Learn Income Tax Return Filing – A Beginner’s Guide

If you are an earning citizen of India, you may have probably heard the phrases ‘income tax return’ or ‘ITR’. It helps to have a basic idea of what ITR is and how to file an income tax return, even if you do not have to pay taxes. And, if you are going to file ITR for the first time, there is a high probability that the jargon and the process seem to be daunting. But don’t worry, we have you covered. This comprehensive, beginner-friendly guide will help you learn income tax return filing in no time.

 

A guide to learn income tax return filing

 

Let’s Understand a Few Key Terms Before We Jump Ahead to Learn Income Tax Return Filing:

 

ITR:

 

We will begin by understanding what is ITR and the different ITR forms available. Income Tax Return (ITR) is a form submitted to the Income Tax Department of India, wherein you record your income details and applicable taxes. There are 7 ITR forms available, starting from ITR-1 to ITR-7. You need to choose the appropriate form while filing ITR depending on your total income, sources of income, type of profession, assets owned, etc.

 

ITR1 to ITR-4 is used by individuals and/or Hindu Undivided Families (HUFs).

ITR-5 to ITR-7 is used by companies.

We will focus only on ITR-1 to ITR-4.

 

ITR-1

  • Resident individuals and HUFs with total income < 50 lakhs and agricultural income < 5000.
  • Income can be from salaries, pension, maximum one house property, agricultural income, interest income, dividend income, and/or other sources
  • Not applicable to an individual who is a company Director/partner in a firm / has investments in unlisted equity / has income or asset outside India /has deferred tax on ESOP

 

ITR-2

  • Individuals and HUFs having total income > 50 lakhs / agricultural income >5000 / income from more than one house property / capital gains income / income from foreign assets / foreign income / investments in unlisted equity shares
  • Applicable to an individual who a Company Director
  • Not applicable to individuals and HUFs having income from business or profession

 

ITR-3

  • Individuals and HUFs having income from business or profession with the business turnover above 2 crores
  • Applicable if an individual is a partner in a firm / Director of a Company / has investments in unlisted equity shares

 

ITR-4

  • Resident individuals, HUFs, and firms (except LLP) earning total income < 50 lakhs and agricultural income < 5000 and/or having income from business and profession
  • Income can be from salaries, pension, maximum one house property, agricultural income, interest income, dividend income, and/or other sources as well as presumptive business income
  • Not applicable to an individual who is a company Director/partner in a firm / has investments in unlisted equity / has income or asset outside India /has deferred tax on ESOP

 

ITR can be filed online or offline. The process of filing ITR online via the Income Tax Department’s website is called e-Filing. In this article, we will be focusing on e-filing to learn about income tax return filing.

 

Financial Year / Previous Year:

 

A Tax Year or Financial Year begins on April 1st and ends on March 31st of next year. When you learn income tax return filing, remember that tax year, financial year, and previous year are used synonymously.

 

Assessment Year / Current Year:

 

To learn income tax return filing, you need to understand the term Assessment Year. The Assessment Year or current year is the year you assess your income from the previous year and file an ITR for the previous year. Let us understand with an example.

 

I am writing this article on 20th May 2022. If I am filing my ITR today, the previous year/tax year/financial year is 2021-2022. The financial year 2021-2022 ended on March 31st, 2022. The Assessment year/current year is 2022-2023. In the assessment year 2022-2023, I will file an ITR for income earned in the financial year 2021-2022.

 

Here are the best ITR Filing Courses

 

Gross Total Income

 

Gross Total Income (GTI) is an individual’s total earnings from all sources of income earned in a financial year and before any taxes or deductions. Sources of income are broadly divided into 5 categories.

 

Gross Total Income (GTI) = Income from Salary + Income from House Property + Income from Capital Gain + Income from Business or Profession + Income from Other Sources

 

To learn income tax return filing, it is crucial to understand GTI.

 

Exemptions:

 

Exemptions are components of your salary income which are not taxed. They are certain allowances paid to you by your employer. You can find these exemptions as components of your salary payslip.

