Theme: Income Tax

The Income Tax Department taxes you based on your income from the categories given below^{(( Section 14, Income Tax Act, 1961))}. Gross total income is the total income calculated based on these categories. It is from this amount that deductions are made.

Income from Salary 

Income from salary is taxable in India. Salaried income which is taxable consists of:

• Salary due from the employer (including a former employer) to the taxpayer during the previous year. The salary will be taxed even if it has not yet been paid.
• Salary paid by the employer (including the former employer) to the taxpayer during the previous year, before it became due. For example, if the employer pays the salary for a project in advance.
• Any arrears or pending salary paid by the employer (including the former employer) to the taxpayer during the previous year. This happens only if tax was not charged to this amount in an earlier year.

The following break-ups within your salary are fully taxable:

Income from Capital Gains

Income from capital gains^{(( Capital Gains, Income Tax Department, available at https://www.incometaxindia.gov.in/Tutorials/15-%20LTCG.pdf. is charged only in the following conditions: There should be a capital asset((Section 2(14),Income Tax Act, 1961))}. In other words, this refers to any property held by a taxpayer.

• During the previous year, the capital asset is transferred by the taxpayer.
• There should be profits or gains as a result of transfer. Read more here to understand which transactions are not considered to be “transferred” by the taxpayer.

Some transactions not taxed are:

• Distribution of assets^{(( Section 46(1), Income Tax Act, 1961))} in a company to the shareholders at the time of liquidation
• Distribution of capital assets ^{(( Section 47(1), Income Tax Act, 1961))}on a partition of a Hindu Undivided Family

Income from House Property 

A house property could be your home, an office, a shop, a building or some land attached to the building like a parking lot. The Income Tax Act does not differentiate between a commercial and residential property. All types of properties are taxed under the head ‘income from house property’ in the income tax return. This includes property you own. Income from house property is taxable if:^{(( Section 22, Income Tax Act, 1961))}

• The house property should consist of any building or land attached with it
• The taxpayer should be the owner of the property
• Business or profession is not carried on by the taxpayer in the house property

Income from Business and Profession 

Remuneration, bonus or commission received by a partner from the firm or anyone working independently in a business or profession, is not taxable as ‘Income from Salaries’. Rather, it would be taxable as ‘Income from a Business or Profession’ ^{(( Section 17, Income Tax Act, 1961))}. Tax is charged  on the following from a business or profession^{(( Section 28, Income Tax Act, 1961;Section 41, Income Tax Act, 1961; Section 43 , Income Tax Act, 1961))}:

• Any compensation or other payment owed to or received by any specified person.
• Income derived from a trade, profession or any specific services performed for its members, like an income made by a contractor.
• Cash assistance (by whatever name it is called) received or receivable by any person against exports under any scheme of Government of India.
• Value of any benefits arising from a business or a profession.
• Interest, salary, bonus, commission or remuneration owed to or received by a partner from partnership firm.

Read more examples on which income is charged here.

Income from Other Sources 

Any income which is not chargeable to tax under any other heads of income, but which is not to be excluded from the total income, is chargeable to tax under the head “Income from Other Sources”.^{(( Section 56, Income Tax Act, 1961))} Some examples of these are:

• Dividends
• Income from winning lotteries, crossword puzzles, races including horse races, card games, gambling or betting of any form or nature.

The following amounts fall under the head “income from other sources”. Amounts not taxed under the head of ‘Profits and Gains from Business or Profession’, fall under this category. This is applicable only if

• Any money received by an employer from his employees as a contribution towards PF (Provident Fund), ESI (Employee State Insurance), Superannuation Fund, etc.
• Interest on securities
• Income from machinery, plant or furniture belonging to taxpayer and let on hire
• Composite rental income from letting of plant, machinery or furniture with buildings
• Any sum received under Keyman Insurance Policy (including bonus)

The rates of income-tax and corporate taxes are available in the Finance Act passed by the Parliament every year. You can also check your tax liability and calculate the amount of income tax you have to pay by using the free online tax calculator available at the Income Tax Department website.

The Budget 2020 has given taxpayers the option to choose between:

• existing income tax regime with applicable income tax exemptions and deductions or
• a new tax regime with slashed income tax rates and new income tax slabs, but no tax exemptions and deductions.

Given below are the income tax rates  for individuals:

Old/existing tax rates

 

New reduced tax rates^{(( The Finance Act, 2020 (Rates applicable from April 1, 2020))}

 

Income Tax for Senior Citizens

Senior Citizens are those who are above the age of 60 years or more during the previous year.

 

Income tax for Super Senior Citizens

Super senior citizens are those who are above the age of 80 during the previous year (year in which income is earned)

Read more on income tax rates for a partnership firm, Hindu Undivided Family,  etc.

It is mandatory for every person to pay Income-tax. Income tax law defines the term ‘person’^{(( Section 2(31), Income Tax Act, 1961))} to include:

• Individual. For example, a salaried employee etc.
• Hindu Undivided Families (HUF). For example, a HUF including the joint family of Mr Rakesh, Mrs Rakesh and their sons pays tax as a separate entity.
• Association of persons or body of individuals. For example, a housing cooperative society.
• Firms. For example, a firm called TaxMann & Co-owned by Mr Rakesh and Mrs Rakesh.
• LLPs. For example, ABC LLP. In an LLP, each partner is not responsible or liable for another partner’s misconduct or negligence.
• Companies. For example, ABC Ltd., XYZ Ltd.
• Local authority and any artificial juridical person not covered under any of the above. For example, University and Institutions, Municipal Corporations, etc.

