Know Your Taxes: Income Tax Part 2

Since we already talked about the basics of Income tax, it is now time to cover it’s another important aspect and that is Income Tax Returns. What exactly is it and is it important to file it on time? Let’s have a look-

WHAT?

Income Tax Return (ITR) is a document that a taxpayer files reporting their income, profit and loss incurred from the business and details about their tax refund. Under Income Tax Act 1961, if you are in a taxable bracket, you must file ITR with the Income Tax Department at the end of every financial year.
ITR must also be filed without fail before the specified due date. Though you can file it after that too but in such a case, you become liable to pay interest or even a penalty. The ITR forms vary according to the source of income and can be filled online.

WHY?

Now the important question- why is it important to file an ITR? Actually there are several benefits of filing Income Tax Returns, which include but are not limited to –
• Availing loans such as for vehicles and home
• Claiming refunds
• For visa processing
• Life-insurance
• Carrying forward capital losses so they can be adjusted against capital gains in the subsequent years

Since, ITR is an important source of information and proof about one’s income, they come handy while applying for loans, life insurance and even visas to travel abroad. Refunds from the Income Tax Department can also be claimed only if you file returns and they are processed within 21 days of filing too.

HOW?

To file an ITR, which can be done through online portals, first you need to calculate your annual income as per the Income Tax guidelines. You also need to summarize your TDS (Tax Deducted at Source) amount for all four quarters of the financial year via Form 26AS available online.
Now as we know that ITR forms vary according to incomes, choose the right one for your case. There are 7 types in all and only ITR 1 to 4 can be filled online. Other three have to be filled only in offline mode which means generating XML and uploading in later. The first four can be filled like this too.
Then you can download the ITR utility form from the portal and fill in your details. Once you are done validating them, you can convert the downloaded file into XML by clicking on the ‘Generate XML’ button. Upload this file on the portal under ‘Income Tax Return’ option and fill in the necessary details, then click on ‘Submit’.

Now all that is left is verification which can be done via Aadhar OTP and you are done!