Theme: Money

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.