Thus, from the definition of the term ‘person’, it can be observed that, apart from a natural person, i.e., an individual, other artificial entities like a company, HUF, etc. are liable to pay Income-tax. All association of persons, body of individuals, local authority, artificial juridical person will have to pay income tax even if they were formed with or without the objective of earning a profit, or income. ^{(( Exception to Section 2(31), Income Tax Act, 1961))} However, certain institutions or entities in India do not have to pay tax under the law. Read here to find out more.

An Income Tax Return (ITR) is a form through which the details of income earned by a person in a financial year, and taxes paid on such income are communicated to the Income Tax Department.

Depending on the nature and status of income, different ITR forms are prescribed for different classes of taxpayers.^{(( Rule 12, Income Tax Rules, 1962))} Every taxpayer has to file tax returns under one specific ITR form only, and you have to choose the ITR form applicable to you. Filing the wrong ITR form will be considered as incorrect and defective.

Income Tax Forms

ITR forms can be downloaded on the Income Tax Department website. You will receive an Acknowledgement Form from the Income Tax Department when the data of the Return of Income in Forms ITR-1 (SAHAJ), ITR-2, ITR-3, ITR4 (SUGAM), ITR-5, ITR-6, ITR-7, is both filed and verified.

ITR-1 (SAHAJ)

Individuals residing in India having a total income of up to 50 lakh have to file this ITR Form. You are a resident if you have lived^{(( Section 6, Income Tax Act, 1961))}:

• in India for at least 182 days in the previous year
• in India for at least 365 days in the four years before the previous year, and in India for at least sixty days in the previous year

You have to fill this form when the source of the income is from your:

• Salary or pension
• One house property
• Other sources like interest etc. (not including lottery winnings, income from race horses etc.)
• Agricultural income up to Rs 5,000

If you are a person who is not residing in India, or a director in a company,^{(( ITR-1, Income Tax Department website, available at https://www.incometaxindia.gov.in/forms/income-tax%20rules/2020/itr1_english.pdf))} or a person who has income from any source outside India, the ITR-1 form is not applicable.

ITR-2

This form is applicable to:

• An individual to whom ITR-1 does not apply, or
• A Hindu Undivided Family (HUF) whose total income does not include profits and gains of a business or profession.^{(( Rule 12(1)(c), Income Tax Rules, 1962))}

For example, if Rama is a director in a company, then she will have to file tax returns under ITR-2, because she is not covered under ITR-1. Further, you have to fill this form when the source of the income is from your:

• Capital gains
• More than one house property
• Foreign income/foreign assets

ITR-3

This form is only applicable to:

• An individual or a Hindu Undivided Family (HUF) to whom forms ITR-1, ITR-2, and ITR-4 are not applicable, and
• Whose income comes from profits and gains of a business or profession.

For instance, if Shyam is a partner at a firm and earns more than Rs 50 lakh annually, then he will have to file ITR-3.

ITR-4 (SUGAM)

This form is applicable to individuals, HUFs and firms (excluding Limited Liability Partnerships) residing in India who have a total yearly income of up to Rs 50 lakh.

ITR-4 is applicable when the source of the income is:

• Business¹
• Profession ^{(( Section 44ADA, Income Tax Act, 1961))}
• Salary or pension
• One house property
• Other sources like interest etc. (not including lottery winnings and income from racehorses)

Further, a person who is not residing in India or a director of a company need not fill this ITR-4 Form.

ITR-5

This form is applicable to the following:

• Firm
• LLP (Limited Liability Partnership)
• Association of Persons/Body of Individuals
• Artificial Juridical Person ^{(( Section 2(31)(vii), Income Tax Act, 1961))}
• Local authority^{(( Section 2(31)(vi), Income Tax Act, 1961))}
• Representative assessee. A representative assessee could be an agent of a non-resident, the guardian of a minor/person of unsound mind, a trustee etc. who is authorised to receive or manage income on behalf of another person. ^{(( Section 160(1), Income Tax Act, 1961))}
• Cooperative society
• Societies registered under the Societies Registration Act 1860.

It is not applicable^{(( Sections 139(4A, 4B, 4C and 4D), Income Tax Act, 1961))} to individuals, HUF, a company and those persons filing ITR-7.

ITR-6

This form is applicable to companies, other than those companies claiming tax exemption for charitable or religious reasons.^{(( Section 11, Income Tax Act, 1961))} Further, you can find a list of tax-exempted institutions here.

ITR-7

This form is applicable to persons (including companies) such as:

• Every person receiving income from property held under trust, or for charitable or religious purposes ^{(( Section 139(4A), Income Tax Act, 1961))}
• Political parties ^{(( Section 139(4B), Income Tax Act, 1961))}
• News agencies, mutual funds, trade unions etc. ^{(( Section 139(4C), Income Tax Act, 1961))}
• Universities or colleges ^{(( Section 139(4D), Income Tax Act, 1961))}

ITR-Verification Form

You have to fill this form in situations where you have filed the data of the Return of Income in Forms ITR-1 (SAHAJ), ITR-2, ITR-3, ITR-4(SUGAM), ITR-5, ITR-7, but not verified electronically. Read more here.

1. Section 44AD and 44AE, Income Tax Act, 1961 [↩]

You can file the Income Tax Return Form with the Income Tax Department in any of the following ways^{(( What are the different modes of filing income?, FAQs on filing the return of income, https://www.incometaxindia.gov.in/Pages/faqs.aspx?k=FAQs%20on%20filing%20the%20return%20of%20income))}:

• Submitting the return in a paper form (offline) to the income tax office
• Submitting the return electronically under digital signature
• Electronically transmitting the ITR data under electronic verification code
• Electronically transmitting the ITR data, and later submitting the verification of the return

Procedure to file

Income tax returns can be filed manually as well as electronically i.e., e-filing.