 

Some of the common exemptions are,

  • House Rent Allowance (HRA) – Can be claimed if you live in a rented apartment/house
  • Leave Travel Allowance (LTA) – Can be claimed for expenditure occurred on travel via rail, bus, or flight within India
  • Transport Allowance – Can be claimed for the cost incurred for commuting to and from your place of work and place of residence

 

Deductions:

 

To learn income tax return filing, it is important to understand deductions as they help save a considerable amount of tax. Deductions reduce your total tax liability. Deductions can be claimed if you have incurred expenses or made investments that are recognized under the Income Tax Act.

 

The below table lists some of the common deductions.

 

SectionDeductions against contributions made towards maximum maximum maximum maximum maximumMaximum Deduction Limit (in Rs. )
80C
  • Public Provident Fund (PPF)
  • ELSS / Tax saving mutual funds
  • 5-year tax saver fixed deposit
  • Employee Provident Fund (EPF)
  • National Pension Scheme (NPS)
  • National Savings Certificate (NSC)
  • Unit-linked Insurance Plans (ULIP)
  • Sukanya Samriddhi Yojana
  • Life Insurance Premium
  • Tuition Fees for children
  • Home Loan Repayment
1.5 lakhs
80CCDCentral Government pension schemes

  • National Pension Scheme (NPS)
  • Atal Pension Yojana (APY)
2 lakhs (1.5 Lakh under Section 80CCD (1) & 50,000 under Section 80CCD (1B) )
80D
  • Medical insurance premium (for self, spouse, parents, dependent children)
  • CGHS
  • Preventive health check-ups
25000 for a person below 60 years

50000 for a person above 60 years

80EInterest paid on the educational loan(s) for self, so children’s total rentTotal interest paid in the financial year
80TTAInterest on savings bank accounts10,000
80GGRent paid to the landlord if HRA exemption cannot be availed (HRA not provided by employer)60,000
80GDonations towards charity dependDepends on the type of donation

 

TDS

Tax Deducted at Source

 

TCS:

Tax Collected at Source

 

Taxable Income:

 

Taxable Income is what remains after your deductions on GTI. The amount of tax you are required to pay is calculated based on your taxable income.

 

Taxable Income = Gross Total Income – Deductions

 

Reasons for Filing ITR:

 

Who should file an ITR? You should know the answer to this question before you learn income tax return filing.

 

  • If your annual income exceeds the basic exemption limit for your age.

 

basic basicBasic Exemption Limit
Below 60 years2.5 Lakhs
Between 60 to 80 years3 Lakhs
Above 80 years5 Lakhs

 

  • If you have performed any high-value transactions (as per 7th Proviso to Section 139 (1)) in the previous year, it is mandatory to file an ITR even if your taxable income is below the basic exemption limit. 
  • If you own any asset located outside India or have a financial interest in any entity located outside India
  • If you are a registered company or firm in India

 

Recommended Read: Business Accounting and Taxation Courses in India

 

Documents to Help you File ITR:

 

Knowledge of the documents required is essential to learning income tax return filing. Below is a list of supporting documents.

  • PAN card
  • Aadhar card
  • Form 16 – It’s a certificate issued by your employer after each financial year containing detailed salary information, TDS on salary, deductions claimed for investments, etc.
  • Form 26AS – This form contains all your tax information and can be availed at the e-filing website
  • Bank account details
  • Dividend income statements
  • Interest Income statements
  • Proof of exemptions to be claimed, such as rent receipts for HRA, travel tickets for LTA
  • Proof of Investment Instruments
  • Proof of loans taken for education, home, etc

 

Tax Regimes:

 

Tax regimes define tax slabs and the tax rate under each tax slab. In India, the amount of tax to be paid by an individual depends on the income level. For taxation purposes, annual income is divided into different ranges, each range is called a tax slab. The higher the income, the higher the tax rate. Currently, we have 2 tax regimes in India.

 

The Old Tax Regime has higher tax rates but you can avail yourself of a range of exemptions and deductions. The New Tax Regime has lower tax rates but no exemption and deduction can be applied. You can choose to file ITR under the old or new tax regime.

 

The best choice for you would depend on your income level, exemptions available, and investment instruments among other factors. A wise approach would be to calculate your tax liability under both regimes and choose the one that results in less tax liability.

