What Is Income Tax? And How to File an Income Tax Return?

    • If you are earning through individuals or by business, the central government of India charges some amount in the form of tax. Taxes play an important role as a source of income to the government. The government utilizes tax amounts for the welfare of public health. It is used for activities such as developing infrastructure, providing health care, education, and some government welfare schemes.
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Taxes are classified into two types.

 

➤Direct tax

➤Indirect tax

 

A direct tax is directly imposed on income earned. For example, income tax is one of them.

 

Direct tax is further categorized into two types

 

➤Income tax

➤Corporate tax

 

Income tax- Tax they pay on income earned is called income tax. Based on the income slab rate, a specific rate of tax has been prescribed by the income tax laws of India.

 

Corporate Tax - a specific rate of tax has been prescribed by the income tax laws of India where the business owner should pay tax on the profit they make.

 

Who Should Pay Income Tax?- Types of Income Taxpayers

 

Different types of tax rates have been categorized based on different types of taxpayers. You may raise the question of how to fill income tax returns and who is necessary to pay the tax.

 

Here is the list of taxpayer

 

  • Hindu Undivided Family(HUF)
  • Individuals
  • Association of Persons(AOP)
  • Body of Individuals(BOI)
  • Firms
  • Companies

Individuals are further classified into two types

 

Residential individuals

Nonresident individuals

 

Residential individuals - One has to pay a tax of global income means if one person earns in India, he has to pay for that, and the same person earns abroad, he also has to pay taxes for abroad.

 

Non- residential Individuals - If the person is non-residential, he never has to pay tax for the income he earned abroad; he has to pay taxes only on income earned or accrued in India.

 

Based on the period of stay of the residential individual in India, the tax has been prescribed by the income tax government of India.

 

Based on tax purposes, the residential individuals have been categorized into

 

➤If the personage less than 60

➤A person more than 60 but less than equal to 80 years

➤If the personage is more than 80

 

Types of Income Head/ Head of Income

 

If the person is earning in India, then he is subjected to pay tax whether you are a resident or nonresident of India. You may raise the question of how to fill income tax returns and calculate tax returns. Here are five main heads of income departments, and the nature of the income covered is given below.

 

Head of Income

Nature of the income covered

Income from other sources

The nature of income covered under this head is saving bank account interest, fixed deposit, winning in lotteries.

Income from house property

The nature of income covered under this head is income earned from renting a house property.

Income from capital gains

The nature of income covered under this head is surplus income from the sale of a capital asset such as mutual funds, shares, house property etc.

Income from capital gains

The nature of income covered under this head is profits earned by self-employed individuals, businesses, freelancers or contractors and income earned by the professionals like life insurance agents, chartered accountants, doctors, and lawyers who have their own practice and tuition teacher.

Income from salary

The nature of income covered under this head is income earned by salary or pension.

 

Taxpayers and Income Tax Slabs

 

Different individuals of taxpayers have been subjected to pay differential under the Indian income tax laws.

Indian companies pay a fixed tax rate that is calculated based on their profits.

HUF, AOP, BOI - Pay tax based on the income slab

If the income of the person increases, then the tax that he should pay also increases. In the year 2020, new tax rules have been established for individual and HUF taxpayers.

 

What Are Income Tax Slabs Under the New Tax Rule?

 

For 2020 -2021 a new tax regime is introduced by the government for individual and HUF taxpayers. HUF can either follow the old rule or opt for a new rule; it can be chosen at the time of filling.

Some of the exemptions and deductions opt for new tax rules are 

 

➤If the person is physically challenged or a specially-abled person, transport allowances can be received

➤One can receive the transportation allowances if the person meets the transportation expenditure incurred as part of the employment.

