An income tax return is a document that taxpayers file with the tax authorities, declaring their income, expenses, deductions, and taxes owed to the government. It is a crucial document that enables the government to track the income of individuals and ensure that they pay taxes on their income.
The income tax return serves as a legal record of a taxpayer's income and tax payments, allowing them to claim refunds, credits, and deductions. Filing an income tax return is mandatory for individuals and businesses that earn income above a certain threshold, as defined by the tax laws of the country.
In India, the Income Tax Act, 1961, governs the taxation of income and the filing of income tax returns. The Act specifies the rules and procedures for filing an income tax return, and the government updates these rules and procedures from time to time to ensure efficient tax administration and compliance.
Who Needs to File an Income Tax Return?
An income tax return is a document filed with the tax authorities by an individual or entity that shows their income, expenses, and other relevant information for a particular financial year. The purpose of filing an income tax return is to determine the tax liability of the individual or entity and to facilitate the collection of taxes by the government.
Determining whether an individual needs to file an income tax return depends on several factors, such as their income, age, and residential status. The following criteria must be considered when determining whether an individual needs to file an income tax return in India:
Income: Any individual whose total income for the financial year 2022-23 exceeds the basic exemption limit of Rs. 2.5 lakhs must file an income tax return. The basic exemption limit for senior citizens (aged 60 years or above but less than 80 years) is Rs. 3 lakhs, and for super senior citizens (aged 80 years or above), it is Rs. 5 lakhs.
Example: Mr. A is a salaried employee who earned Rs. 3.5 lakhs during the financial year 2022-23. As his income exceeds the basic exemption limit of Rs. 2.5 lakhs, he is required to file an income tax return.
Residential Status: An individual who is a resident in India and has earned any income during the financial year must file an income tax return in India. However, non-residents are required to file an income tax return only if their income in India exceeds the basic exemption limit.
Example: Ms. B is a non-resident Indian who earned Rs. 3 lakhs from a fixed deposit in India during the financial year 2022-23. As her income in India exceeds the basic exemption limit of Rs. 2.5 lakhs, she is required to file an income tax return in India.
Who is required to file the return of income?
The return of income is a mandatory form that taxpayers must submit to the Incometax Department. In this form, taxpayers must communicate the details of their income earned during the financial year. The provisions relating to the filing of the return of income depend on the status of the taxpayer, whether it be a company, partnership firm, individual, charitable or religious trust, political parties, or certain associations. In this blog post, we will provide an overview of the provisions relating to the return of income.
Individual/HUF/AOP/BOI/Artificial Juridical Person: Every individual/HUF/AOP/BOI/artificial juridical person has to file the return of income if his total income (including income of any other person in respect of which he is assessable) without giving effect to the provisions of section 10(38), 10A, 10B, 10BA 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB or Chapter VIA (i.e., deduction under section 80C to 80U), exceeds the maximum amount which is not chargeable to tax i.e. exceeds the exemption limit.
It is mandatory for a taxpayer to file their income tax return if their income exceeds the basic exemption limit of Rs. 2.5 lakhs for individuals and HUFs, Rs. 3 lakhs for senior citizens (between 60 to 80 years of age), and Rs. 5 lakhs for super senior citizens (above 80 years of age). Failure to file a mandatory return can result in penalties under Section 271F of the Income Tax Act,1961
- For very senior citizens (age 80 or more): Rs 500000
- For Senior citizens (age 60-80): Rs 300000
- For others (age less than 60): Rs 250000
He is required to file an Income tax return as his income before deduction of chapter VI(80C in this case)(in present case Rs 370000) is more than the maximum amount which is not chargeable under Income Tax Act is Rs 2,50,000 for AY 2023-24
So if your Gross Total income before deductions is less than Rs 250000/- for the assessment year 2023-24 and your age is less than 60 then no need to file an income tax return(subject to other conditions applicable for foreign income and bank accounts).
Example:2 Suppose an individual (age less than 60 years), during FY 2022-23 AY 2023-24 having an Income of Rs 4 Lakh from long-term capital gain from shares sale exempted under section 10(38).
He is required to file an Income tax return as income before exemption u/s 10(38) is more than maximum amount which is not chargeable under Income Tax Act ie Rs 2,50,000 for Ay 2023-24.
Companies: Every person, being a company, must file its return of income compulsorily, irrespective of whether its income is a profit or a loss.