 

Learn income tax return filing – Old Vs New Tax Regimes – A Comparison of Tax Rates:

 

Annual Income in Rs.Tax Rates under the Old regime (in %)Tax rates under the New regime (in %)
Up to 2.5 Lakhs00
2.5 to 5 Lakh55
5 to 7.5 Lakhs2010
7.5 to 10 Lakhs2015
10 to 12.5 Lakhs3020
12.5 to 15 Lakhs3025
Above 15 Lakhs3030

 

For example, assume that my income is 9 lakhs per annum and I chose the new tax slab:

For 0 – 2.5 lakhs of my income, I have to pay no tax 🡪 0.

For 2.5 – 5 lakhs of my income, I have to pay 5% tax 🡪 2.5 lakhs * 5/100  🡪  12500

For 5 – 7.5 lakhs of my income, I have to pay 10% tax 🡪   2.5 lakhs * 10/100  🡪  25000

For 7.5 – 9 lakhs of my income, I have to pay 15% tax 🡪 1.5 lakhs * 15/100  🡪  22500

 

Therefore, my total tax liability is Rs. 60,000.

 

In the case of the old tax regime, you need to subtract applicable exemptions and deductions from your GTI and then apply the above process to your taxable income. Being able to calculate your tax liability is integral to choosing a tax regime that is beneficial for you. We suggest you go through the above exercise by yourself to learn income tax return filing.

 

Recommended Read: Financial Modeling Courses in India

 

Learn Income Tax Return Filing – A Step by Step Guide:

 

We have discussed the basic jargon. Now, let’s go through the steps to learn income tax return filing.

 

1. Register:

 

You need to register yourself before you can start e-filing. 

    • Open the e-filing website of the Income Tax Department – https://www.incometax.gov.in/iec/foportal
    • In the upper right corner of the page, click Register
  • Register yourself as a Tax Payer. Enter basic details as per the instructions provided.

You need the below information for the registration process

  1. PAN Number
  2. Mobile Number
  3. E-mail address
  4. Address for communication
  • Set your password and the personalized secure access message and click Register.

 

2. Login:

 

  • In the upper right corner of the e-filing website, click Login
  • Enter your PAN / Aadhar No and Continue
  • Confirm your secure access message and clicking the checkbox
  • Enter your password and Continue

 

3. Navigate to the File Income Tax Return page:

 

  • Once you log in successfully, you will see an option to ‘file your return for this assessment year’. Click on File Now.

 

Alternatively, on the top menu bar, go to eFile 🡪  Income Tax Returns 🡪 File Income Tax Return

  • Select the Assessment Year for which you need to file ITR
  • Choose the mode of filing as Online and Continue
  • Click on Start New Filing to file a fresh income tax return. 

 

If you have saved any previous draft for the chosen assessment year, that will be displayed on this page and you can resume your filing from the point you paused last time.

 

4. Select Your Status:

 

On the next page, choose whether you are filing your ITR as an Individual, HUF (Hindu Undivided Family), or Others.  

Choose Individual and click Continue

 

5. Choose an ITR Form:

 

Choose the appropriate ITR Form and Click on ‘Proceed with <your chosen ITR>’

The next page will show you a summary of this ITR and a high-level list of steps you have to complete. 

Click ‘Let’s Get Started’.

 

6. Choose Your Reason for Filing the Income Tax Return:

 

As discussed, there are several cases when you should fill an ITR. The most common reason is when your taxable income is more than the basic exemption limit. If that is your case choose ‘Taxable income is more than basic exemption limit’.

 

Otherwise, select the appropriate option. Continue.

 

7. Validate Your Returns Breakup (Pre-filled)

 

Based on the information available with Income Tax Department, the ITR form will be pre-filled. Confirm your details, update incorrect information and add any missing information in the upcoming sections. 

 

Personal Information:

  • Verify your profile information and contact details
  • Select your Nature of Employment from the drop-down list. If no match, choose Others.
  • Choose the appropriate option in the filing section. If you are filing on or before the due date, choose 139(1).
  • Specify whether you are opting for the new tax regime. 
  • Declare the details of all your bank accounts held in India, excluding dormant accounts. Make sure you validate at least one of the bank accounts where you wish to receive your refund.
  • Choose a revalidated bank account for availing refund. Confirm.