 

New regime slab rates

Tax to be paid

Income from Rs 2.5 lakh to Rs 5 lakh

Tax to be paid is 5%

Income from Rs 5 lakh to Rs 7.5 lakh

Tax to be paid is 10%

Income from Rs 7.5 lakh to Rs 10 lakh

The tax to be paid is 15%

Income from Rs 10 lakh to Rs 12.5 lakh

Tax to be paid is 20%

Income from Rs 12.5 lakh to Rs 15 lakh

The tax to be paid is 25%

Income above Rs 15 Lakh

Tax to be paid is 30%

 

Existing/ old regime slab rates

Tax rate

Tax to be paid

Up to Rs 2,50,000

0

No tax to be paid

Between Rs 2.5 lakhs and Rs 5 lakhs

5%

Tax to be paid is 5%

Between Rs 5 lakhs and Rs 10 lakhs

20%

Rs 13,000 + 20% of income above Rs 5 lakhs

Above 10 lakhs

30%

Rs 13,000 + 30% of the income Above Rs 10 lakhs

 

How to File an Income Tax Return on the Government Portal?

 

A person who is getting income should file the income tax return to the government in the financial years. Through ITR (income tax returns), the taxpayers can report their losses and even claim an income tax refund.

 

It enables the taxpayers to mention the income, expenses, tax deduction, investment, etc. As per the income tax act in 1961, a taxpayer should file their ITR (income tax returns) on their financial years. You may raise the question of how to fill income tax returns. Here is the step-by-step guide on e-filing Income tax returns.

 

Steps Involved in How to File Income Tax Returns

 

Here are the series of steps involved in filing the income tax returns that are

 

  • Calculation of income and tax
  • Tax deduction at source(TDS) certification and Form 26AS
  • Choose the right income tax form
  • Download ITR utility from income tax portal
  • Download the file after filling in the required details
  • Validate the information entered
  • convert the file to XML format
  • upload the XML file on the income tax portal and filing

 

Calculation of Income and Tax

 

The first step in filing ITR(income tax returns) is the taxpayers should calculate the required income as per the income tax law. so that he can find out whether it is necessary to pay tax or not

Tax Deduction at Source(TDS) Certificates and Forms 26AS

 

The taxpayers must summarize the TDS amount with the help of TDS certificates. He can summarize it from the certificated he received from all the four quarters of the financial years

Even 26AS can help the taxpayers to summarize the TDS amount

 

Choose the Right Income Tax Form

 

First, the taxpayers should check whether he is eligible for filing income tax returns or ITR forms. After making sure the eligibility of income tax returns, the taxpayers can proceed with filing income tax returns.

 

Taxpayers can file income tax returns either online mode or offline mode. For individual taxpayers, online mode is not available. Online mode is available for ITR 1 (income tax return 1) or ITR 4 (income tax return 4). If you are going for offline mode, then taxpayers should generate XML and then should upload

 

Download Itr Utility from Income Tax Portal

 

You can go to the official income tax return filing website (www.incometaxindiaefiling.gov.in). On the right side of the menu, you can see the IT return preparation software option-click to that.

Choose the assessment year slab. For example (The assessment year 2020-2021 tax slab). You can download the utility software offline. You can download either Microsoft Excel or Java utility based on your convenience.

 

Download the File After Filling in the Required Details

 

In the downloaded utility, fill the necessary details in it. Fill out relevant details like income and so on. Check if there is the possibility of getting a tax refund or not as per the calculation of the utility.

 

In the downloaded form, one is able to fill in the details of the income tax challan.

 

Validate the Information Entered

 

On the right-hand side of the downloaded form, one is able to see a few buttons in the click validate button to make sure all the required information is filled.

 

Convert the File to Xml Format

 

If you successfully fill in all the required information, then click on the generate XML button. It is available on the right-hand side. It is used to convert the file into the XML file format.

 

On the Income Tax Portal, Upload the Xml File

 

You can now upload the XML file by logging in through the income tax e-filing in that click income tax return option.

 

Fill in all the necessary information such as PAN card number, Your ITR(income tax return) form number, and fill out the resubmission. In submission, upload your XML file. After filling out all the necessary information, click the submit button.

 

You can select the verification mode based on convenience. The verification modes are 

 

  • Aadhaar OTP
  • Electronic Verification Code(EVC)
  • Sending manually signed copy of ITR-V to CPC Bengaluru

 

Efiling of ITR (income tax Return)

 

1) How to Fill Income Tax Returns Offline

One can file the ITR ( income tax return) by XML method in case of offline mode, but the user must download either excel utility or Java utility.