Option 1: Manual Filing

For filing returns manually, you need to go to the Income Tax Department’s office to physically file returns. You can locate your nearest tax office here. Ensure that you fill the form completely and provide all the necessary details correctly. ​​​​​​​​​​ITR forms are attachment less forms and, hence, you are not required to attach any document (like proof of investment, TDS certificates, etc. along with the return of income. However, these documents should be kept safely and should be produced before the tax authorities when demanded in situations like assessment, inquiry, etc.

Option 2: Filing Electronically

Electronically filing your tax returns through the Internet or online is an easier process than physically filing returns because you do not need to take an actual print out of the documents. Also, it is a simpler process and can be done for free online through the income tax website.

Electronic filing or e-filing of ITR can happen in two ways: Offline and Online.

In the offline mode, you download the ITR form from the income tax website, fill it offline and then submit it on the website. In the online mode (applicable only for ITR forms 1 and 4), you fill in the form directly online.

For the financial year of 2019-20, the Income Tax Return (ITR) general filing deadline is November 30, 2020. The deadline to file belated and/or revised tax returns for the previous financial year of 2018-19 is July 31, 2020.

You can find other important due dates and income tax timelines for the year 2020 in this Tax Calendar.

In your Income Tax Return (ITR) form, you will have to select a category to file the form, depending on:

• Date of filing the ITR form – You will be filing the form on/before the due date, or after due date
• Type of income tax return – Generally, you will be filing an original ITR form applicable to that assessment year. After filing the original form, suppose you later have to correct or modify any details in the form. Then, you will be filing another revised or modified return in reference to the original.

Different Timelines while filing tax returns

Thus, different income tax returns can be filed as:

On or before the due date ^{(( Section 139(1), Income Tax Act, 1961))}

For example, the filing deadline is 30th November. If Priti files her income tax return on 15th November, then she has filed the ITR before the due date.

Belated return (after due date)^{(( Section 139(4), Income Tax Act, 1961))}

If you have not submitted your income tax return within the time allowed to you, then you may submit the return for any financial year at any time before the end of the relevant assessment year, or before the completion of the assessment (whichever is earlier).

For example, take a situation where you had to submit your income tax return for the financial year 2019-20 by 30th June 2020, but you didn’t do so. In this case, your assessment year will be 2020-21. If the assessment year is ending on 31st March 2021, you will have to submit your return by this date (end of assessment year). If the income tax assessment happens before the end of the assessment year, then you will have to submit your delayed return before the assessment.

Revised return ^{(( Section 139(5), Income Tax Act, 1961))}

After submitting a return/belated return, if you discover any omission or any wrong statement, you can submit a revised return at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

For example, if you submitted your income tax return for the financial year 2019-20 by the deadline of 30th June 2020, your assessment year will be 2020-21. After submitting the return, if you realise that you have given some wrong information in the form, then you have to submit another revised form. This should have the correct information. If the assessment year is ending on 31st March 2021, you will have to submit your revised return by this date (end of assessment year). If the income tax assessment happens before the end of the assessment year, then you will have to submit your revised return before the assessment.

Modified return ^{(( Section 92CD, Income Tax Act, 1961))}

This applies in a situation where you have entered into an agreement after submitting your income tax return. If the agreement is applicable to or affects the financial year for which you have filed income tax, you will have to submit a modified return in accordance with the agreement.

For example, if you submitted your income tax return for the financial year 2019-20 by the deadline of 30th June 2020. Your assessment year will be 2020-21. After submitting the return, if you enter into an agreement that impacts your income tax returns for the financial year, then you have to submit a modified return including the details of the agreement.

The modified return should be filed within three months from the end of the month in which you entered the agreement. For instance, if you have entered into the agreement in July, you have to submit the modified return by the end of October (3 months).

When delay has been permitted by income tax authorities ^{(( Section 119(2)(b), Income Tax Act, 1961))}

The Central Board of Direct Taxes (CBDT) may authorise any income-tax authority to allow an application from you. The application may be for income tax exemption, deduction, refund, relief etc. Your application may be allowed/accepted even after the expiry period. You can take the help of a Chartered Accountant or Lawyer to do this.

Filing tax returns is a detailed and long-drawn process. Some legal aspects to keep in mind are:

Step 1:

Initially, for filing an Income Tax Return (ITR), you need to find out what category of taxpayer you are. This involves calculating your taxable income based on standard tax rates. There may also be certain tax deductions that you can avail to reduce your tax liability.

Step 2:

When it comes to actually filing tax returns, you must most importantly ensure that you submit your returns within the specified dates/timeline by selecting the correct ITR Form that is applicable to you.

Step 3:

There are various ways in which your ITR can be filed i.e., physically or electronically, and each filing option comes with a different procedure. Even within electronic filing, you have the offline and online options. Irrespective of how you file your ITR, you will have to verify it upon submission. Sometimes, you might have to correct certain details in your ITR Form, or claim a refund if you have paid excess tax.

Step 4:

Accurate information and filing on time is essential while filing taxes. If you violate any laws related to income tax, you can be punished. Hence, if you are doubtful about any aspect of filing returns, it is advisable to seek help by contacting the income tax authorities.

The offline electronic filing (e-filing) mode is applicable for all Income Tax Retun (ITR) Forms. In the offline e-filing mode, you have to fill the ITR form offline, and then submit it on the Income Tax Department website.

Step 1: Select ITR Form

For offline mode, you have to download the appropriate ITR Form from the Income Tax Department’s e-filing portal. If you want to know which ITR form you have to fill, read here.

A pre-filled form can also be downloaded if you log in to the e-filing portal. From your account, you can choose to ‘Download Pre-Filled XML’. Import this to fill personal and other details into your ITR forms.

Step 2: Fill in Details

You can fill in the downloaded ITR form offline. Ensure that you fill the form completely and provide all the necessary details correctly. Validate all the tabs in the form.

