile.com/
2. http://www.taxspanner.com/

Filling ITR 1 is very simple and so one can fill that easily with very less knowledge of Income tax rules etc. However other ITR forms needs some information. And ITR 4 needs advance level information for IT rules and for your income as well. So it is better to either use the services of CA or any online portal for filling the ITR 4.

I found online portals (given as 4th option above) as most convenient way at very nominal price. It is easy to input the details and get the final return for you. However whatever approach you follow, always ensure to review the final IT return yourself before filing it. Anyone can make the mistakes, even the softwares also. I personally faced issues sometime.  

Note: Please ensure the credibility of online web sites for data security, and whether they are authorized intermediary to file the income tax return on your behalf. Keep in mind, that sites giving free service for IT return may have some hidden agenda.

If you file the return online, you will get ITR V on your email id. You need to sign it and send it to Banglore Income Tax Department office. Refer to IT Department web site for the latest address. Alternatively, you can use digital signature while filing the return online. This way, you need not to send the ITR V and return will be submitted online with your digital signature. This is the best and fastest approach. 

People who read this post also read :