What is Income Tax Return (ITR)?

Every earning individual in India is liable to pay taxes on their earnings as per the law set forth by the Income Tax Act of 1961. Previously the process of submitting the income tax was a hassle, but as technology has evolved, you can now complete this process online without many issues.
Starting from computing the total taxable income to submitting the Income Tax Return (ITR) to paying the dues, you can complete the whole process through the official website of the Income Tax (IT) Department.

Even though the process has become hassle-free, drafting an ITR is still a highly complicated process. But what is an ITR? Read on to learn more.

Also Read:  Don't Fall In Financial Pits, Debunk These Tax Deduction Myths
 

What is an ITR (Income Tax Return)?

The full form of ITR is an income tax return. It is a form that a taxpayer uses to declare the particulars of their income. This will include your total annual income, i.e. from every source, exemptions and deductions. Based on all the information that you declare on your ITR, your taxable income will be calculated.
Now, in case you have paid more than what your final income tax is, the IT department will refund the amount. And, if there is an amount due, you need to clear it within the stipulated time.

A crucial point to note here is that your annual income must include your salary, rental income, interest income, income from dividends and capital gains.
Now that you know what an ITR is, let’s focus on who should file it.
 

Types of ITR Forms

 
The Income Tax Department has designated 7 types of ITR forms, namely ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. The choice of form is contingent on factors such as income nature and amount, and taxpayer type. The following list comprises the ITR forms commonly used:
   

Do I Need to file ITR?

Whether you need to file an ITR or not depends on a few factors. Here are they –
 

• Income Crossing the Exemption Limit

  As per the Income Tax Act of 1961, if you are under the age of 60 and your annual income is more than Rs 2.5 lakh, then you need to file ITR. On the other hand, this limit is Rs 3 lakh for senior citizens and Rs 5 lakh for super senior citizens.
  A point to remember here is that the income here should be computed before considering the deduction under Section 80C to Section 80U, along with exemptions under Section 10.
   

• Owning a Foreign Asset

  If you have any assets outside of the country generating income, you need to file an ITR. This could include any investments, be it short- or long-term.
   

• Deposits in Bank

  If your bank account or accounts receive more than Rs 1 crore in deposits within a fiscal year, you need to submit an ITR.
   

• Paying Electricity Bill

  In case your annual electricity bill is more than Rs 1 lakh, then you need to file an ITR and declare your earnings.
   

• Travelling Overseas

  Travelling overseas is not an issue. However, if the associated expenses cross the threshold of Rs 2 lakh in a year, then you need to declare your income through an ITR.
  Apart from this, every registered company needs to file an ITR, irrespective of whether it is making any profit or not. Foreign companies operating in India also need to file ITR and declare their earnings. Besides, Non-Resident Indians (NRIs) who earn more than Rs 2.5 lakh in a financial year from India must also file ITR.
  
  Now that you are aware of what the term ITR stands for and who should file ITR let’s shift the focus toward its benefits of it.

Also Read: Take Advantage of Lesser Known Income Tax Deductions

Advantages of Filing the Income Tax Return

Here are some of the notable advantages of filing an ITR every fiscal year –
 

• Claiming Tax Refund

  One of the main reasons for filing an ITR is to claim a tax refund. To elaborate, the financial institutions or your employer deducts TDS from your deposits and salaries, respectively. Now, if you do not stop this and continue to pay it, that means you are paying the tax in advance.
  At the end of the financial year, when you compute your income tax, there is a possibility that you have paid all the taxes and some in advance as Tax deducted at Source (TDS). In that case, the IT department is liable to return the extra amount.
  
  So, if you do not file the TDS, you will not be able to claim that.
   

• Acts as an Income Proof

  Filing the ITR on time and without fail can act as income proof. Since it includes all your income sources and the details, you can easily use it to show what your annual income is. This, specifically, comes in handy when you apply for any loan. The lender will treat this as proof of income and check whether you have the repayment capacity if you take a loan.
  For instance, if you apply for a personal loan against ITR, you do not have to submit any additional papers to prove your repayment capacity.
   

• Helps in Your Visa Processing

  When you decide to apply for a visa, submitting the ITR is mandatory, and the embassy asks for it to check your tax compliance. Additionally, they also review if you have enough funds to take care of your travel cost in another country.
   

• Avoiding Legal Complications

  As mentioned above, paying income tax over a certain threshold is essential, and failing to do so can lead to legal complications. This entails a fine and, in some cases, jail time. So, if you file the ITR on time, you can avoid such problems.
   

Parting Thoughts

Hopefully, this blog has solved all your queries regarding what an ITR is, who should file it, and what its benefits are. So, remember these details and file your ITR on time to avoid its implications. Also, use it as income proof to get a personal loan from Hero FinCorp without any hassle.
 

FAQs

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   A salaried person needs to have a monthly income of at least Rs 15,000 to secure a personal loan from Hero FinCorp.

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