 

Gross Total Income:

Salary Exemption:

If you are eligible to claim exemption from salary, choose Yes under the applicable exemption and specify the amount to be exempted. Continue.

 

Verify your Income Source Details:

  • Verify, add, or edit the details under each of the income categories.
  • Match the Income from Salary details against your Form 16.
  • Add Income from House Property, if applicable.
  • Verify/Add Income from Other sources such as savings account interests, dividend income, interest income, income tax refund, income from family pension, etc.
  • If you have any Exempt Income, choose the Nature of Exempt Income from the given list and specify the amount exempted.
  • Confirm

 

Total Deductions:

Deduction:

If you are eligible for any deductions, choose Yes under the appropriate deduction and specify the amount to be deducted. Continue.

 

Verify your Deductions:

  • Verify the list of claimed deductions and the amount deducted for each. Add/Edit/Delete, if required.
  • Verify the Total Deductions amount and Confirm

 

Taxes Paid:

Preview your tax summary for the last financial year. This includes TDS on salary income, other incomes, TCS, advance tax, self-assessment tax, etc. You can drill down to details of taxes. You can also view your Form 26AS.

 

Verify the details and the Total Taxes Paid amount. Confirm.

 

Total Tax Liability:

 Tax Liability is the total tax you owe to the Government. This section displays calculations and details of your Total Tax Liability.

 Verify the details and Confirm.

 This concludes the validation of the pre-filled return section. Click Continue.

 

Recommended Read: Business Accounting and Taxation Courses in Delhi

 

8. Confirm Your Return Summary:

 

You can view the summarised information of your ITR. The Amount Payable will show whether you have to make any payment or receive a refund from the Government. Click Pay Now to pay the taxes if you have payments due. Otherwise, proceed to the next step.

 

9. Verify & Submit your Return:

 

The final step to learning income tax return filing is to verify all the information provided and submit the ITR. Before submission, you need to specify how you choose the verify the ITR. Verification is a mandatory process after e-filing. You can choose from 3 options.

 

  • e-verify (now)
  • e-verify later (within 120 days)
  • Send a signed physical copy of the ITR form to the Income Tax Department (within 120 days)

 

Choose your preferred verification method. Preview and Submit the ITR.

 

10. E-Verify:

 

If you choose e-verification in the above step, you can proceed by any of the below methods,

  • Digital Signature Certificate
  • Aadhaar OTP
  • EVC using pre-validated bank account/Demat account
  • EVC using bank ATM
  • Net Banking

 

Choose the most suitable option and follow the instructions to complete the e-verification process.

 

Congratulations, you have successfully filed your first ITR!

 

FAQs:

 

1. What is the difference between TDS and TCS?

If the payment exceeds a specific limit, TDS or Tax Collected at Source is the amount deducted by a company on payments like salary, commission, rent, brokerage, etc. TCS or Tax Collected at Source is the amount collected by a seller, when you purchase an item for sale. The amount deducted by your employer as tax from your salary is TDS. The amount deducted by a seller as tax when you buy items, like a bicycle, is TCS.

 

2. What is an Income Tax refund?

The Income Tax Department pays you back the excess tax deducted from you in a financial year, if applicable. This amount is an income tax refund.

Income Tax Refund = Total Tax Deducted – Your Tax Liability

 

3. When will I receive my refund?

Once you have verified your ITR, your refund will be credited within 25-60 days.

 

4. What is Standard Deduction?

If you are a salaried employee or pensioner filing ITR under the old tax regime, you can get a flat deduction of Rs. 50,000 on your gross total income. The standard deduction is considered an exemption. You need not have any exemption components in salary or investments to claim the standard deduction. It brings down your taxable income by 50,000.

 

Conclusion

 

E-filing or filing ITR online is intimidating, especially the first time. But the process is easy if you grasp the basics. Many people hire a professional accountant to file ITR because they do not get the proper guidance. We are not downplaying the complexities of taxation. Professionals are required for companies and businesses because of the complexities involved. But for most individuals, it is straightforward. The e-filing website is self-explanatory and designed for normal citizens. We hope this article helped you learn income tax return filing and made the process less scary. So, start your journey to learn income tax return filing.

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