A Guide to filing Income Tax Returns

Traditionally filing of Income Tax Return is seen as a complicated and tiresome task, and therefore, most people keep putting it off till the last possible moment. But in the recent years, thanks to the initiatives taken by the government in simplifying the rules and the filing process, the task has become less daunting. With increasing prosperity and higher income levels, larger numbers of people have become eligible for filing Income Tax Returns.

What is Income Tax and who is liable to pay Income Tax?

Income tax is a tax paid to the central government on personal income. It is the direct tax paid on income by an individual or a company/firm within a given financial year (April-March). The Indian Income Tax department is governed by the Central Board for Direct Taxes (CBDT) (External website that opens in a new window) and is part of the Department of Revenue (External website that opens in a new window) under the Ministry of Finance (External website that opens in a new window), Government of India.

The Income Tax Act, 1961 (External website that opens in a new window) as amended by Finance Act 2010 (External website that opens in a new window), under Section 139 (External website that opens in a new window) makes it obligatory upon any person to file return if the person's total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax.

Provided that a person referred to, who is not required to furnish a return under this sub-section and residing in such area as may be specified by notification in the Official Gazette, and who during the previous year incurs an expenditure of fifty thousand rupees or more towards consumption of electricity or at any time during the previous year fulfils any one of the following conditions, namely:

is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified; or
is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or
has incurred expenditure for himself or any other person on travel to any foreign country; or
is the holder of a credit card, not being an "add-on" card, issued by any bank or institution; or
is a member of a club where entrance fee charged is twenty-five thousand rupees or more.

The tax liability to be computed for Assessment Year 2010 - 2011 is as per the under:-

(i) In case of individuals (other than women and individuals who are of the age of 65 years or more at any time during the financial year 2009-10) -

Income (In Rs.) : Tax Liability (In Rs.)

Upto Rs. 1,60,000 : Nil
Between Rs. 1,60,001 - Rs. 3,00,000 : 10% of income in excess of Rs. 1,60,000
Between Rs. 3,00,001 - Rs. 5,00,000 : Rs. 14,000 + 20% of income in excess of Rs. 3,00,000
Above Rs.5,00,000 : Rs. 54,000 + 30% of income in excess of Rs. 5,00,000

(ii) In case of women (other than women who are of the age of 65 years or more at any time during the financial year 2009-10)-

Income (In Rs.) : Tax Liability (In Rs.)

Upto Rs. 1,90,000 : Nil
Between Rs. 1,90,001 - Rs. 3,00,000 : 10% of income in excess of Rs. 1,90,000
Between Rs. 3,00,001 - Rs. 5,00,000 : Rs. 11,000 + 20% of income in excess of Rs. 3,00,000
Above Rs.5,00,000 : Rs. 51,000 + 30% of income in excess of Rs. 5,00,000

(iii) In case of individuals who are of the age of 65 years or more at any time during the financial year 2009-10-

Income (In Rs.) : Tax Liability (In Rs.)

Upto Rs. 2,40,000 : Nil
Between Rs. 2,40,001 - Rs. 3,00,000 : 10% of income in excess of Rs. 2,40,000
Between Rs. 3,00,001 - Rs. 5,00,000 : Rs. 6,000 + 20% of income in excess of Rs. 3,00,000
Above Rs.5,00,000 : Rs. 46,000 + 30% of income in excess of Rs. 5,00,000

More details on tax liability computation can be found here (File referring to external site opens in a new window) .

It is mandatory to file a return, irrespective of the fact that tax has been deducted at source by your employer or not, and whether you are eligible for a refund or not. To know more about income tax rules, click here (External website that opens in a new window).

Detailed information on all types of taxation in India can be found here.

Selecting the Appropriate Form for filing Income Tax Returns

To file your Income Tax returns, you need to fill and submit the requisite forms (ITRs). There are different ITRs to file your income returns, depending on your profession/business/property.

The four types of Income Tax Return forms applicable for individuals and Hindu Undivided Families (HUFs), depending on the source(s) of income, are: Saral-II (ITR-1) (File referring to external site opens in a new window) , ITR-2 (File referring to external site opens in a new window) , ITR-3 (File referring to external site opens in a new window) and ITR-4 (File referring to external site opens in a new window) . Individuals having income from Salary / Pension / Family Pension & Interest may use ITR-1 (File referring to external site opens in a new window) to furnish their returns for the assessment year 2010-11.

For others, e.g., Association of Persons (AOP), Body of Individuals (BOI), co-operative societies, companies and firms, ITR-5 (File referring to external site opens in a new window) , ITR-6 (File referring to external site opens in a new window) and ITR-7 (File referring to external site opens in a new window) forms are applicable.

You can check the applicability of the forms and download them from here (External website that opens in a new window).

You can also refer to the handbooks on Filing your tax returns (File referring to external site opens in a new window) and Taxation of salaried employees, pensioners and senior citizens (File referring to external site opens in a new window) .

