All the help you need to file ITR for FY 2021-22

Income tax return (ITR) is the process of informing the government about the total income earned in the financial year gone by and paying taxes on it. The year in which income is earned and for which tax return i…Income tax return (ITR) is the process of informing the government about the total income earned in the financial year gone by and paying taxes on it. The year in which income is earned and for which tax return is called financial year/ previous year. The year in which ITR is filed is called assessment year. A financial/previous year is followed by assessment year.

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How to file income tax return?

To file income tax return, an individual is required to compute net taxable income, fill ITR form as applicable, pay taxes if any. Once all the required taxes have been paid and ITR has been submitted on the new income tax portal, ensure that the ITR filed is verified. Once the ITR is verified, then the tax department will take up for processing. Once the ITR is processed, then intimation notice will be sent on your registered email id informing about whether your income tax calculations matches or with that of income tax department’s calculations. If it matches, then ITR filing process for a particular financial year is completed. If it does not match, then either you have income tax refund due or have income tax payment pending. If income tax refund is due to you, then it will be credited in your bank account, provided it is pre-validated on the new income tax portal. If the income tax payment is pending, then income tax department will ask you to make payment along with interest, if any.

How to calculate total taxable income for ITR filing?

To know the income tax an individual is required to pay, one must first calculate the total taxable income. The total taxable income is divided into five categories:

  • Income from salaries
  • Income from house property
  • Income from capital gains
  • Income from business/profession
  • Income from other sources

Income from salaries: The first head includes income from salaries and pension. Salary/pension received from employer is taxable under this head. The information related to salary/pension received by you during a particular financial year can be obtained either via Form 16 (TDS certificate) or salary/pension slips. There are certain tax-exemptions and deductions that an individual is eligible from the salary/pension income. The tax-exemptions are house rent allowance (HRA), leave travel allowance (LTA), etc. These tax-exemptions will be available provided they are paid by the employer. Further, salaried/ pensioner is also eligible for standard deduction for income from salary/pension.

Income from House Property: Any rental income earned from house property is computed under the head ‘Income from house property’. To compute the taxable income under the head, ‘income from house property’, there is a concept of self-occupied, rent, deemed to be on rent. If the house is occupied by the taxpayer himself/herself, then house is self-occupied. If the house has been given on rent, then house is on rent. If a taxpayer has more than two house properties and they are not on rent, then the house is ‘deemed to be on rent’. If the house is on rent or deemed to be on rent, then the individual is eligible to claim a standard deduction at 30%, deduction of municipal taxes paid. An individual can also claim a deduction on the interest paid on the home loan.

Income From Capital Gains: Capital gains are earned from the sale of land, house property, equity shares, mutual funds (equity and debt), gold jewellery etc. The capital gains computed can either be long-term or short-term. The capital gains are classified as short-term or long-term depending on how long the asset was held by the individual. Different asset classes have different holding periods. For instance, equity shares and equity-oriented mutual funds should be held for more than one year for gains to classify as long-term. Similarly, house property must be held for more than two years for capital gains to classify as long-term. Long-term and short-term capital gains have different income tax rates for the different asset classes.

Income From Business/Profession: Individuals earning income from business or by working as freelance or consultant are required to report their income under the head, ‘Income from business/profession’. While filing their income tax return, an individual running a business can claim certain expenses to lower his taxable income and thereby his/her income tax.

Income From Other Sources: The fifth category of income has all those incomes that are not reported in other categories. These include – income from interest incomes from fixed deposits, RBI taxable bonds, family pension, pension received from insurance company policies, dividends etc.

What are the different types of income tax regime for filing income tax return (ITR)?

Effective from FY 2020-21, individuals can choose between old, existing income tax regime and new income tax regime with lower, concessional income tax regime. If an individual continues with the old income tax regime, then individual will continue to pay income tax on the existing tax rates. Further, individual will be eligible to claim tax-exemptions and deductions for which he/she is eligible for.

If an individual opts for new income tax regime, then he/she will calculate income tax on the lower, concessional income tax rates. Do note that by opting for new income tax regime, individual forgoes to claim almost 70 tax-exemptions and deductions.

What are the documents required to file ITR?

The new income tax portal offers pre-filled ITR. However, it may happen that pre-filled ITR has errors. Hence, individuals must cross-check the information. One must collect the following documents to cross check the information: a) TDS certificates (Form 16, Form 16A), b) Interest certificates (savings accounts, fixed deposits etc.), repayment certificates (if you have home loan, education loan), Form 26AS, annual information statement (AIS), Aadhaar number, bank accounts.

Can I correct mistakes made at the time of filing ITR?

Yes, an individual has an option to correct mistakes at the time of filing ITR. To correct the mistakes made, an individual will be required to file ITR again under section 139(5) of the Income-tax Act, 1961 with correct information. The last date of filing revised ITR is December 31, unless extended by the government.

How to know which income tax return (ITR) filing form is applicable to me?

To know which ITR form is applicable to you, it is important to know the sources of your income. An individual can file income tax return using ITR-1 form if he/she has income from salaries, one house property and income from other sources. However, if his/her income sources include capital gains, then he/she cannot file income tax return using ITR-1. An individual will have to file income tax return using ITR-2, if the source of incomes includes capital gains.

William Murphy

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