Note that ​​​​​​​​​​ITR forms are attachment less forms and, hence, you are not required to attach any document (like proof of investment, TDS certificates, etc.) along with the return of income. Keep the ITR forms safely as they may be asked by the tax authorities when demanded in situations like assessment, inquiry, etc.

Step 3: Compute your Tax Liability

Compute total income for the financial year and compute your tax liability. You can also take the help of a Chartered Accountant for this. After this, collect all the documents and verify all the taxes deducted from your income. This way you can compute the total income chargeable to tax. After computing your total income, you have to calculate your tax liability. You can do this by applying the tax rates in force as per your income slab.

Step 4: Deductions

Once you have computed your tax liability, deduct the taxes that have been already paid by you through TDS, TCS and Advance Tax, and add interest payable (if any). This will tell you if all the taxes are already paid by you or any additional tax has to be paid, or if you have paid any excess taxes and a refund is due to you.

Step 5: Submit ITR Form

Generate and save the form. After preparing the form offline, you can then submit it online by logging in to the e-filing portal.

Step 6: Upload ITR Form in XML Format

After selecting the ‘e-File’ menu, leading to the ‘Income tax return’ page, you will have to select the assessment year, ITR form number, and whether your ITR is an original/revised return. You can then upload your form in the XML format. You have several options for verifying your form, and can choose to verify your form at the time of submission or later.

Once the verification is done, you can check your ITR status here.

Sometimes, you may be required to file income tax returns (ITR) in response to a notice issued to you by the income tax authorities. These are some major instances when notice can be issued to the taxpayer:

If your tax return is defective

If the Assessing Officer thinks that your return of income is defective, he may notify you of the defect,^{(( Section 139(9), Income Tax Act, 1961))} and give you an opportunity to rectify the defect within fifteen days of the notice. The defect should be rectified within fifteen days or the extended period allowed by the Officer. Otherwise, your return shall be treated as an invalid return. It will be considered that you as the taxpayer have failed to submit the return, which will result in penalties for you.

Not filing tax return on time

In order to make an income tax assessment, the Assessing Officer may serve a notice on any person who has not submitted an income tax return on time, to make the person submit the return. The Officer can also ask you to produce any accounts or documents required by the Officer. The income tax authorities can ask you to submit or verify any information.  Further, this may include a statement of all your assets and liabilities.^{(( Section 142(1), Income Tax Act, 1961).} Reassessment of your income chargeable to tax – If the Assessing Officer thinks that any part of your income chargeable to tax has escaped assessment or not been assessed for any assessment year,((Section 147, Income Tax Act, 1961))

then he may assess or reassess such income which has escaped assessment and which comes to his notice subsequently. Before making this assessment, the Assessing Officer shall serve you a notice.^{(( Section 148, Income Tax Act, 1961))} The notice will require you to submit a return of income for the previous year corresponding to the relevant assessment year. The notice will specify the time within which you have to submit the return.

Penalties for not responding to notices

You have to respond promptly to the notices mentioned above, and act accordingly. If you do not respond, you can be punished under the Income Tax Act. However, you will not be punished if:

• You submit the return before the end of the assessment year
• Tax payable does not exceed Rs. 10,000.

If you don’t respond to a notice asking you to submit your tax return, or a notice asking you to submit your return for reassessment, then you can be punished with imprisonment and an unlimited fine. If the tax amount involved is more than Rs. 25 lakh, you can face imprisonment from 6 months up to 7 years. In other cases, you can face imprisonment from 3 months up to 2 years.^{(( Section 276CC, Income Tax Act, 1961))}

The online electronic filing (e-filing) mode is applicable only for ITR forms 1 and 4, which you can fill directly online.

Step 1: Select Income Tax Return (ITR) Form

For online mode, you have to directly login to the Income Tax Department’s e-filing portal and select either ITR-1 or ITR-4. If you want to know which ITR Form is applicable to you, read here.

Step 2: Prepare your ITR Form online

Select the ‘e-File’ menu and then the ‘Income tax return’ page. You will have to select the assessment year, ITR form number. You will also select whether your ITR is an original/revised return. Further, you can then access your form by selecting the ‘Prepare and submit online’ option.

Step 3: Fill in Details

Read the instructions carefully. Ensure that you fill the form completely and provide all the necessary details correctly. Click on the ‘Save Draft’ button periodically to save the entered ITR details as a draft. You can do this to avoid loss of data/rework due to session timeout. The saved draft will be available for 30 days. However, this means 30 days from the date of saving or till the date of filing the return.

Note that ​​​​​​​​​​ITR forms are attachment less forms and, hence, you are not required to attach any document (like proof of investment, TDS certificates, etc.) along with the return of income. Keep these documents safely with you as they make be asked by the tax authorities or officers in situations like assessment, inquiry, etc.

Step 4: Submit the form

After filling the form, you have to choose the appropriate verification option in the ‘Taxes Paid and Verification’ tab. You have several options for verifying your form, and can choose to verify your form at the time of submission or later.

Once the verification is done, you can check your ITR status here.

The last step of the Income Tax Return (ITR) filing process is verification. You have to file your ITR verification within 120 days of filing the tax return. If you don’t do so, then it means that you have not filed ITR.

These are the several ways in which you can electronically verify your ITR at the time of filing your ITR:

• Digital Signature Certificate (DSC) – Along with your ITR form, attach the signature file generated from DSC management utility.
• Aadhaar OTP – Enter the Aadhaar OTP you receive in your mobile number registered with UIDAI.
• Electronic Verification Code (EVC) using Prevalidated Bank Account Details, or using Prevalidated Demat Account Details – Enter the EVC received in the mobile number registered with Bank or Demat Account respectively. Validity of such EVC is 72 hours from the time of generation.

There is no requirement to send documents to the Income Tax Department if you want to verify your tax return electronically. If you verify your ITR using an electronic method, then you will immediately receive the confirmation from the Tax Department regarding verification. Read more about e-verifying your return here.

