Income Tax Return

Income tax is the annual direct tax on income which every individual, corporate firm, local authority or company is legally required pay to the government if they fulfil certain criteria. This tax on income is calculated on the net taxable income of a person or entity for the applicable fiscal.

In India, tax on income is applicable at incremental income tax slab rates i.e. lower income is taxed at a lower slab rate (including nil rate) and higher income features a higher slab rate. The income tax cycle in India currently coincides with the start of the fiscal on 1st April of the year and ends on 31st March of the next calendar year.

Filing Returns is Mandatory

  • The Income Tax Department is responsible for activities related to the taxation process.
  • At the end of the financial year, every tax payer has to declare his income to the Income Tax Department in a form prescribed by the Govt. of India.
  • It is mandatory for individuals and entities earning income in India to file a return, irrespective of the tax being deducted at source.
  • This ITR (Income Tax Return Form) summarizes income earned in a particular financial year.
  • The income can be from business, salary, pension, income from housing property, or even income from capital gains.

Avoiding Penalties

  • By filing the ITR form (Income Tax Return form) you inform the government about your earnings and the tax paid on it.
  • When you file the Income Tax Return, it is a proof of the income on which you have paid the tax.
  • As per the Income Tax Act, it is mandatory to file ITR every year.
  • Not filing Income Tax Returns can have serious implications. The IT Department may consider you as a tax defaulter.
  • It can attract penalties from the Income Tax Department.
  • If you have paid more tax than required, the excess amount paid by you will be refunded.

Filing Income Tax Returns

  • If your gross total income is over ₹ 2,50,000 in a financial year. This limit exceeds to ₹ 3,00,000 for senior citizens and ₹ 5,00,000 for citizens who are above 80 years.
  • You exist as a company irrespective of whether you witness a loss or profit.
  • You look forward to claiming an 
  • income tax refund.
  • Filing income tax return is mandatory if you are a resident of India and you have assets outside India.
  • If you receive income from a property held under a trust for religious and charitable purposes, a research association, a political party, educational institution, news agency, medical or educational institution.
  • In case of NRIs, income earned in India is taxable.

E-filing Income Tax

  • For the first time in the year 2006-2007, the e-filing facility was introduced by the Income Tax Department.
  • The benefit of e-filing has been extended to all assessees
  • It is mandatory for firms and companies which require statutory audit under section 44AB.
  • At present, a significant section of tax payers are e-filing income tax returns.
  • The income tax department hopes to bring all the returns online.
  • You can ⦁ e-file your income tax returns at
  • e-filing returns has several advantages, like you don’t have to perform paperwork and waste time sorting them out.
  • With the click of a mouse, you can log in to the secured website and file income tax returns online.

Before you make your income tax payments you should have a working knowledge of how income tax is computed. This will not only give you an idea on how much you have to pay but also find out ways in which you can save tax. If you are aware of the income tax slabs, computing the tax amount is easy. The final tax which is payable is calculated by applying the tax rates which are in force and then by deducting the taxes which have been paid through TDS (tax deduction at source).

To save the maximum amount of tax, it is necessary that you examine the deductions which have been defined under the different sections of IT Act, 1961. Certain investment avenues such as National Savings Certificate and Public Provident Fund are eligible for deduction under section 80C of the IT Act 1961. However, most tax payers tend to ignore a range of investment avenues which are eligible for tax concessions. Here is a quick rundown on investments which qualify for deductions under different sections of the Income Tax Act:Under section 80C, the Income Tax deductions are allowed for the following:

  • Tax Saving Mutual Fund
  • Tax Saving Fixed Deposit
  • National Savings Certificate
  • Repayment of the principal on a housing loan
  • Life insurance policy premium
  • Equity Oriented Mutual Funds
  • Contributions made to Employee Provident Fund
  • Under section 80C, the tax exemption limit is ₹ 1.5 lakhs.

Deductions allowed under various Sections

A taxpayer can claim for additional deductions under various sections. Some of these are mentioned below:

  • Under Section 80CCC, contributions to annuity plans such as LIC are considered for tax benefit up to ₹ 1.5 lakhs.
  • Interest on savings account is tax exempt up to Rs. 10,000 annually under Section 80TTA.
  • Investment in Rajiv Gandhi Saving Scheme is eligible for deduction under Section 80CCG.
  • Under Section 80D, if an individual makes a payment for medical insurance premium for his spouse, children or his own self, he can claim income tax deduction for the same for ₹ 25,000. For senior citizens, the limit has been extended to ₹ 30,000. Additionally, preventive health check-up costs till ₹ 5000 per family qualify for tax deductions.
  • Under Section 80DD, if a family member of the tax payer is suffering from 40% disability, he can claim deductions for up to ₹ 75,000 for spending on medical treatments for disabled dependents.
  • Under Section 80DDB, a person is allowed deductions if he pays an amount of ₹ 40,000 or more on treatment of specific diseases which includes malignant cancers, neurological diseases, chronic renal failure, haematological disorders and AIDS.
  • If you have taken an education loan and you are repaying the interest, you will qualify for income tax deductions under Section 80E. However, deductions are not allowed for repayment of the principal amount of the education loan.
  • Under Section 80G, 80GGA, 80GGB, 80GGC, if a person has made donations to an approved body during a financial year, he will qualify for deductions.
  • A standard deduction of ₹ 40,000 has been introduced in Budget 2018 for the salaried class in lieu of Medical Reimbursement and Transport allowance. This deduction is allowed irrespective of expenses incurred by the employee. The assessee does not have to submit actual bills to claim this deduction.

About Income Tax Rebate

A number of confusions arise when terms like income tax rebate, income tax exemption and income tax deduction are used. Although all these terms are beneficial to the tax payer, they have different meanings.

  • Income tax rebate includes those items which can be claimed from the total tax payable.
  • Tax deductions and tax exemptions are claimed from the income whereas in case of rebates, claims are made from the tax payable.
  • You can claim an Income Tax rebate under section 87A when you file the income tax returns.
  • A rebate will be available if the tax payer is a resident individual who has not crossed the 80 year mark and whose taxable income is ₹ 5,00,000 or less.
  • Hindu undivided Families, companies, trusts, LLP, partnership firms and NRIs are not eligible for tax rebate.

Difference between “Deduction” and “Exemption

  • Both tax exemption and tax deduction are tax relief which are extended by the government to the tax payers.
  • If an income is eligible for tax exemption, that particular income will not be liable for taxation.
  • It means that the income is completely tax free and is not included when computing the total taxable income.
  • In case of deductions, initially the income is included when the total income is computed.
  • If you qualify as per the guidelines provided for a deduction, the income tax deduction will be available to you.
  • In case of tax deduction, the income tax liability decreases by a specific amount for investing in a particular avenue.
  • In case of deductions, a monetary ceiling may be specified whereas generally there is no limit on exemption.