Partnership Firms: Every person, being a partnership firm (including Limited Liability Partnership), has to file its return of income compulsorily, irrespective of its income being profit or loss.
Charitable or Religious Trusts: Every person in receipt of income derived from property held under charitable or religious trusts/legal obligations or in receipt of income being voluntary contributions referred to in section 2(24)(iia), has to file the return of income if its total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount not chargeable to income-tax.
Political Parties: The Chief Executive Officer of every political party has to file the return of income of the party if the total income of the party without giving effect to the provisions of section 13A exceeds the maximum amount not chargeable to income tax.
Certain Associations are liable to file the return of income if their total income without giving effect to the provisions of section 10 exceeds the maximum amount not chargeable to tax.
Changes made by the Finance Act, 2022:
The Finance Act, 2022, brought about significant changes to the Income Tax Act, of 1961, impacting the filing of income tax returns. Some of the key changes are:
Introduction of section 194P: The Finance Act, 2022, introduced section 194P, which requires banks to deduct tax at source (TDS) on interest income earned by senior citizens, aged 75 years and above, who do not have any other income sources. This move aims to reduce the compliance burden on senior citizens, making it easier for them to file their income tax returns.
Changes in section 206AB: The Finance Act, 2022, amended section 206AB, requiring non-resident taxpayers to furnish their Tax Identification Number (TIN) or equivalent identification number of their country of residence to avoid higher TDS rates. This change aims to ensure that non-residents comply with their tax obligations in India.
Changes in section 139AA: The Finance Act, 2022, amended section 139AA, making it mandatory for taxpayers to link their PAN (Permanent Account Number) with their Aadhaar (a biometric-based identification number issued by the Unique Identification Authority of India). This change aims to curb tax evasion and ensure transparency in tax administration.
Introduction of section 194Q: The Finance Act, 2022, introduced section 194Q, which requires buyers of goods with a turnover of more than Rs. 50 crore to deduct TDS on the purchase value. This change aims to widen the tax base and increase tax compliance.
The changes introduced by the Finance Act, 2022, highlight the government's commitment to efficient tax administration and compliance. Filing an income tax return is a critical responsibility for individuals and businesses, and failure to comply can lead to penalties and legal consequences. Therefore, it is essential to stay updated with the latest tax laws and filing requirements to avoid any complications or financial losses.
Types of Income Tax Returns and Mandatory Filing
The Income Tax Department has created different types of income tax return forms to cater to the diverse income streams of taxpayers. Some of the popular types of income tax returns are ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7.
ITR-1: This return form, also known as Sahaj, is meant for salaried individuals whose income comes from salary, pension, or interest. This form cannot be used if the individual has income from capital gains, business/profession, or foreign assets. whose income is up to Rs. 50 lakhs are required to file ITR-1
ITR-2: This return form is meant for individuals and HUFs (Hindu Undivided Families) who have income from capital gains, foreign assets, or more than one house property. This form cannot be used if the individual has income from a business/profession.
ITR-3: This return form is meant for individuals and HUFs who have income from business/profession.
ITR-4: This return form is meant for individuals, HUFs, and firms who have presumptive income from business/profession. This means that the taxpayer can declare their income at a certain rate, and they do not have to maintain detailed books of accounts.
ITR-5: This return form is meant for LLPs (Limited Liability Partnerships), AOPs (Association of Persons), BOIs (Body of Individuals), and partnerships.
ITR-6: This return form is meant for companies that do not claim an exemption under Section 11 of the Income Tax Act.
ITR-7: This return form is meant for persons including companies who are required to furnish return under Section 139(4A) or Section 139(4B) or Section 139(4C) or Section 139(4D) of the Income Tax Act.
Due Dates for Filing Income Tax Returns
Every taxpayer is required to file their income tax returns within the specified due date. The due date varies based on the category of the taxpayer. It is important to file the returns on time to avoid any interest or penalty charges.
For individuals, the due date to file the income tax returns for FY 2022-23 (AY 2023-24) is July 31, 2023, if the individual is not required to get their accounts audited.
If the individual is required to get their accounts audited under section 44AB of the Income Tax Act, the due date to file the income tax returns is October 31, 2023.
For companies, the due date to file the income tax returns for FY 2022-23 (AY 2023-24) is October 31, 2023. However, if the company is required to get its accounts audited, the due date to file the income tax returns is November 30, 2023
Summary of Due Dates.