Verifying at a later time

You can also choose to verify at a later time. If you don’t want to e-verify the ITR, you can instead send the signed ITR-Verification through normal or speed post to “Centralized Processing Center, Income Tax Department, Bengaluru – 560500”.

When you send the ITR-Verification via post to the Income Tax Department, they will send you an email confirming its arrival. This means your ITR is verified. The email will be sent to the email address you have registered in your e-filing account on the Income Tax Department’s e-filing website.

Income Tax Department’s Processing of Tax Returns

After the return is verified, either via e-verification or physically, the Income Tax Department will start processing your tax return. This is to ensure that the details filled by you are correct as per the Income Tax Act. The authorities may also cross-check details with you.

In order to make an income tax assessment, the Assessing Officer may serve a notice on any person who has not submitted an income tax return on time, to make the person submit the return. The Officer can also ask you to produce any accounts or documents required by the Officer. The income tax authorities can ask you to submit or verify any information.  Further, this may include a statement of all your assets and liabilities. ^{(( Section 142(1), Income Tax Act, 1961))}

Once the return is processed, the Department communicates it to your registered email ID. If there are errors, you have to explain further or correct the mistakes made while filing the original ITR.

A deduction is an expense that is subtracted from an individual’s gross total income to reduce the amount which is going to be taxed. Deduction can be less, more than or equal to the amount of income. If the amount deductible is more than the amount of income, then the resulting amount will be taken as a loss while calculating taxes^{(( Section 80A, Section – 80AA, Section – 80AB, Section – 80AC, Section 80B, Section 80C, Section 80CC, Section 80CCA, Section – 80CCB of the Income Tax Act, 1961))}. Some of the deductions for individuals are:

Contribution to LIC and Other Pension Fund 

Individuals can claim all contributions up to Rs. 1,50,000 of a payment under LIC’s annuity plan, or to any other insurer for receiving pension.^{(( Section 80 CCC, Income Tax Act, 1961))} This does not include any interest or bonuses that are in the individual’s account.^{(( Section 80 CCC, Income Tax Act, 1961))} If a deduction is claimed for this, later on when the pension is received by the individual or someone that he appoints (nominee), the pension will be taxable.

Taxable income received under a pension scheme includes:

• contributions made to receive pension; and
• contributions to all approved insurers under the Insurance Regulatory and Development Authority.^{(( Section 23 ABB, Income Tax Act, 1961))} You can find a list of approved insurers here.

This also includes contributions in Equity Linked Savings Scheme (ELSS) which is a mutual fund equity scheme that offers long-term wealth creation along with tax benefits^{(( Section 80C, Income Tax Act, 1961))}, and has a mandatory lock-in period of three years. Investments in ELSS up to a maximum of Rs. 1.5 lakh per annum qualify for deductions. You can deduct the amount you invest in an ELSS from your total income in order to reduce your taxable income, and thus reduce your taxes.

Contribution to National Pension System

National Pension System^{(( Section 80 CCD, Income Tax Act, 1961))} is a retirement benefit scheme which is compulsory for all Central Government workers who were employed on or after January 1, 2004. Other employees and self-employed persons also have the option of being a member of NPS.^{(( Section 80 CCD(1), Income Tax Act, 1961))}

Deduction for Employer: All employer’s contributions to NPS is taxable as salary income. The employer’s contribution to the NPS is deductible by the employee in the year in which contribution is made. The maximum deduction is 10% of the salary amount of the employee.

Deduction for Employee: The NPS contribution made by an employee is deductible in the year the contribution is made. Here, the deduction amount is 10% of the salary of the employee. If the contribution is made by another person who is not an employee, then the deduction limit is 20% of the gross total income.^{(( Section 80 CCD(2), Income Tax Act, 1961))}

Pension or other payments out of the NPS account will be taxable for the person who receives it. However, if the amount of pension received by NPS  is used to purchase an LIC annuity plan in the previous year, then it will be exempt from tax.

Maintenance, including Medical Treatment of a person with a disability

An individual as well as a member of a Hindu Undivided Family can claim deduction for expenditure related to:

• Medical treatment including nursing, training and rehabilitation of a person with a disability.^{(( Section 80DDB, Income Tax Act, 1961))}
• Deposits made under an approved LIC scheme or other insurers.

Deductions can be claimed depending on the disability faced by the individual or a dependent relative, like a member of a family including spouse, children, siblings, parents etc.

• Persons with disabilities can get a fixed deduction of Rs. 75,000. A person with disability includes those suffering 40% or more of blindness, low vision, hearing impairment, locomotor disability, mental retardation, mental illnesses and cured of leprosy.
• A higher deduction of Rs. 1,25,000 is available for persons with severe disabilities (80% and higher). To claim such deductions, the individual must have certification issued by the medical authority. The assessing officer may even ask you to get a fresh reassessment to obtain a fresh medical certificate.

Medical Treatment

A resident individual or resident Hindu Undivided Family can claim deductions for medical treatment if they have:

• Incurred expenditure for the medical treatment of a specified disease or ailment as prescribed. Some examples of such diseases are dementia, Parkinsons disease, malignant cancers, AIDS, chronic renal failure, etc. ^{(( Rule 11DD, Income Tax Rules, 1962))}
• Incurred medical treatment for themselves or for dependants like husband,wife, children, parents, siblings etc.
• A prescription for such medical treatment can be from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, etc.^{(( Proviso to Section 80 DDB, Income Tax Act, 1961))}

Either Rs. 60,000 (for senior citizens) or Rs. 40,000 (for any other person) will be taken as the deduction (whichever expenditure on medical treatment is lower). The amount deducted will also be reduced if an individual gets insurance money or is reimbursed by the employer for medical treatment.

