What Is ITR?
The full form of ITR is Income Tax Return. ITR is basically a form which the taxpayers use to fill in the required information about their income earned and the tax applicable on it so that it can be provided to the Income Tax department.
Filling up the ITR might sound tough but it is a simple step by step process. The income tax department has broken down the complete ITR into 7 sub parts namely ITR1, ITR2, ITR3, ITR4, ITR5, ITR6 and ITR7. The income tax should be filed by all taxpayers before the specified due date. The application of ITR forms varies as per the source of income earned and the category of the tax paying entity like individual, HUF, company, etc.
It is mandatory to file income tax returns (ITR) in India if any of the conditions mentioned below are applicable to you:
- If your gross annual income is more than ₹ 2,50,000/annum.
- If you have more than one source of income like house property, capital gains etc.
- If you want to claim an income tax refund from the department.
- If you have earned from or have invested in foreign assets during the FY.
- If you wish to apply for a visa or a loan
- If the taxpayer is a company or a firm, irrespective of profit or loss.
All taxpayers need to submit an official statement of their annual income, expenses, carry forward losses, savings etc.
The ITR enables a taxpayer to declare his earnings, expenditure, tax deductions, investments, taxes, etc. According to the Income Tax Act,1961 it is obligatory for a taxpayer to file ITR as per the circumstances mentioned.
The department of Income Tax has provision for Electronic filing (e-filing) of ITR. Before jumping on to the step by step e-filing procedure of Income Tax Return, it is important for you to have your documents at the ready.
Individuals whose annual income is in excess of the basic exemption limit of Rs 2.5 lakh must mandatorily file their income tax returns. Even when there is no tax liability, an income tax return (ITR) must be filed if the total income exceeds the above-mentioned threshold.
Benefits of Filing ITR
Filing ITR not only keeps you tax-compliant, but also offers the following benefits:
1. Filing ITR avoids penalties
Under section 234F, individuals who do not file their ITR have to pay upto ₹10,000 as penalty to the Income Tax Department effective from FY 2017-18. Timely filing of ITR helps avoid the penalties.
2. ITR receipt is a very important document
Everytime you file an ITR, you receive a “Receipt” which is way more than just a piece of paper. The income tax receipt is the proof of your income and payment of your taxes. Besides, your ITR receipt is a useful document for easy loan process as many banks demand the ITR receipts of the last three years.
3. Visa processing
During Visa Application processing,embassies countries like UK, US, Canada and Australia require you to present your ITR receipt of the recent past. No country wants someone who is not a tax compliant. Filing ITR thus becomes critical when you want to go abroad for work.
4. Compensate losses in the next financial year
To carry forward losses in business from current year to the next financial year one must file an ITR. As per the Income Tax Law if an individual does not file ITR, he/she in such case is not allowed to carry forward losses against next financial year income. It thus is very important to file your ITR regularly.
5. Get Rid of Notices from ITD for Non-Filing of ITRs
As per the ammendment, if assessee have deposited more than rs. 10 lacs in saving bank account, then if ITRs are not filed on or before due date notices can be raised on non-filing of ITR by Income Tax Department.