Contact

For queries and assistance, you can also contact the Public Relations Officer of the Income Tax Department at

ask@incometaxindia.gov.in

or the

'Aykar Sampark Kendra' at 0124-2438000.

Supporting Documents

Supporting documents that you require to calculate tax liability (External website that opens in a new window) while preparing IT Returns are:

Form No. 16 (File referring to external site opens in a new window) (received from the employer): Form 16 is the Annual Salary Statement issued by your employer and provides details about the income earned and tax deducted during the year.
Form No. 16A (File referring to external site opens in a new window) (received from all the payers who have got their tax deducted): This form needs to be collected from the parties who have deducted the tax while making payment to you during the year. This includes banks and companies (with whom you have kept fixed deposits and so on).
Form No. 26AS (File referring to external site opens in a new window) : The Income Tax Department through the National Securities Depository Limited (NSDL) (External website that opens in a new window) sends taxpayers a document called the 'Annual Tax Statement' or Form 26AS. This statement gives information about tax deducted and collected at source by entities such as employers and banks for your permanent account number (PAN) in a certain year. It also lists information about advance tax/self assessment tax/regular assessment tax deposited by you in the bank. You may view the status of tax credit online (External website that opens in a new window) by registering at the NSDL website (External website that opens in a new window).
Summary of account: It is important to have a summary of all bank accounts that you operated in the last fiscal year. The bank statements have details of the interest income earned and the expenditures incurred during the year.
Details of property owned: If you own some property or bought a new one during the last fiscal year, keep receipts of property tax paid during the year and rent received (if any).
Details of sale & purchase with respect to investments or assets sold during the year.
Details of any other tax payments made during the year.

It is also mandatory to quote the Permanent Account Number (PAN) while filing the return.

Manual Filing

In case you prefer to file your return manually, you would need to take the following steps:-

Download (External website that opens in a new window) and complete the appropriate ITR form
File the return with the concerned ward in the Income Tax Department of your jurisdiction. You can find your jurisdiction here (External website that opens in a new window)
Obtain receipt for your return
There is no need to attach any supporting documents with your return. However, you must have these available in case called for.

E-Filing

There was a time when people had to travel miles and wait in long queues outside the Tax Department to file their Income Tax returns. But a few years ago, the Income Tax Department introduced a convenient way to file these returns online. The process of electronically filing your Income Tax Returns through the Internet is known as e-filing of returns (External website that opens in a new window). It offers convenience of time and place to tax payers and is available round the clock to taxpayers located in any place in the world.

Electronic filing, or e-filing, of tax returns first began in India as part of a proposal for Internet-based electronic tax administration system for service tax. The Central Board of Excise and Customs's efforts made the introduction of e-filing of tax returns possible for the first time in India in April 2003, but its benefit was available only to a few service tax providers.

Considering the comfort for taxpayers across the country and also technology lending a helping hand, both the Central and State governments decided to extend e-filing of tax returns to the other types of taxes, including Income Tax, Excise and VAT.

Under the Income Tax law, this facility was introduced by the Central Board of Direct Taxes (CBDT) for the first time during assessment year 2006-07, wherein corporate assessees had to mandatorily e-file their income-tax returns.

At present, it is mandatory for companies and firms requiring statutory audit under Section 44AB (External website that opens in a new window) to e-file their Income Tax Returns. Also, the e-filing benefit has been extended to all assesses except for trusts.

Steps for E-Filing

Login to the official website for Income Tax e-filing (External website that opens in a new window)
Read the instructions given on the website
Select and download (External website that opens in a new window) the appropriate Income Tax Return form
Download Return Preparation Software (External website that opens in a new window) for selected Return Form.
Fill your return offline and generate XML file.
Register and create a user id/password.
Login and click on relevant form on left panel and select "Submit Return".
Browse to select XML file and click on "Upload" button.

3 ways to file returns electronically

Option 1: Use digital signature (External website that opens in a new window), in which case no further action is required.

Option 2: File without digital signature, in which case ITR-V form (66 KB) (PDF file that opens in a new window) is to be filed with the department. This is a single page receipt-cum-verification form.

Option 3: File through an e-return intermediary (External website that opens in a new window) who would do eFiling and also assist the assessee file the ITR -V Form (66 KB) (PDF file that opens in a new window).

For more details, click here (External website that opens in a new window).

On successful upload acknowledgement details would be displayed. Click on "Print" to generate printout of acknowledgement/ITR-V Form (66 KB) (PDF file that opens in a new window).
In case the return is digitally signed, on generation of "Acknowledgement (File referring to external site opens in a new window)" the Return Filing process gets completed. Assessee may take a printout of the Acknowledgement for his record.
In case the return is not digitally signed, on successful uploading of e-Return, the ITR-V (66 KB) (PDF file that opens in a new window) Form would be generated which needs to be printed by the tax payers. This is an acknowledgement cum verification form. The tax payer has to fill-up the verification part and verify the same. A duly verified ITR-V form should be submitted with the local Income Tax Office within 15 days of filing electronically. This completes the Return filing process for non-digitally signed Returns.