Everything you need to know about ITR in 2021

People find it difficult and burdensome to file ITR, especially when they have no prior experience completing this process. Even if it is tough for you, filing ITR is the duty of every responsible citizen of the country, and they get to benefit from this form filing. According to the income tax laws, IT returns filing is mandatory for some categories, while a voluntary procedure for others. There are different categories of IT returns that people are included in, but you must file them accordingly. Filing ITR is easy if you find the right type of ITR form, and you need to spend a little time and provide accurate details in the form. Still, some people may think about why they should file ITR, so let’s discuss more on ITR and understand the procedure.

What is ITR?

Income Tax Return Forms are submitted by individuals or organizations to the Income Tax Department of India, that include details like the income and taxes to be paid by an individual during the year. Information in the ITR needs to be regarding a particular financial year, starting from 1st April of this year and ending on the 31st March of next year. The personal income can be from various sources, salary, profits/gains from business, winning a lottery, house property, royalty income, capital gains, interest on deposits, or any other kind. 

You can file the Income Tax Returns in two ways- offline and online. In the offline method, you can download the required ITR form, complete the details, validate the information provided, save the generated XML file, and upload it to the portal. The taxpayer can download the various ITR forms from the official website of the Income Tax Department for returns filing. In the online method, the taxpayers can go directly to the e-filing portal and provide the required details. After validating the information, you can submit the ITR form easily. Online ITR filing is for ITR1 and ITR4, so the taxpayers can utilize this quick method. 

Why do we need to file ITR? 

It is mandatory to file Income Tax Returns for any person who has a gross total income above that of the lowest income tax slab for their age.

Exemption limit considering age:

-For persons below 60 years- Rs.2.5 lakh

-For persons whose age is between 60 and 80 years- Rs.3 lakh

-For persons above 80 years- Rs.5 lakh.

Some people are in the ITR exempted category but will have to file them under certain conditions. They have to file ITR mandatory,

• If the electricity bill in a single bill or totally in a financial year exceeds Rs.1 lakh. 
• If any of your current accounts in a bank or cooperative bank have a deposit of Rs.1 crore. 
• If you are an ordinarily resident individual who has income/ assets/ signing authority of any accounts in the foreign countries. 
• If the person has to spend Rs.2 lakh for themselves or for others to travel to a foreign country. 
• Before claiming for the capital gains incurred under any of the sections- 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB, when your GTI exceeds the basic exemption.

Never miss out on filing income tax returns, as there are benefits you get 

• If you plan to apply for any loan, you can submit the income tax returns of the last two or three years when the lender asks for income proof for loan sanction.
• By filing your income tax returns, you can claim to carry forward the incurred losses to the next financial year. 
• You can claim for TDS refunds by filing for ITR.
• The tax paid by individuals helps in the progression of your nation, and it is the majority cash flow for the government. Citizens must file ITR at the right time to support developmental activities. 
• You can submit the ITR of the last three years as income proof for visa or credit card applications. For visiting countries like the USA, Canada, or any part of Europe, you will have to provide ITR for the verification process. 

DOs and DON’Ts While Filing the ITR 

You need to file ITR every financial year before the commencement of the last date so that you don’t have to pay fines or late charges. If you follow the procedure, filing income tax returns is easy than you think. Some people are still reluctant to file ITR themselves due to fear of making mistakes. The process is simplified, but many people get confused when they file for IT returns. So, before you start filing ITR, you must know some of the dos and don’ts regarding the process. Having a clear idea about the procedure will help you to avoid mistakes and to complete income tax returns filing.

Do’s:

• Link your Aadhaar ID with your PAN, or else the ITR won’t be processed. Every taxpayer needs to be aware of this requirement for ITR filing. 
• When you need to file for income tax returns, every document should be ready so that you don’t have to rush at the last minute. You have to collect all the necessary documents for the filing process, and it helps to keep the procedure simple and easy. If your return is called out for scrutiny, you will need these documents again. 
• You can find the income tax slab you fall under considering your income from various sources. 

-Up to Rs.2.5 lakh – Nil

-Rs.2,50,001 to Rs.5,00,000 – 5%

-Rs.5,00,001 to Rs.7,50,001 – 10%

-Rs.7,50,001 to Rs.10,00,000 – 15%

-Rs.10,00,001 to Rs.12,50,000 – 20%

-Rs.12,50,001 to Rs.15,00,000 – 25%

-Above Rs.15,00,000 – 30%

• Considering your source of income, choose the correct ITR form for yourself. Each type has its features, which you need to check and proceed with the tax filing process. 
• Calculating the tax liability and pay self-assessment tax/advance tax before the financial year ends is necessary when you file ITR. 
• When you plan to file ITR, you need to calculate your tax liability properly, and the deductions you expect to claim. With the tax liabilities calculated in advance, your ITR filing is going to be easy. 

Don’ts:

• Don’t fill up incorrect information in the ITR form, it will delay the processing. So, it is better to avoid mistakes related to details you include in the income tax returns form. 
• Never wait till the end date to file for ITR, so you have to calculate accurately everything prior and do the process without delay. Don’t leave the necessary details or end up paying more taxes in the ITR filing process due to your last-minute rush.
• You should keep TDS records, and never try to hide your salary or additional income source while filing your returns.
• Mention the investments made in the same financial year when filing your ITR to gain benefits claiming the deduction based on the investments. 

What is the difference between old and new income tax regimes?

When you file for ITR, you need to understand that you can opt for the old or new tax regime considering the comfortability. You may be confused about which tax regime you need to opt for, so you have to check the features that they offer you before filing them. In the old tax regime, you have deductions and exemptions, but in the new tax regime, you can file for ITR with lower slab rates, without deductions and exemption. 