Step 1 - You can go to the official income tax return filing website (www.incometaxindiaefiling.gov.in)

Step 2 - Under IT return preparation software, you can either download Excel utility or Java utility based on your preference.

Step 3 - This utility file will be downloaded in the form of ZIP. You have to extract the file from the ZIP.

Step 4 - In the ITR form, you have to fill in all the necessary information. One can see the pre-filled Xml sheet by login through the e- filing portal.

Step 5 - Calculate the tax and validate all the income tax return form tabs.

Step 6 - After filling in all the information, you can generate and save the XML

Step 7 - The taxpayers can log in to the e-filing portal by entering the User ID and password and the computer-generated captcha code.

Step 8- Click on the file e-file menu and click the ITR link

Step 9 - On the income tax return page, select the assessment year, ITR form number, File type( original or revised return), submission mode(upload XML)

Step 10 - To verify the ITR, you have to choose based on your preference, such as Digital Signature Certificate(DSC), Aadhaar(OTP), EVC ( bank account details), EVC (using Demat bank details) as the EVC validity period is 72 hours. If you would like to verify your e- filing later, you can click to remind me later. You can either send Signed ITR-v, Send a manually signed copy of ITR-V to CPC Bengaluru via speed post.

Step 11 - After choosing the verify option-click continue

Step 12 - Upload the XML file on choosing the following

Step 13 - Choose the verification option as DSC and also attach your sign generated from the DSC management utility

Step 14 - Choose the Aadhar card OTP verification option. you will receive the OTP to Aadhar card linked mobile number

Step 15 - If you choose EVC by bank account or Demat account, you will receive the OTP through the registered mobile number

Step 16 - If you choose the other two options, your ITR won't be complete without verifying e- filing. You can verify ITR later by the return option

Step 17 - After completing, the verification process, submit the ITR

Step 18 - Now, you can view the uploaded ITR

 

2) How to File Income Tax Returns Online

 

One can directly fill the ITR by login into the e-filing portal and submitting it. Online mode is available for ITR 1 (income tax return 1) or ITR 4 (income tax return 4).

Step 1 - You can go to the official income tax return filing website (www.incometaxindiaefiling.gov.in)

Step 2- The taxpayers can log in to the e-filing portal by entering the User ID and password and the captcha code generated by the computer

Step 3 - Click on the file e-file menu and click the ITR link

Step 4 - Select the assessment year and ITR form number on the income tax return page. Also, select the Filling type( original or revised return), submission mode(prepare and submit mode)

Step 5 - After selecting all the details required, click continue

Step 6 - Before filling the online ITR form, read the instructions carefully. In case during submission due to some network error, your session becomes time out; you can see it by clicking the save draft button. Your ITR details will be saved in the draft for 30 days from the date of filling. You can verify as soon as possible

Step 7 - In the Taxes paid verification, choose the appropriate option based on your convenience and choose any one of the verification options given below

Step 8 - If you would like to verify the filling now, click I would like to e-verify

Step 9- If you would like to verify your filling later, click I would like to e-verify later within 120 days from the date of filling

Step 10 - If you don't want to verify your e-filing, you can send Signed ITR-V, Send a manually signed copy of ITR-V to CPC (centralized processing centre) Bengaluru via speed post

Step 11- Verify all the dates that you have entered in the ITR form, then click preview and submit

Step 12 - After completing all the above processes submit ITR

Step 13 - To verify the ITR, you have to choose based on your preference, such as

 

  • Aadhaar(OTP),
  • EVC ( bank account details),
  • EVC (using Demat bank details),
  • prevalidated bank account and
  • prevalidated Demat account. 

 

By using a prevalidated bank account and prevalidated Demat account, the ITR can be filled, but it can be verified. If you don't want to verify your e-filling, you can send a Signed ITR-V; send a manually signed copy of ITR-V to CPC (centralized processing centre) Bengaluru via speed post.

Step 14 - By choosing EVC as the verified option, you will receive the OTP valid for 60 seconds and can sometimes be auto-filled. You can verify ITR later by the return option or by sending a manually signed copy of ITR-V to CPC Bengaluru via speed post.

Step 15 - After completing, the verification process, submit the ITR

Step 16 - Now, you can view the uploaded ITR