What exactly is ITR?

Through an Income Tax Return, or ITR, taxpayers like you and me declare our tax liability, seek tax deductions, and report gross taxable income. As an assessee, you file that with the Income Tax Department. You must file Income Tax Returns with the department if you earn more than a specific amount of money in a fiscal year (1st April to 31st March). You could work for yourself or for a company. You can run Hindu Undivided Families or partnership firms or companies (HUFs). Everyone is required to file an ITR with the IRS. An assessee must record income in the form of a salary, business profits, income from a house property or dividends received, capital gains (both short- and long-term), and interest income from any other source.

Also Read: Income Tax Return Filing

ITR filing eligibility

Individuals and enterprises who fall into particular income levels are only required to pay income tax, according to the Income Tax Act. The following are the entities or companies that must file ITRs in India:

• Individuals who earn more than Rs.2.5 lakh in a given fiscal year.
• Whether or whether they make a profit during the year, all registered firms that generate money.
• Those who want a refund for any excess tax withheld from their paycheck.
• Individuals holding assets or financial interests in non-Indian companies.
• Foreign firms with treaty advantages doing business in India.

Documents necessary for ITR filing

If you are a salaried employee, you must have certain paperwork on hand before filing your ITR. These documents include your Aadhar card and PAN card, as well as your wage stubs, savings bank account passbook, records of investments made in a year, and capital gains caused, if any. You must also be familiar with the use and purpose of specific forms associated with ITR filing. Among them are:

Form 16

This document is issued by your employer and contains information about your salary as well as the TDS (tax deducted at source) that has been deducted from it.

Form 16A

The TDS deducted on interest earned from fixed or recurring bank deposits is detailed on this form.

Form 16B

When you sell a property, this form contains information on TDS deducted by the buyer.

Form 16C

Form 16C records the TDS deducted from the rent paid to you by your renter.

Form 26AS

Based on your PAN number, this form provides your entire tax statement. This category includes your employer or anyone who pays you. Form 26AS lists self-assessment taxes or advance taxes paid, as well as documentation of tax-saving investments such as deductions under Sections 80C to 80U.

What are the benefits of filing an ITR?

Individuals and enterprises who fall into particular income levels are only required to pay income tax, according to the Income Tax Act. The entities or businesses that must file ITRs in India are listed below.

Responsibility:

Every responsible citizen of the country is obligated to file tax returns on a yearly basis. It provides a framework for the government to establish the amount and means of citizens’ spending, as well as a platform for assesses to request refunds and other forms of assistance when needed. You exhibit accountability by filing income tax returns. It also makes it easier for people and enterprises to engage in subsequent transactions because their earnings are recorded by the tax department, together with any necessary taxes paid.

Utility:

Even if your income does not qualify you for required filing, filing income tax returns voluntarily may be a good idea. Most states require three years’ worth of tax returns as proof when registering immovable property. When you file returns, it’s easy to document a transaction.

Credit is readily available:

If you plan to take out a loan in the future, such as a home loan, it’s a good idea to preserve a continuous record of ITR filings because the lender will almost probably ask you to prove. Before providing you a credit card, credit card issuers also want proof of filing an ITR.

Required for obtaining compensation for earlier losses:

Losses sustained by an individual or a business, including short- and long-term capital losses, that are not documented in the ITR for a relevant year cannot be used to offset capital gains or business gains in following years. As a result, it’s best to file ITRs on a frequent basis.

Useful for ITR revision:

If you do not file the initial Income Tax Return by the deadline, you will not be able to file an amended return later, even if the ITR contains a mistake.

Suggested Read: Income Tax Advisory Services