Is it difficult to file an income tax return in India?

Is it difficult to file an income tax return in India?

What is the purpose of an income tax return? or ITR, as it is most often called.

When a person is required to submit a tax return to the United States Internal Revenue Service, this is known as an income tax return. It conceals information about a person’s earnings and the taxes that must be paid during the year.

The most important thing to remember is that the information reported in an ITR should and always refer to a certain financial year, which begins on April 1st and ends on March 31st of the following year.

As you may be aware, there are five different sources of income:
  • A salary is a source of revenue.
  • The income and gains generated by a firm or profession.
  • The revenue generated by residential property.
  • Profits from capital gains are referred to as capital gains income.
  • Dividends, interest on deposits, royalty revenue, and other sources of income are used to supplement the income.

The Income Tax Department requires each individual to file a different ITR based on their various sources of income. According to the Income Tax Department of India, there are seven different types of ITR forms: ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7, which are used depending on the nature and amount of the taxpayer’s income. In India, most people use an income tax calculator to figure out how much they’ll have to pay and which ITR they’ll have to file, so here’s a quick overview.

ITR Forms: What Are They and How Do They Work?

ITR – 1: When an individual has a total income of up to 50 lakhs from a wage, one house property, another source other than lotteries, and agricultural income of up to 5000, they must file this form.

ITR-2: Individuals and HUFs who are not entitled to file the ITR 1 form and have income and earnings from a profession or business must complete the ITR 2.

ITR-3: Individuals with income from a business or profession file Form ITR-3.

ITR-4: When an individual, HUF, or firm has a total income of up to 50 lakhs and income from a business or profession computed under sections 44AD, 44ADA, or 44AE, they must file an ITR-4.

[pt_view id=”baa39696xe”]

Is it Really That Difficult to File an ITR?

If you’re wondering if completing an income tax return is a difficult task, you’re not alone. It isn’t truly the case. In certain circumstances, filing an ITR isn’t even essential, and the task comes in when you need to know whether or not you should file an ITR.

There are some circumstances in which an ITR should be filed.

a) When a person possesses a beneficial ownership interest in an asset located outside of India.

b) When an individual has signatory power over an account that is not in India.

c) If you are a beneficiary of an asset that is not located in India.

Haven’t received an Income tax refund yet? Follow these Steps 

d) When an individual makes a bank deposit of greater than Rs. 1 crore.

e) When a foreign travel expense of more than Rs. 2 lakhs is incurred.

f) When a household’s electricity consumption exceeds Rs. 1 lakh.

What Is the Process for Filing an ITR?

Here are a few steps to help you file your ITR online using the internet.

#1. Firstly, visit the Income-tax official website.

#2. Create an account on the portal and log in using your ID.

#3. Select ‘Taxpayer’ from the drop-down menu and input your PAN.

#4. Following the validation, you will be required to provide personal information such as your name, address, and phone number.

#5: Provide your email address and phone number.

#6. After you’ve completed all of this, click on the ‘proceed’ button.

7 ways in which taxpayers can reduce their tax liability

#7. You must then verify your information using an OTP issued to your registered phone number.

#8. Enter the one-time password (OTP) that was supplied to you.

#9. Once the OTP has been successfully entered, a window will popup allowing you to review the information provided.

#10. Finally, you’ll be able to create a password and log in.

#11. After that, click register, and you’ll get an acknowledgement message and a file to return by selecting the return option.

Is It Necessary to File an ITR?

Filing tax returns is a yearly auction that every responsible citizen of the country is expected to do. It is the only way for the government to know how much money citizens spend and gives a forum for them to request refunds and other forms of assistance on a regular basis. Here’s why it’s critical for you to file income tax returns:

  •  Filing tax returns demonstrate that you are accountable.
  • In some circumstances, it is required.
  • Your loan and credit card companies will most likely want to see this information.
  • It’s also required if you want to file a claim for compensation for prior losses.
  • It will also come in handy and be beneficial in the event of updated returns.
Conclusion

If you thought filing income tax returns was a difficult task, you can now rest assured that it is not. All you need to know is whether it is required of you, which ITR you should file, and what role the returns will play in your financial situation.

7 steps to a simple income tax return filing

7 steps to filing your income-tax returns smoothly

For individual taxpayers and assessees other than those whose accounts are due for audit, the CBDT has extended the deadline to file FY 2020-21 income tax returns (ITRs) to December 31, 2021, from the previously extended deadline of September 30, 2021.

Returns must be filed meticulously to ensure accuracy and completeness. Any inconsistencies or holes in reporting can result in questions or tax notices from the IRS.

The entire procedure of filing returns takes place online. Furthermore, due to the demand of additional information as well as the changes in processes in the new income-tax portal, an individual may make mistakes. It’s also possible that the process will take longer than usual.

In light of the foregoing, the following are some typical errors that people should avoid while filing their ITR.

