"Taxes are the lifeblood of government and no taxpayer should be permitted to escape the payment of his just share of the burden of contributing thereto." - Arthur Vanderbilt

What is ITR?

ITR is known as Income Tax Return. Income Tax Return (ITR) is a form that is filled to submit the information about the income earned in the financial year to the Income Tax Department. The Tax Laws in India are framed by the Government of India. The tax is imposed on all the taxable person that includes Hindu Undivided Family (HUF’s), firms, companies, Limited Liability Partnership (LLP), the association of persons, winning of a lottery, and Individual. Certain rules are followed by the taxpayer in filling the ITR in every financial year.

According to the laws of Income Tax, the return must be filed every year by business or individuals that earn during the financial year. There can be various sources of income such as capital gains, interests, dividends received, rental income, business profits, or salary. Tax returns must be filed by businesses and individuals before the specified date to avoid penalties.

Types of ITR

ITR 1 (SAHAJ): To be Filed by individuals having total income up to Rs 50 Lacs from the sources like Salary, House property, Agriculture income of Rs 5000, or other sources excluding income from horse races.

ITR 2: To be filed by Hindu Undivided Family (HUF’s) or Individuals who are not eligible to file form ITR-1 and do not have income from gains and profits from profession or business.

ITR 3: To be filed by Hindu Undivided Family (HUF’s) having income from gains and profits from profession or business.

ITR 4 (SUGAM): To be filed by Hindu Undivided Family (HUF’s), Firms (other than LLP) being a resident having total income up to Rs.50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE.

ITR 5: To be filed by Artificial Judicial Person (AJP), Estate of deceased, Estate of insolvent, Business trust, and Investment funds.

ITR 6: To be filed by Companies other than companies claiming exemption under section 11.

ITR 7: To be filed by persons including companies to furnish returns under section 139(4A) or 139(4B) or 139(4C) or 139(4D) only.

Is filing Income Tax Return mandatory?

According to the tax laws laid down by the government of India, it is compulsory to file ITR if your income is more than the basic exemption limit. The income tax slab and tax rate are decided by the government of India for Taxpayers. Delay in the filing of ITR not only attracts penalties but also leads to prosecution and it also hampers your chances of getting a loan or visa for travel purposes.

Why you must file ITR even if your salary is not taxable?

It is mandatory to file ITR in India if the below-mentioned conditions are met.

1. If your annual income is more than: 

 a) The individual below 60 Years – Amount Rs 2.5 Lacs 

 b) The Individual above 60 Years but below 80 Years – Amount Rs 3.0 Lacs 

 c) TheIndividual above 80 Years – Amount Rs 5.0 Lacs 

It is always advised to file your ITR even if it is not taxable as it is our duty towards our nation and it also helps in record keeping and a variety of necessities.

2. If you want to apply for Visa or Loan 

The income tax return is especially important for the processing of documents. The ITR is now a necessity for availing the loan facility as eligibility depends on individual income which can be established through ITR. ITR gives a clear idea to the lender about individuals earning throughout the year and taxes paid on earnings. Most banks and NBFCs mandatorily require ITR of the last three years if you file for a home loan or car loan. Even embassies of the developed country like USA and Canada ask for your ITR to process your visa applications.

3. If you want an Income Tax refund from the Income Tax department 

There does exist the possibility in most cases that have been tax deduction at the source on some investments done by the individuals. Individuals can only claim an Income tax refund from the Income Tax department if they file ITR on time.

4. If the taxpayer is a firm or a company, Irrespective of losses or profits

If a company or firm made losses in a financial year then the income tax rule allows you to carry forward losses to set off the against the capital gains only to those who file the ITR in the relevant assessment year. Your loss incurred can be speculative as well as non-speculative, short term as well as long term capital losses and various other losses if not recorded in ITR filled in a financial year then those losses cannot be exempted in subsequent years for tax calculations.

5. If you have earned from your investments

It is an important document that carries all your details. Long term investment sometimes gives enormous returns to the investors and if you file your ITR regularly then such enormous returns can be easily utilized by you without getting into any kind of prosecution by the Income Tax Department. There are various cases where people have made investments that gave them huge returns but because they do not file ITR and such returns came in notice of Income Tax departments then those individuals had to bear the consequences. ITR saves you from penalty and prosecution from the Income Tax Department.

6. If you have more than one source of income such as rental income, earning from interests, etc

Filing return is a sign that you are a responsible citizen of the country and want to support the government in the growth of the country. One can have multiple sources of income and providing the right information about the earnings supports you in the easy expenditure of your hard-earned money without getting into trouble from the Income Tax Department.