The Indian Tax Return Filing Process Explained

Filing an income tax return in India is an annual obligation for many individuals and entities. This process involves reporting income earned during a financial year, from April 1st to March 31st, to the Income Tax Department. The purpose of this filing is to declare income, calculate tax liability, claim deductions, and report taxes already paid.

Determining Your Filing Obligation

An individual’s requirement to file an income tax return is based on their gross total income before any deductions are applied. If this income exceeds the basic exemption limit, filing is mandatory. Under the new tax regime, the default option, the basic exemption limit is ₹3 lakh for all individuals. If a taxpayer follows the old tax regime, the limits are ₹2.5 lakh for those under 60, ₹3 lakh for senior citizens (60 to 80), and ₹5 lakh for super senior citizens (over 80).

Even if gross total income does not surpass the exemption limit, certain conditions still require an individual to file a return. These conditions include:

• Depositing ₹1 crore or more in one or more current accounts during the financial year.
• Incurring expenses over ₹2 lakh for foreign travel for oneself or another person.
• Having an electricity consumption bill exceeding ₹1 lakh in a year.

The filing obligation extends to both residents and Non-Resident Indians (NRIs). An NRI must file a tax return in India if their income earned or accrued in India exceeds the basic exemption limit. This includes income from salary, rental income from property in India, or capital gains on assets in India. Any resident who owns assets outside of India or has signing authority in a foreign account must also file a return, regardless of their income level.

Required Information and Documentation

Gathering the necessary documents is the first step for tax filing. The following information and forms are needed:

• The Permanent Account Number (PAN) is the unique identifier for all tax activities. The Aadhaar card is also required, as linking it with the PAN is mandatory for filing a return.
• All active bank accounts held in India must be listed, with one designated as the primary account to receive any potential income tax refund.
• Form 16 is the TDS certificate issued by an employer detailing salary paid and tax deducted. For other income, such as interest, the corresponding TDS certificate is Form 16A.
• Form 26AS and the Annual Information Statement (AIS) are available on the e-filing portal. Form 26AS summarizes all taxes deposited against a PAN, while the AIS provides a comprehensive view of financial transactions.
• Proof of investments and expenditures is needed to claim deductions. This includes receipts for insurance premiums, a Public Provident Fund (PPF) passbook, home loan interest certificates, and donation receipts.

Selecting and Completing the Correct ITR Form

Choosing the correct Income Tax Return (ITR) form is based on the taxpayer’s residential status, total income, and income sources. Using the wrong form can lead to the return being classified as defective. For individuals, the most common forms are ITR-1, ITR-2, ITR-3, and ITR-4.

ITR-1 (Sahaj) is for resident individuals with a total income up to ₹50 lakh from salaries, one house property, and other sources like interest. It cannot be used by company directors or those who have invested in unlisted equity shares.

ITR-2 is for individuals and Hindu Undivided Families (HUFs) who are not eligible for ITR-1 and do not have income from a business or profession. This form is used for income from salary, more than one house property, capital gains, or foreign income.

ITR-3 is for individuals and HUFs who have income from a business or profession. A partner in a firm would also use this form to report detailed financial information about the business or professional practice.

ITR-4 (Sugam) is for individuals, HUFs, and firms that have opted for the presumptive taxation scheme and have a total income up to ₹50 lakh. This scheme allows small taxpayers to declare income at a prescribed rate without maintaining detailed books of account.

Once the form is selected, it must be populated with the gathered information. Salary details from Form 16 are entered in the ‘Income from Salaries’ schedule, while interest income is reported under ‘Income from Other Sources’. Details of tax deductions are filled into the relevant sections, such as Chapter VI-A.

The E-Filing and Verification Procedure

Submission and verification of the return are conducted through the official Indian Income Tax e-filing portal. After logging in with your PAN, you will select the assessment year and ITR form number. The return can be filled out directly online or by uploading a prepared JSON file from the offline utility.

The filing process is not complete until the submitted return is verified. The tax department offers several electronic verification methods:

• Using a One-Time Password (OTP) sent to the mobile number registered with Aadhaar.
• Generating an Electronic Verification Code (EVC) through a pre-validated bank or demat account.
• Logging into the e-filing portal via a net banking account.

For those unable to use electronic methods, there is an offline alternative. The taxpayer can download the ITR-V (Income Tax Return Verification) form, sign it in blue ink, and mail the physical copy to the Centralized Processing Centre (CPC) in Bengaluru within 30 days of filing.

Post-Filing Status and Communications

After filing and verification, you should monitor the status of the return through the e-filing portal. The portal provides updates such as “Successfully e-Verified” or “Processed.”

If the return results in a refund, its status can be tracked separately on the e-filing portal or the TIN NSDL website using your PAN and the assessment year.

The final communication from the tax department is an intimation under Section 143(1). This document, sent to your registered email, compares your calculations with the department’s. It will state if there is a tax demand, if a refund has been determined, or if the calculations match and no further action is needed.