Income Tax Returns- What You Need to Know

We cannot run away from certain things in life- income tax is one of them. Everybody hates it but we cannot avoid coming dealing with it, at least once a year. In fact income tax is a big factor that influences so many of our personal finance decisions and while filing tax returns we reflect on how effectively our purchases and investments were managed through the year.

Read on to get a clearer view on who's, how's and when's of the tax return filing right. To begin with, for going-to-be tax payers, income tax return is the form filed with the I-T guys by those whose income is taxable, which has details of what sources of income they had in the previous year and how much tax was paid.

At the outset we need to be clear about two distinct periods one encounters in the tax returns forms- assessment year and previous year. In the assessment year 2014-15 tax returns on previous year, i.e. 2013-14 have to be filed.

Who should file tax returns?

Everyone who earns an income beyond the minimum taxable limit must file tax returns. Tax slabs are declared every year by the finance ministry. For the financial year 2013-14 the people in the lowest tax slab (income above Rs 2 lakhs) will be taxed at 10%.

In assessment year 2014-15 everyone whose income is taxable should file their tax returns. Exemption for those having income up to Rs 5 lakhs has not been extended this year. Those having income over Rs 5 lakhs need to file returns electronically this year onwards.

Why file tax returns?

3 good reasons to file tax returns even if you have no refunds to claim or losses to carry forward:

1. Do you think you might need to borrow from the bank any time in the next few years? Most lenders ask to produce 3 years' I-T returns.

2. I-T returns are part of documentation in many visa processes. Surely filing I-T returns does not pose as much trouble as a stalled visa process can.

3. If returns are not filed you cannot claim a refund. You might end up discovering that more tax has been deducted than you ought to pay while filing returns (often possible, due to TDS) and can claim it back.

When to file tax returns?

Tax returns are filed to reconcile your income and tax paid on them. If excess tax has been paid you can claim refund or if you haven't paid your dues they will be deducted. Tax returns must be filed every year on income earned in the previous year. The due date for salaried individuals usually falls on 31 July. Although there is no fine for delayed filing of returns and they can be filed until the end of the assessment year on 31 March, it is best to file it by due date. The most obvious reason to file on time is that the longer you delay filing, the longer the refund will be delayed. There are two more compelling reasons:

1. You might have made some errors in filing returns or could have missed out on a deduction. In some cases certain details may not be available before due date. In such cases, subject to certain conditions, filed information can be revised. However if tax returns are filed after due date, they cannot be revised.

2. Short term or long term capital loss from sale of shares or mutual funds can be carried forward for eight consecutive years and set off against profits from capital gain or business. But if tax return is not filed by due date, this benefit will be missed.

What details to file in ITR?

For salaried persons either ITR 1 or ITR 2 is applicable (read section How to file IT returns below). There are fields for personal details like name, date of birth, age, gender, PAN, address etc.

Next you need to provide details of your gross total income. Here income refers to salary/pension, income from house (positive if you're earning rent or possibly negative if home loan EMIs being paid) and income from other sources like interest, dividends, profit/loss from investments in shares, mutual funds and bonds. If you have merely made investments but have not sold them yet you do not have 'income' from other sources yet so only indicate sources from which you have had income in the previous year.

Finally you need to mention the amount you are entitled to claim as income tax deduction based on investments such as PPF, ELSS, NSC you would have made in the previous year or expenses on insurance premiums etc under various sections.

How to file IT returns?

I-T return is filed by filling in and submitting I-T return form. No documents are to be attached. For individuals with salary/pension, income from a house and interest as the only source of income ITR 1 Sahaj is the form to be filled. If you have income from salary/pension, income from more than 1 house, profit/loss on investments and no other sources of income you need to file ITR 2.

Most of the details will just have to be duplicated from your employer's form 16. The forms can be downloaded from, filled and submitted with digital signature. Every tax payer can create a digital signature. For detailed step by step explanation of the process don't miss the article Filing I-T Returns Yourself (ITR-1) from the additional resources mapped below.

If you are not the tech-savvy type you can get the ITR V, which is the acknowledgement form printed and mailed to the I-T Office in Bengaluru. But in case of digitally signed forms, the process becomes truly online.You don't even have to  mail ITR V. 

The entire process is actually as simple as that. Nevertheless if you are the lazy type you may want to bank on your financial adviser for filing your income tax returns.

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