Income tax returns can be a daunting task for many individuals, especially those who are new to the workforce or have recently started their own businesses. With several types of income tax returns and a plethora of rules and regulations to follow, it can be overwhelming to understand the process.
Types of income tax returns
There are several types of income tax returns, and it’s essential to understand each type’s purpose and applicability. Here are the most common types of income tax returns:
Individual income tax returns are filed by salaried individuals, freelancers, and self-employed individuals. The purpose of an individual income tax return is to report all income earned during the financial year and pay the applicable income tax on it. An individual income tax return is filed in ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, or ITR-7 forms, depending on the type of income and the source of income
Corporate Tax Returns
Corporate tax returns are filed by companies and businesses. The purpose of a corporate tax return is to report all income earned during the financial year and pay the applicable income tax on it. A corporate tax return is filed in the ITR-6 form
Partnership tax returns are filed by partnerships and LLPs (Limited Liability Partnerships)
Trust and Estate Tax Returns
Trust and estate tax returns are filed by trusts and estates. The purpose of a trust and estate tax return is to report all income earned during the financial year and pay the applicable income tax on it
Applicability of income tax returns
Not everyone needs to file an income tax return. The applicability of income tax returns depends on several factors, such as the type of income, the source of income, and the income tax slab rate
If you’re a salaried individual, you need to file an income tax return if your annual income exceeds Rs. 2.5 lakhs. However, if you’re over 60 years old, the minimum threshold limit is Rs. 3 lakhs, and if you’re over 80 years old, the minimum threshold limit is Rs. 5 lakhs.
Freelancers and Self-Employed Individuals
If you’re a freelancer or self-employed individual, you need to file an income tax return if your annual income exceeds Rs. 2.5 lakhs.
Businesses and Companies
All businesses and companies needed to file a corporate tax which is known as income tax incorporate sector. if the business is excited from 2.5 lakhs before the deduction then such businesses or firms needed to file the income tax. 2.5 lakh is the basic taxable limit for any corporate or firms.
Partnership Firms and LLPs
Partnership firms and LLPs Needed to file a partnership tax return if there annual turnover exceeds from rupees 2.5 lacs
Trusts and Estates
Trusts and estates need to file a trust and estate tax return if their annual income exceeds Rs. 2.5 lakhs
Understanding income tax slabs and rates
Income tax slabs and rates are the basis on which income tax is calculated. India has a progressive tax system, which means that higher income earners pay a higher tax rate.
Individual Income Tax Slabs and Rates
- Up to Rs. 2.5 lakhs – No tax
- Rs. 2.5 lakhs to Rs. 5 lakhs – 5% tax
- Rs. 5 lakhs to Rs. 7.5 lakhs – 10% tax
- Rs. 7.5 lakhs to Rs. 10 lakhs – 15% tax
- Rs. 10 lakhs to Rs. 12.5 lakhs – 20% tax
- Rs. 12.5 lakhs to Rs. 15 lakhs – 25% tax
- Above Rs. 15 lakhs – 30% tax
Corporate Tax Slabs and Rates
- Domestic Companies – 22% tax
- Domestic Companies with a turnover of up to Rs. 400 crores – 25% tax
- Foreign Companies – 40% tax
Surcharge on income tax is levied If in case of individual the income is more than rupees 50 lakh and Rupees 1 crore in case of companies or firms.
Partnership Tax Slabs and Rates
A flat rate of 30% tax is decided for partnership firms apart from this 30% tax, health and education tax is levied at the rate of 4% of total income tax.
Trust and Estate Tax Slabs and Rates
Tax rate for trust and estate is differ from whatever we have discussed in partnership and individual tax sales.
- If the total income of the trust is in the slab of 2.5 lakh then there is no need to pay the income tax.
- if the total income of the trust is in between 2.5 to 5 lakh and there is 5% is the income tax rate.
- if the total income of the trust is in between 5 to 10 lakh then there is a income tax rate of 20% + 12500 at flat rates
- if the total income of the trust is exceed 10 lakh then the tax is 30% along with 1,12,500 Rupees.
Deductions and exemptions are provisions in the Income Tax Act that allow taxpayers to reduce their taxable income. Here are some of the most common deductions and exemptions available in income tax returns:
Section 80C allows taxpayers to claim deductions up to Rs. 1.5 lakhs on investments made in specified instruments such as PPF, EPF, NSC, ELSS, and life insurance premiums.
Section 80D allows taxpayers to claim deductions on the premium paid towards health insurance policies for self, spouse, children, and parents.
under section 80D, maximum deduction in income tax allowed as follow
- If both individual and parents are below 60 years of age then there is 50000 deduction.
- if the individual is below 60 years and the parents are senior citizen then there is a deduction of 75000.
- if both individual and parents are in senior citizens lab then there is a reduction of 100000.
Section 80E allows taxpayers to claim deductions on the interest paid towards education loans.
Section 80G allows taxpayers to claim deductions on donations made to specified charities and trusts.
Section 80TTA allows taxpayers to claim deductions up to Rs. 10,000 on interest earned from savings accounts.
Understanding the deductions and exemptions available can help you save on your taxes. However, it’s crucial to file your income tax returns correctly to avoid any penalties or fines.
According to the section 80TTB, in deduction of 50000 or the income amount Which ever is lower is allowed for the deduction from the gross total income.
Filing income tax returns online
Filing income tax returns online is quick, easy, and convenient. Here’s a step-by-step guide on how to file your income tax returns online:
- Visit the Income Tax e-Filing website (https://www.incometaxindiaefiling.gov.in/).
- Register yourself on the website using your PAN (Permanent Account Number).
- Download the relevant income tax return form based on your type of income.
- Fill in the details in the form and upload any supporting documents.
- Verify the details in the form and submit the form.
- Once the form is submitted, you’ll receive an acknowledgement number.
- You can check the status of your income tax return using the acknowledgement number.
Common mistakes to avoid while filing income tax returns
Filing income tax returns can be a complex process, and it’s essential to avoid common mistakes to ensure that your returns are error-free. Here are some common mistakes to avoid while filing income tax returns:
Incorrect Personal Details
Ensure that your personal details such as name, address, and PAN are correctly entered in the income tax return form.
Incorrect Bank Details
Ensure that your bank details such as account number and IFSC code are correctly entered in the income tax return form.
Ensure that you’re filing the correct income tax return form based on your type of income.