Personal Tax Return Filing

It is obligatory for individuals, NRIs, partnership firms, LLPs, companies, and trusts to submit annual income tax returns. Individuals and NRIs must file income tax returns if their annual income surpasses Rs. 2.5 lakhs. Proprietorship and partnership firms are obligated to file income tax returns regardless of their income or loss amounts. All companies and LLPs are compulsorily required to file income tax returns, regardless of their turnover or profit.

An income tax return is a document that an individual is obligated to furnish to the Income Tax Department, providing details about their income and taxes paid during the financial year from April 1st to March 31st. The Income Tax Department has designated seven ITR forms based on factors such as income amount, income source, and the taxpayer’s category.

Electronic filing (e-filing) of income tax returns is obligatory when your income exceeds the basic exemption limit. However, even if your income is below the basic exemption limit, filing an Income Tax Return (ITR) becomes necessary under the following conditions:

1. If your deposits across all current accounts exceed Rs 1 crore.
2. If you have spent Rs 2 lakh or more on foreign travel.
3. If your electricity expenses amount to Rs 1 lakh or more.
4. If you possess beneficial interests or signing authority in foreign countries.
5. If your total business turnover surpasses Rs 60 lakh.
6. If your gross professional receipts are higher than Rs 10 lakh.
7. If your total savings bank account deposits are Rs 50 lakh or more.
8. If the total of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) is Rs 25,000 or more (Rs 50,000 or more for senior citizens).

While it may not be mandatory for individuals to file ITR according to the Income Tax Act, it is advisable to do so. Filing ITR serves as proof of income for various purposes, including loan approval, VISA applications, credit card applications, claiming income tax refunds, and facilitating the set off and carry forward of losses.

Penalty For Late Income Tax Filing

Income Tax Act levies penalties for late filing of income tax returns. Under Section 234F, a maximum late fee of Rs 5000 is applicable for filing ITR after due dates.
However, there is a relief given to small taxpayers, if the total income does not exceed Rs 5 lakh, the maximum penalty levied for delay will be Rs 1000.

Interest penalty on outstanding tax liability
Under Section 234A of the Income Tax Act, a taxpayer with outstanding tax liability will have to pay monthly interest of 1% on the outstanding tax payable till the belated ITR is filed.

Documents Required:

Let’s explore the documentation required for filing your Income Tax Return (ITR):

1. Form 16:
Form 16, also known as the Tax Deducted at Source (TDS) certificate, is provided by your employer. It includes details of your salary, allowances, and deductions.

2. Payslips:
Salaried individuals should keep their salary slips, containing information on salary components, House Rent Allowance (HRA), Dearness Allowance (DA), Traveling Allowances (TA), tax deducted, and statutory deductions.

3. Form 26AS:
Form 26AS provides information on TDS, advance tax, self-assessment tax, and TCS linked to your PAN. It also reflects details from the Annual Information Return (AIR) filed by various entities.

4. Annual Information Statement:
This statement offers a comprehensive view of your financial information, including transaction details where TDS/TCS may not be applicable, such as savings account interest, mutual funds transactions, and rental income.

5. Form 16A/16B/16C:
Form 16A outlines TDS on various incomes like interest on fixed deposits, rental income, or insurance commission. Form 16B provides details if you purchased a property during the previous year, and Form 16C includes TDS on income from renting plant and machinery.

6. Interest Certificates:
Obtain interest certificates from banks or post offices for taxable interest income from savings accounts, fixed deposits, recurring deposits, or post office savings accounts.

7. House Property Details:
Collect rental receipts and house owner details for HRA claims. If you reside in your property, note down property details, ownership percentage, and obtain a “loan repayment certificate” from your bank for claiming deductions under Sections 24 and 80C.

8. Capital Gains Details:
Keep the sales deed for any property sold during the previous year. For investments in shares or mutual funds, collect a capital gain statement from your broking house.

9. Business Profit and Loss (PL) and Balance Sheet (BS):
If you are involved in a business, maintain your business’s profit and loss account and balance sheet, as these determine your business income reported in your ITR.

10. Other Income Details:
Gather documents related to various sources of income, such as dividends, family pension, interest from loans, honorarium, tuition fees, freelancer income, and winnings from lotteries or game shows.

11. Investment Proofs:
Keep documents related to investments, such as EPF and PPF contributions, investments in ELSS schemes, life insurance premium payments, contributions to NPS, children’s education expenses, health insurance premiums, and interest paid on educational loans.

Ensuring these documents are ready will help you claim deductions and provide accurate information while filing your ITR.