The individuals and Hindu Undivided Families can file according to the new tax regime. For taxpayers up to Rs.15 lakh can pay the lower slab rates, 5%, 10%, 15%, 20%, and 25% slab rates are considered for an increase of Rs.2.50 lakh from the basic exemption. But when you choose to be under the new tax regime, you will have to forgo some of the deductions and exemptions that were present for the old regime. Taxpayers who have income from salary cannot get the major benefits like HRA, LTA, and some of the allowance for duties. If the taxpayer gets salary or self-employed, they can’t get the deductions under Section 80 C, 80 D, 80 CCD (1), and 80 CCD (1B) (for NPS). The person can’t set off any of the forward losses against the current income when they opt for the new scheme. If you are receiving a pension, you can’t claim a standard deduction in respect of your past employment. The people with salaries, or even the self-employed will be reluctant to switch to the new tax regime as they have to forego various benefits. The salaried people have the option to switch the regimes yearly, but the self-employed cannot go back to the old regime after they opt for the new scheme. 

What are the ITR File types?

ITR files can be provided as income proof when you require them, and there are more benefits. Everyone has to submit different ITR forms depending on your category, and the income collected from various sources. If you fill the wrong ITR form, you will have to repeat the whole process which is a time-consuming process. You need thorough research to understand the different types of ITR forms and choose the apt form to complete the ITR filing. There are seven types of ITR forms for the different income and category groups- ITR1, ITR2, ITR3, ITR4, ITR5, ITR6, and ITR7. 

ITR1:

This form is commonly known as Sahaj and is filed by the majority of the taxpayers. The individual taxpayers who are residents of India can use ITR for tax purposes.

Who can file this income tax returns form?

• Individual taxpayers who are residents of India, whose income doesn’t exceed Rs.50 lakhs. 
• Income from the profession or pension of the taxpayer. 
• Income from the house property (they should own the property) or any other sources.

ITR2:

The individuals and Hindu Undivided Families who receive income other than profits and gains from business or profession can file for ITR2. If they have income from business or profession, they are not eligible to file for ITR2. 

Who can file this income tax returns form?

• Income of the taxpayer from the salary and pension.
• Income from house property, which can be from more than one house property.
• The income of the taxpayer from capital gains or loss on sale of investments or property (it can be short-term and long-term).
• If you have foreign assets or foreign income, you can file ITR2.
• The non-residents and residents not ordinarily residents can use this form.
• If the person has an agricultural income of more than Rs.5000.
• Income from other sources, including lottery winning, bets on racehorses, or other legal means of money. 

ITR3:

The individuals and the Hindu Undivided Families that earn profit and gains from a proprietary business or a profession should file for ITR3. But they can’t file for ITR3 if they have income as a partner of a partnership business firm.

Who can file this income tax returns form?

• Income from the profession of the taxpayer.
• Proprietary business income.
• Taxpayers who have income from other sources exempt salary.
• The income that is collected from house property, salary, or pension. 

ITR4:

If the taxpayer has chosen the Presumptive Taxation Scheme (exempts the small taxpayers from keeping the books of accounts) under section 44D, 44DA, 44AE of the Income Tax Act,1961, they will file for ITR4. This form can be filled offline or online according to the convenience of the taxpayer. 

Who can file this income tax returns form?

• Business income should come under Section 44AD/Section 44AE.
• Taxpayers who have professional income that comes under Section 44ADA.
• Income from salary or pension should not exceed Rs.50 lakh.
• Income from one house property needs to be under Rs.50 lakh without including the brought forward loss or loss that is to be brought forward under this head.
• Income collected from other sources, this doesn’t include horse races or money winning from the lottery should not exceed Rs.50 lakh. 
• Even freelancers whose income doesn’t exceed Rs.50 lakh can file for ITR4. 

ITR5:

ITR5 is used by some particular people or parties like AOPs, LLPs, and likewise. People who file their return of income under the section 139(4A)/ 139(4B)/ 139(4C)/ 139(4D) need not file for ITR5.

Who can file this income tax returns form?

• Income of firms.
• Association of Persons.
• Artificial Juridical Person referred under section 2(31)(vii).
• Estate of Deceased/ Insolvent.
• LLPs.
• BOI.
• Local Authority.
• Cooperative society.
• Investment fund.

ITR6:

The companies that don’t claim an exemption under section 11 of the Income Tax Act 1961 can file for ITR6. It means that the companies don’t have income from any property held by a religious or charitable person. This form is filed by the companies electronically. 

Who can file this income tax returns form?

• The companies who are registered under the Companies Act 2013 or the earlier Companies Act 1956 can file the ITR6 form. They should not have income coming from property used for charitable or religious requirements.
• The entities whose sales, turnover, or gross receipts exceed Rs.1 crore in the preceding financial year, then the accounts must be audited by a certified chartered accountant. 

ITR7:

The companies who can’t file for ITR5, which means that fall under section 139(4A)/ section 139 (4B)/ section 139 (4C)/ section 139 4(D) will have to file for ITR7. 

Who can file this income tax returns form?

• Income from the property held for any charitable or religious purpose (wholly or partially). (section 139(4A))
• Political parties should file ITR7 if the income exceeds the maximum amount not chargeable to income tax under section 139A. (section 139(4B))
• Fund/ educational institutions/ university/ hospital/ other medical institution. (section 139(4C))
• Scientific research association/ association or institution under section 10(23A)/ institution under section 10(23B)/ news agency. (section 139(4C))
• The universities, colleges, or other institutions that are not required to furnish return of income or loss under any other provisions of section 139(4D) should file ITR7.
• Every business trust that is not required to furnish return of income or loss under section 139(4E) should file ITR7.
• Any investment fund under section 115UB that is not required to furnish return of income or loss under section 139(4F) should file ITR7