Payment of Interest on Loan Taken for Higher Studies

An individual can claim deduction for the payment of interest on a loan taken for high studies^{(( Section 80E, Income Tax Act, 1961))} for themselves or their relatives like spouse, children etc. If the loan is taken for higher studies is from a bank, financial institution or an approved charity, the interest is deductible in the year the interest is paid. The entire interest is deductible on the year the individual pays interest on the loan, as well as seven years^{(( Section 80E(2), Income Tax Act, 1961))} after the interest is paid up.

Payment of Interest on Loan for buying House Property

To claim a deduction for interest on loan taken for residential house properties, a taxpayer can be a resident or non-resident of India. Further, the following conditions are to be met^{(( Section 80 EE, Income Tax Act, 1961))}:

• The person has to take a loan.
• The loan should be for a residential house property.
• The loan should be taken from a bank or a housing finance company. For example, the loan is sanctioned by the bank or housing finance company during April 1, 2016 to March 31, 2017.
• The amount of the loan sanctioned should not exceed Rs. 35 lakhs.
• The value of the house property should not exceed Rs 50 lakhs.
• The person claiming deduction should not own any residential house property on the day the loan is sanctioned.

The taxpayer can claim deduction under Section 80EE only if the above conditions are satisfied.

Donation to certain funds, trusts and charitable institutions

Deduction is available to a taxpayer if he contributes or gives donations to approved funds and charitable institutions/donations^{(( Section 80G, Income Tax Act, 1961))}. Any taxpayer , company, firm etc. can claim such deductions. 100% deduction is available for donations to National Defence Fund, Prime Minister’s National Relief Fund, Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND) Prime Minister’s Armenia Earthquake Relief Fund, Africa (Public Contributions – India) Fund, National Children’s Fund etc.

Rent Paid^{(( Section 80GG, Income Tax Act, 1961))}

An individual can claim deductions for the rent paid for a residential accommodation by him or for his family. This person can be anyone including a self-employed person or a person who does not get house rent allowance from the employer. However, it should not exceed Rs. 5000 a month or 25% of the person’s income. Only an individual who pays rent for a residential accommodation for himself or his family can avail this deduction through Form No.10BA.

Donations for scientific research and rural development

Any individual, except someone gaining profits out of a business or profession, can claim deductions for donations made towards scientific research or rural development.^{(( Section 80GGA, Income Tax Act, 1961))} Such donations must be given to research associations, universities or other institutions which work in this area. A contribution can also be made for projects (approved by the Income Tax Department)^{(( Section 35AC, Income Tax Act, 1961))} or for the National Fund for Rural Development or National Urban Poverty Eradication Fund. The entire amount donated i.e., 100% can be deducted. The donation can be given in cash, cheque or draft. However, no deduction is allowed for cash contributions exceeding Rs. 10,000.

The points given above are some examples of major deductions applicable to individuals. Read here for more.

The Right to Information Act 2005 (RTI Act 2005) states that all Indian citizens can access information which is under the control of public authorities.^{(( Section 4, Right to Information Act, 2005))} For example, if you want to know why your tax returns are delayed, then you can file an RTI application.

If you require any information which is tax related, you can approach the Central Public Information Officer (CPIO) or Central Assistant Public Information Officer (CAPIO) as the case may be, and specify the particulars of the information you require.((RTI, Income Tax Department, available at https://www.incometaxindia.gov.in/Pages/right-to-information.aspx The request has to be:

• Made in writing or submitted online
• Written in English, Hindi or official language of the state you are living in
• Accompanied by fees requested during the application

The Public Information Officer will also help you write down the application if you require assistance. Other than the personal details, you will not have to give any reason for asking the information.

The CPIO has to provide the information within 30 days of the receipt of the request. If he does not do this, he may be punished with a penalty of Rs. 25,000. For details of CPIO, please click here​​ and visit the respective Field Offices/Directorate Generals Pages​​ or call Aaykar Sampark Kendra at 0124-2438000.

If you require any assistance on filing an FIR, then you can check out the Right to Information topic for any further clarification.

Exemptions are those incomes which are exempt from tax. In other words, they do not form a part of the total income calculated for taxation purposes.

Incomes Exempt from Tax

Given below are some examples of income that are exempted from tax:

• Agricultural income^{(( Section 10(1), Income Tax Act, 1961))}
• Any payments received from family income or income of an estate belonging to the family by an individual member of a Hindu Undivided Family^{(( Section 10(2), Income Tax Act, 1961))}
• Share of profit from a firm^{(( Section 10(2A), Income Tax Act, 1961))}
• Leave travel concession provided by an employer to his employee who is an Indian citizen
• Remuneration received by foreign diplomats^{(( Section 10(6), Income Tax Act, 1961))}
• Death-cum-retirement gratuity^{(( Section 10(10), Income Tax Act, 1961))}
• Retrenchment compensation^{(( Section 10(10B), Income Tax Act, 1961))}
• Scholarship granted to meet the cost of education^{(( Section 10(16), Income Tax Act, 1961))}
• Family pension received by families of Armed Forces^{(( Section 10(19), Income Tax Act, 1961))}
• Foreign allowance granted by the  Government of India to its employees posted abroad^{(( Section 10(7), Income Tax Act, 1961))}
• Tax paid on behalf of foreign companies in India^{(( Section 10(6A), Income Tax Act, 1961))}
• Income of mutual fund set up by a public sector bank or financial institution^{(( Section 10(23D), Income Tax Act, 1961))}
• Compensation received by victims of Bhopal Gas Tragedy^{(( Section 10(10BB), Income Tax Act, 1961))}
• Any sum of money from a life insurance policy. This includes bonuses but does not cover Keyman insurance policies^{(( Section 10(10D), Income Tax Act, 1961))}
• Daily allowance of Member of Parliament or State Legislature^{(( Section 10(17), Income Tax Act, 1961))}
• Any income from an approved research association^{(( Section 10(22B), Income Tax Act, 1961))}

Further, apart from the ones listed above, there are multiple exemptions under income tax law. To read more click here.