- For Individuals, HUFs, BOIs, AOPs:
- If tax audit is not applicable: July 31, 2023
- If tax audit is applicable: October 31, 2023
- If tax audit is not applicable: July 31, 2023
- If tax audit is applicable: October 31, 2023
- If tax audit is not applicable: October 31, 2023
- If tax audit is applicable: October 31, 2023
- November 30, 2023
Consequences of Filing after the Due Date:
Interest on Late payment of Tax
If a taxpayer fails to file their income tax returns by the due date, they may have to pay interest and penalties. The interest is charged under section 234A, which is 1% per month or part of a month on the tax amount due, starting from the due date of filing the return until the actual date of filing the return.
Late Fees u/s 234F
If the taxpayer fails to file the income tax returns by the due date, they may also have to pay a penalty under section 234F. The penalty amount varies based on the timing of filing the return. If the return is filed after the due date but before December 31 of the assessment year, the penalty is Rs. 5,000. If the return is filed after December 31 but before March 31 of the assessment year, the penalty is Rs. 10,000. However, if the total income of the taxpayer does not exceed Rs. 5 lakhs, the penalty amount will be restricted to Rs. 1,000.
No Carry forward of Losses
A taxpayer may also file a revised return if they discover any errors or omissions in their original return after it has been filed. A revised return can only be filed before three months prior to the end of the assessment year or before the completion of the assessment, whichever is earlier. It is important to note that a revised return can only be filed if the original return was filed on time. Additionally, if any tax has already been paid based on the original return, the taxpayer must pay any additional tax due as a result of the revised return.
For Assessment Year 2023-24, revised returns can be filed Up to 31.12.2023
Once an income tax return has been filed, it needs to be verified by the taxpayer. Verification is important to ensure the authenticity and accuracy of the information provided in the tax return. Failure to verify the return can result in it being treated as invalid.
Who is required to verify an income tax return?
The taxpayer who has filed the income tax return is required to verify it. This applies to all categories of taxpayers, including individuals, HUFs, companies, firms, LLPs, etc.
The Income Tax Department provides various methods for verifying an income tax return. These include:
Aadhaar OTP: Taxpayers can verify their tax returns using an Aadhaar OTP (One-Time Password). This method requires the taxpayer's mobile number to be linked with their Aadhaar card.
Digital signature: Taxpayers can also digitally sign their tax returns using a digital signature certificate (DSC). A DSC is issued by a certifying authority and is used to authenticate digital documents.
EVC (Electronic Verification Code): Taxpayers can generate an EVC to verify their tax returns. An EVC is a unique code that is sent to the taxpayer's registered mobile number or email address. The taxpayer can then use this code to verify their tax return.
Sending signed ITR-V to CPC Bangalore: If the taxpayer is unable to verify the return using any of the above methods, they can print and sign the ITR-V (Income Tax Return Verification) form and send it by post to the Centralized Processing Center (CPC) in Bangalore.
Explain the consequences of not verifying an income tax return.
If a taxpayer fails to verify their income tax return, it will be treated as if it was never filed. This means that the taxpayer will be considered a defaulter and may have to face penalties and interest charges. The taxpayer will also need to file a revised return within the due date to avoid any further penalties. Therefore, it is important to verify the income tax return within the stipulated time to avoid any complications.
In conclusion, filing income tax returns is a crucial requirement for every taxpayer in India. The income tax return is a document that outlines the income earned, deductions claimed, and tax liability of an individual or a company. The Finance Act, of 2022 has brought about significant changes to income tax laws, including the introduction of new forms, changes in tax rates, and exemptions.
It is important for individuals to understand the criteria for determining whether they need to file an income tax return and the consequences of failing to do so. Different types of income tax returns such as ITR-1, ITR-2, etc. are designed for different categories of taxpayers based on their income sources and other factors.
Furthermore, timely filing of income tax returns is crucial to avoid penalties and interest. Different due dates apply to different categories of taxpayers, and non-compliance can result in penalties and interest payments. Finally, taxpayers should ensure that they verify their returns using the methods prescribed by the Income Tax Department to avoid penalties and other legal consequences.
In conclusion, filing income tax returns accurately and in a timely manner is not only a legal requirement but also a crucial aspect of financial planning. By filing their returns promptly, taxpayers can avoid unnecessary penalties and interest and contribute to the growth and development of the country.