Background: Filing your Income Tax Returns (ITR) not only ensures that you are tax compliant but also has several other benefits. In his previous article Navneet Dhiman shed light on IEC Code. Here he explains the benefits of filing ITR.
What is ITR?
Income Tax Return (ITR) is a form in which the taxpayers file information about their income earned and tax applicable to the income tax department. The department has notified 7 forms i.e. ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 & ITR 7 till date. Individuals whose annual income is in excess of the basic exemption limit of Rs 2.5 lakh must mandatorily file their income tax returns.
Also read: Budget impact: Taxation on businesses
Benefits of ITR
Even though filling of ITR is not mandatory for some individuals, there are several benefits of filing ITR.
- Claiming refund: There may be possibility that TDS may be deducted on some investments made in the name of the individual. If TDS has been deducted, then one will have to file return to claim refund for the same.
- Processing documents: While applying for loans, banks depend on the ITR of last three years to assess detailed picture of total income and taxes. Lenders consider ITR as the most vital document supporting an individual’s income.
- Visa processing: ITR is accepted for visa processing. Embassies of various countries like the United States, United Kingdom, Canada, and Australia ask for ITR receipts of the past years to process visa application. This helps them assess income and ensure that the applicant is able to fund their trip.
- Carry-forward of losses: Income tax rules allows carry-forward losses to set them off against capital gains only to those who file ITR in the relevant assessment year. There are possibilities that you may have incurred losses for a year. Hence, it is vital to file your income tax return on time in order to claim the losses in future years.
Besides keeping you tax compliant, filing of ITR on time is beneficial in many ways.
Also read: A list of tax benefits for startups in India
How to file income tax returns online
E-filing is the online filing of returns and this can be done via www.incometaxindiaefiling.gov.in.
Here are the steps for online filing of returns:
- Register on the e-filing website, if you are filing returns for the first time, else login. Your permanent account number (PAN) will be your user ID.
- Keep all key documents ready including PAN, Aadhaar, Form 16 (TDS certificate), Form 26AS (tax credit statement), bank statements, copy of returns filed last year, investment details.
- Go to the 'Downloads' tab to download the ITR preparation software (JAVA or Excel utility) for the relevant assessment year.
- Prepare the return using the downloaded software application. Click on the 'pre-fill' button to pre-populate personal details and tax payments/TDS.
- Enter all relevant data and click on 'Calculate' to compute the tax and interest liability and final figure of refund or tax payable.
- If tax is due, make the payment immediately and enter the details in appropriate schedule.
- Repeat above step so that tax payable turns 'zero'. Once all the details are in place generate and save the ITR data in XML format.
- Log in to the e-filing website, go to 'e-file' and click on 'Upload Return'. Select the relevant ITR, assessment year and XML file saved earlier.
- Upload the digital signature certificate (DSC), if applicable and it is registered with the portal. Click on the 'Submit' button.
- If you have not used DSC, ITR-V (verification form) will have to be downloaded; you can also choose to generate electronic verification code (EVC) through your bank ATM/netbanking or use Aadhaar-based OTP for e-verification.
- For physical verification, within 120 days of e-filing your return, send the printed and signed form to the I-T department's CPC in Bengaluru by post. An acknowledgement from the department will complete the process.
- After the return is verified, the I-T department will start processing your tax return to ensure that all details are correct and also verify the data filed with the other data available with the department.
- Once the return is processed, the I-T department communicates to your registered e-mail ID. In case of any discrepancies, it may ask you to provide further explanation or correct the mistakes made while filing the ITR.
Note:The last date of filing income tax return (ITR) for FY 2018-19 is July 31, 2019.
Also read: 6 limiting financial beliefs that prevent SMEs from achieving business success
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CS Navneet Dhiman
His Passion has been over the years to help inject techno-legal innovation and compliance strategy into Mylex Infotech Pvt Ltd.
With the expertise in the compliance and legal...