1. What is ITR?
An Income Tax Return (ITR) is a formal statement submitted to the Income Tax Department of India
that declares a person's or entity’s income, expenses, tax liabilities, and other relevant financial
information for a given financial year. It is a self-assessment document used to calculate tax liability
and request refunds (if any excess tax has been paid). Individuals, companies, firms, and other entities
are required to file Income Tax Return depending on their income level, source of income, and category of taxpayer.
The Income Tax Department offers different forms — ITR-1 to ITR-7 — to cater to different taxpayer
profiles. The form you should file depends on various factors, including your income type (salary,
business, capital gains, etc.), residential status, and total income.
2. Why is Filing ITR Important?
Filing your ITR is not just a legal requirement — it's also a critical financial habit with numerous
Benefits:
- Proof of Income: ITR serves as official proof of your income, which is often required when
applying for loans, visas, or renting property.
- Claiming Refunds: If you've paid more tax than your actual liability (TDS, advance tax), you
can claim a refund through ITR.
- Carrying Forward Losses: Filing within the due date allows you to carry forward capital
losses or business losses to set off against future income.
- Faster Loan Processing: Many banks and financial institutions ask for ITR receipts for the
past 2–3 years when sanctioning loans.
- Avoiding Legal Trouble: Filing timely returns ensures you stay compliant and avoid notices or scrutiny from the Income Tax Department.
- Visa Applications: Several countries request ITRs as part of their visa documentation process
to assess financial credibility.
3. Failure to file ITR on time can result in several consequences:
- Late Filing Fees (Section 234F):
o ₹1,000 if total income is below ₹5 lakh
o ₹5,000 if total income is above ₹5 lakh
- Interest on Due Tax (Section 234A): If taxes are unpaid and the return is late, interest is
charged at 1% per month on the outstanding tax.
- Loss of Carry-Forward Benefits: You cannot carry forward certain losses (e.g., business or
capital loss) if you fail to file ITR before the due date.
- Prosecution and Penalty: In extreme cases involving willful evasion, the taxpayer may face
prosecution, including imprisonment ranging from 3 months to 7 years along with fines.
4. Types of ITR
In India, the Income Tax Department provides different Income Tax Return (ITR) forms for different
types of taxpayers and income sources. Here's a summary of the main ITR forms (as of AY 2024–25)
and their key differences:
a) ITR-1
Who can file: Resident Individuals (not HUF) with:
- Salary or pension income
- One house property
- Other sources (excluding lottery/gambling)
- Total income ≤ ₹50 lakh
Not for: Directors, persons with foreign assets/income, or capital gains.
b) ITR-2
Who can file: Individuals and HUFs with:o Income from salary, house property, capital gains, or other sources
- Income from foreign assets
- Agricultural income > ₹5,000
Not for: Those with business/professional income.
c) ITR-3
Who can file: Individuals and HUFs with:
- Income from business/profession (proprietorship)
- May also include salary, capital gains, house property, etc.
d) ITR-4
Who can file: Resident Individuals, HUFs, and Firms (non-LLP) opting for Presumptive
Taxation under sections 44AD, 44ADA, or 44AE.
o Income up to ₹50 lakh (for professionals) or ₹2 crore (for businesses).
Not for: Those with foreign assets, directors, or more complex income.
e) ITR-5
Who can file: Partnership firms, LLPs, AOPs, BOIs, etc.
Not for: Individuals, HUFs, or companies.
f) ITR-6
Who can file: Companies (other than those claiming exemption under section 11—like
charitable trusts).
g) ITR-7
Who can file: Entities like trusts, political parties, institutions claiming exemption under
sections 139(4A) to 139(4D).
5. Recent Changes in ITR Forms (FY 2024-25)
- Pre-filled Data Enhancements: More detailed pre-filled information from AIS and TIS.
- Crypto and Digital Asset Disclosure: Clear sections added for virtual digital assets (VDAs).
- Simplification of Salary Structure: Enhanced fields for reporting salary components.
ITR Due Date:
Category of Taxpayer
|
Due Date for Tax Filing – FY 2024-25
*(unless extended)
|
| Individual / HUF/ AOP/ BOI
(books of accounts not required to be audited) |
31st July 2025 |
| Businesses (Requiring Audit) |
31st October 2025 |
| Businesses requiring transfer pricing reports (in case of international/specified domestic transactions) |
30th November 2025 |
| Revised return |
31st December 2025 |
| Belated/late return |
31st December 2025 |
| Updated return |
31 March 2030 (4 years from the end of the relevant Assessment Year) |
6. Who Should File ITR? Mandatory Filing Criteria:
- Gross total income before deductions exceeds the basic exemption limit.
- Income from foreign assets or signing authority in a foreign account.
- Deposits of over ₹1 crore in a bank account.
- Foreign travel expenses exceeding ₹2 lakh.
Electricity bill exceeding ₹1 lakh in a financial year.
Voluntary Filing: Benefits:
- Proof of income and financial standing.
- Easier loan, visa, and credit card approvals.
- Refund claims for TDS/tax paid in excess.
- To carry forward capital or business losses.
Special Cases:
- NRIs: Must file ITR if income earned in India exceeds ₹2.5 lakh.
- Minors: If income from gifts or investments crosses the limit, their guardians must file.
- Senior Citizens: May be eligible for higher exemption limits; e-filing is optional for super
seniors (80+).
7. Documents Required for Filing ITR
For Salaried Individuals
- Form 16
- Salary slips
- Investment proofs for deductions (e.g., 80C, 80D)
- Rent receipts (for HRA)
For Self-employed/Business Owners
- Profit and loss statement
- Balance sheet
- Details of business expenses
- GST returns (if applicable)
Other Key Documents
- Form 26AS
- AIS (Annual Information Statement)
- TIS (Taxpayer Information Summary)
- PAN, Aadhaar, bank account details
8. Understanding Tax Slabs and Deductions
Old vs New Tax Regime
- Old Regime: Allows deductions and exemptions (e.g., 80C, HRA, LTA).
- New Regime: Lower tax rates but no exemptions/deductions (except few like NPS, EPF
employer contribution).
Key Deductions
- Section 80C: Investments in PPF, ELSS, LIC (up to ₹1.5 lakh)
- Section 80D: Health insurance premiums
- Section 80G: Donations to approved charities
Tax Credits and Exemptions
- Rebate under Section 87A (for income up to ₹5 lakh)
- HRA, LTA, standard deduction (under Old Regime)
- Tax relief under Section 89(1)
9. Best Practices and Pro Tips
When to Start Preparing
- Don’t wait until July 31st
- Collect documents in April-May
- Track TDS and investments throughout the year
10. Consult Chhota CFO: When and Why
- Multiple income sources
- Business or capital gains income
- Foreign assets or crypto transactions
- Filing revised/rectification returns