Some institutions are also exempt from giving tax such as India Wildlife Conservation Trust, charitable organizations etc. Read here to see more on exempted institutions.

The government levies income tax on the annual income of an individual. Income tax is calculated from a period starting from 1st April and ending on 31st March of a calendar year.

The income tax law classifies the calendar year as:

• Previous year^{(( Section 3, Income Tax Act, 1961))}: The year in which income is earned is called a previous year.
• Assessment year: The year in which the income is charged for taxation is called an assessment year.

For example, income earned during the period of 1st April, 2020 to 31st March, 2021 by an individual is income of the previous year 2020-21. The income of the previous year 2020-21 is taxable in the next year, i.e., in the assessment year 2021-22.​

Previous Year for Businesses^{(( Proviso to Section 3, Income Tax Act, 1961))}

However, for businesses or professions, the “previous year” is the period beginning with

• The date of setting up of the business or profession; or
• The date on which the source of income newly comes into existence,

and ending with the said financial year.

Electronically filing revised return (offline):

Step 1: Select ITR Form

For offline mode, you have to  download the appropriate ITR Form from the Income Tax Department’s e-filing portal. If you want to know which ITR Form you have to fill, read here.

A pre-filled form can also be downloaded if you log in to the e-filing portal. From your account, you can choose to ‘Download Pre-Filled XML’, which can be imported to your ITR form for prefilling the personal and other available details.

Step 2: Fill in Details

You can fill in the downloaded ITR form offline. Ensure that you fill or correct the relevant details of the form. Under ‘General Information’, choose the ‘Return filing section’ as ‘Revised return under section 139(5)’ and ‘Return filing type’ as ‘Revised’.

Enter the Acknowledgement number and date of filing of the original return. You can find out these details by going to your e-filing account and choosing ‘Income Tax Returns’ under the e-filed returns/forms.

Step 3: Submit the Form

Generate and save the form. After preparing the revised return offline, you can then submit the form online by logging in to your account on the e-filing portal.

Step 4: Upload ITR Form in XML Format

After selecting the ‘e-File’ menu, leading to the ‘Income tax return’ page, you will have to select the assessment year, ITR form number, and state that your ITR is a revised return. You can then upload your form in the XML format. You have several options for verifying your form, and can choose to verify your form at the time of submission or later.

Once the verification is done, you can check your ITR status here.

 

Electronically filing revised return (online):

Step 1: Select ITR Form

For online mode, you have to directly login to the Income Tax Department’s  e-filing portal and select either ITR-1 or ITR-4. If you want to know which ITR Form is applicable to you, read here.

Step 2: Prepare your ITR Form online

After selecting the ‘e-File’ menu, leading to the ‘Income tax return’ page, you will have to select the assessment year, ITR form number, and state that your ITR is a revised return. You can then access your form by selecting the ‘Prepare and submit online’ option.

Step 3: Fill in Details

Ensure that you fill or correct the relevant details of the form. Under ‘General Information’, choose the ‘Return filing section’ as ‘Revised return under section 139(5)’ and ‘Return filing type’ as ‘Revised’.

Enter the Acknowledgement number and date of filing of the original return. You can find out these details by going to your e-filing account and choosing ‘Income Tax Returns’ under the e-filed returns/forms.

Step 4: Submit the form

After filling the form, you have several options for verifying your form, and can choose to verify your form at the time of submission or later.

Once the verification is done, you can check your ITR status here.

It is mandatory for all income tax taxpayers or persons who have to file income returns (even on behalf of others), to have a Permanent Account Number (PAN). Your Permanent Account Number (PAN) is a 10-digit alphanumeric identifier, issued by the Income Tax Department. Each taxpayer (e.g. individual, firm, company, etc.) is issued a unique PAN Number, and it is compulsory to quote your PAN Number on return of income tax.

While making an application for a PAN Number, it is mandatory to quote your Aadhaar/Aadhaar Enrolment ID.  You can get an instant PAN by providing your Aadhaar details. Once you have applied for a PAN, you can also check the status of your PAN application. If there are any changes in your PAN/Aadhaar details, you can update the details.

Read more here about the procedure for obtaining a PAN number.

If the Assessing Officer is satisfied that the amount of tax paid by you for any assessment year exceeds the amount with which you should actually be charged, then you are entitled to a refund of the excess.^{(( Section 237, Income Tax Act, 1961))} Any excess tax you pay can be claimed as a refund.

How to get your refund

If you want to claim any refund from the Income Tax Department, you can do so only if you file your ITR. There is no separate procedure as such in order to claim an income tax refund due to you. You can claim tax refund by simply filing the return of income^{(( Section 239, Income Tax Act, 1961))} and verification in the usual manner. The Income Tax Department will then confirm your ITR verification, including details of the refund amount. Your refund claim will either be accepted or rejected.

The excess tax will generally be refunded by crediting it in your bank account through ECS transfer. Sometimes, you may owe some payment to the Income Tax Department. In this case, the income tax authorities may set off the refund amount against the sum payable by you. This is done after giving you a written intimation of the action proposed to be taken.^{(( Section 245, Income Tax Act, 1961))}

Delay in payment of refund

The Income Tax Department has been making efforts to settle refund claims at the earliest.​​ After applying for a refund, you can check your refund status. If the Assessing Officer does not grant the refund within three months after the month in which the refund is claimed, then the government shall pay you simple interest at 15% per annum on the refund amount.^{(( Section 243, Income Tax Act, 1961))}

While filing your income tax return (ITR), ensure that you use the correct form to file it. If you use the wrong form to file your ITR, it is a defective return. You will be have to file it again. ​​​

If you have made any mistake or omission in filing your ITR, you should file a revised return.^{(( Section 139(5), Income Tax Act, 1961))} The return should be revised within the given time limit. A return can be revised before the end of the assessment year or before the completion of the assessment; whichever is earlier.

