Theme: Money

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.