If the Assessing Officer thinks that your return of income is defective, he may notify you^{2(( Section 139(9), Income Tax Act, 1961))} of the defect, and give you an opportunity to rectify the defect within fifteen days of the notice. The Officer may also allow an extension of time to rectify the defect if you apply for the same. The defect should be rectified within fifteen days or the further period allowed. Otherwise, your return shall be treated as an invalid return. It will be considered that you as the taxpayer have failed to submit the return, which will result in penalties for you.

However, in some instances, the Assessing Officer may allow the delay and treat the return as a valid return.This can happen if you have rectified the defect after the permissible period, but before the income tax assessment has been made by the authorities.

Manner of filing

If the original return has been filed in paper format or manually, then technically it cannot be revised by online mode or electronically.

If you do not file your income tax returns or you delay it, then ​you will face a penalty by the Income Tax Department. Return of income which has not been submitted on or before the due date specified is called belated return.

If you don’t submit a required return of income within the prescribed time limit, you will have to pay interest on tax due.^{(( Section 139, Income Tax Act, 1961))} Any person who has not filed their tax returns within the time period, can submit return for any previous year at any time before (whichever is earlier):

•  The end of the relevant assessment year or
• Completion of the assessment

Penalty Fee or Amount

You can find a detailed list of penalties and punishments for income tax related offences here. Some of the offences are:

Delay in Filing Returns

The fee you will have to pay for a default in submitting return of income is:

• Rs. 5000 if return is submitted on or before 31st December of the assessment year.
• Rs. 10,000 in any other case. However, late filing fee shall not exceed Rs. 1000 if the total income of the taxpayer does not exceed Rs. 5 lakh.^{(( Section 234F, Income Tax Act, 1961))}

Non-Payment of Tax / Not filing Tax Returns

If you do not pay taxes or file your income tax returns then you will have to pay interests, penalty and even face prosecution (go to Court). The prosecution can lead to rigorous imprisonment from 3 months to 2 years. In situations where  the tax sought to be evaded exceeds Rs. 25,00,000 the punishment could be 6 months to 7 years.​​^{(( Section 276CC, Income Tax Act, 1961))}

If you have any income tax-related doubts or complaints, you can make use of the Income Tax Department’s tax helplines. For specific issues related to the filing of income tax returns, you can contact the help desk of the income tax e-filing portal.

The Income Tax Department also issues useful tax information through booklets and pamphlets.

Grievances

The Income Tax department has a set procedure for addressing your grievances.

An Aaykar Sampark Kendra is as a single window mechanism resolve your grievance. You can locate your nearest ASK center here.

At ASK, a unique identification is given to you on the spot. After that, the authorities record the details of your complaint. In addition, you will receive an acknowledgement for your complaint, along with an indication of how much time it will take to address your complaint.

The ASK center also gives you information about the employee you can contact for future communication. The details include:

• name of the employee
• designation
• telephone number

After the department takes a decision regarding your complaint, you will immediately be told of the decision. Sometimes, the decision does not give you the remedy you want. However, you will be told of the justification for the decision. The alternative options for appeal will be conveyed to you.

You can also electronically submit your grievance here.

General questions

The government has set up Aaykar Sampark Kendras in some income tax offices. These are centers where taxpayers can file income tax returns and address tax related grievances. For general queries on income tax, call the Aaykar Sampark Kendra (ASK) on 1800 180 1961.

E-filing returns

You can enquire about e-filing your returns on +91-80-46122000/91-80-26500026.

Refund/rectification

For enquiring about refund or correcting your tax returns, you can call +91-80-46605200.

Explained below are various income tax authorities, including the governing body and income tax officers. The revenue functions of the Government of India are managed by the Ministry of Finance.

Governing Body

Central Board of Direct Taxes and the Income Tax Department

The Finance Ministry has entrusted administration of direct taxes like Income-tax to the Central Board of Direct Taxes (CBDT). The CBDT is a part of the Department of Revenue in the Ministry of Finance. The Central Board of Revenue Act, 1963 is the law that regulates the CBDT.

The CBDT provides essential inputs for policy framing and planning of direct taxes. Additionally, it administers direct tax laws through the Income Tax Department. Thus, income tax law is administered by the Income Tax Department under the control and supervision of the CBDT.​

Authorities^{(( Section 116, Income Tax Act, 1961))} appointed by the Income Tax Department 

The most senior ranks of income tax officers are:

• Principal Director General or Director-General
• Chief Commissioner or Principal Chief Commissioner
• Director or Principal Director
• Commissioner or Principal Commissioner

The officers mentioned above can appoint other income-tax authorities below the rank of an Assistant Commissioner or Deputy Commissioner.

Assessing Officer

An Assessing Officer is an officer of the Income Tax Department. He/she is given the power to take decisions on income tax law in a particular geographical area or over a class of persons.^{(( Section 7A, Income Tax Act, 1961))} You can find out who is your assessing officer based on your geographical jurisdiction, or the nature of your income. An Assessing Officer could have the designation of:

• Assistant Commissioner or Deputy Commissioner
• Assistant Director or Deputy Director
• Additional Commissioner or Additional Director
• Joint Commissioner or Joint Director

Public Relations Officer and Tax Return Preparers

If you want to take the help of any expert on tax-related matters, you can take the help of the Public Relations Officer (PRO) in the local office of the Income Tax Department.

Further, to assist regular taxpayers in preparation of their return of income and other income tax related issues, the government authorizes tax professionals called as Tax Return Preparers (TRPs).