[pt_view id=”064542bwhr”]

Using correct ITR Form

The taxpayer must utilise the correct ITR form when filing the ITR. If a taxpayer files an ITR on the incorrect form, the tax department may issue a notice of defective return to the taxpayer under section 139(9) of the Act. In this case, the instructions on the form given by the tax department should be consulted in order to decide the relevant form to use depending on residency, kind of income, number of housing properties, and other factors.

For example, anyone with taxable income of less than Rs 50,00,000 (Rupees fifty lakhs) can use Form ITR-1 as long as he does not have any income from “Capital gains” or “Profits and gains of business or profession.” If you are a director of a firm or own unlisted stock, or if you own more than one residence or have agricultural income over Rs 5,000, you cannot utilise Form ITR 1.

Mentioning correct basic details

Individuals should make certain that they have the correct PAN, Aadhaar, and TAN numbers, as well as that their residential status is accurately established and stated. They should also double-check all of the information on the ITR Form before submitting the tax return.

Mention correct communication details

An individual must include accurate and up-to-date contact information, such as an email address, address, and phone number. Because the IRS has shifted to faceless assessments, all correspondence will be sent to the email address listed on the tax return.

Report all sources of income

Based on his residency status, a taxpayer must record all sources of income, including interest on fixed deposits (FDs), capital gains from the sale of mutual funds, including equity shares, and any other asset. Dividend income becomes taxable in FY 2020-21, and taxes must be paid accordingly.

All international assets and income, including overseas pensions, ESOPs, foreign bank accounts, and any benefits claimed under the Double Taxation Avoidance Agreements, should be reported by residents and ordinarily resident individuals.

Save your Taxes via Hindu Undivided Family (HUF)

Reconciliation of income in Form 26AS

Individuals should double-check that the income recorded on Form 26AS matches the income reported on their ITR. Any discrepancy will result in the department issuing a tax enquiry. For proper return processing, the taxpayer should ensure that the tax paid facts contained in Form 26AS are appropriately mentioned in Form ITR.

Reporting income from the previous employer

If you changed employment during FY 2020-21, you must declare income from your old employer as well as income from your present employer. Additionally, the standard deduction should be limited to a maximum of Rs 50,000.

Taxpayer should ensure that active and precise bank account details (i.e. account number, IFSC code, name of the bank, etc.) are stated in case of a tax refund arising from an ITR to enable faster arrival of the refund to the taxpayer’s bank account.

E-verify ITR

Only the e-verification of the ITR filed completes the ITR filing process. To e-verify a tax return, you can use Aadhaar OTP, Net banking, Demat account, bank ATM, or just email the signed physical copy of Form ITR-V to CPC Bangalore.

To facilitate smooth e-verification of returns filed, the taxpayer must ensure that PAN and Aadhaar are linked (the deadline for connection has been extended to March 31, 2022). The Indian mobile number must also be active. Tax authorities consider the return to have been filed once the e-verification is completed.

Save your Taxes via Hindu Undivided Family (HUF)

Save your Taxes via Hindu Undivided Family (HUF)

What is HUF?

1. Under Hindu Law, a HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. A HUF cannot be created under a contract, it is created automatically in a Hindu Family. Jain and Sikh families even though are not governed by the Hindu Law, but are treated as HUF under the Act.

2. Hindu Undivided Family (‘HUF’) is treated as a ‘person’ under section 2(31) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act). HUF is a separate entity for the purpose of assessment under the Act.

Who can be KARTA?

1. Senior most MALE co-parcener of the HUF: The Karta is the senior-most male coparcener of the HUF. Even if the Karta becomes aged, infirm, ailing, or even a leper, he may continue to be Karta. Where the senior-most member is not Karta, the next senior male member takes over as Karta.

2. A Junior Coparcener can be Karta The Supreme Court is held that only if the senior-most member gives up his right, a junior coparcener can become Karta of the HUF, with the consent of all other members.

3. There can be more than one KARTA of a HUF :

4. Only Co-parcener can become Karta: The Supreme Court held that co-partnership is a necessary qualification for the managership of a joint Hindu family.

5. Minor as Karta: In absence of the father, the elder minor son could act as the Karta of the family. Therefore, a minor can be the managing member of a Hindu undivided family

Powers of KARTA
  • Managing the affairs of HUF
  • Control & become custodian of the finances
  • Can borrow money for & on behalf of HUF
  • Spend the money for the family & not be accountable for it
  • NOT liable to submit an account to anybody
  • Can make partition of the family suo moto
  • Quantum of partition shall be with KARTA’s liking
  • HUF cannot enter into contracts, or form a partnership firm, or representation except through Karta, however, Karta may allow others to represent HUF
  • Can Gift away the movable properties of HUF for natural love & affection but within a reasonable limit
  • May transfer immovable properties for pious purposes or for the benefit of the family

[pt_view id=”baa39696xe”]

o Position of Female in HUF

After the amendment made by Hindu Succession (Amendment) Act, 2005, the daughter can be a coparcener of HUF like the sons of HUF. After her marriage, she becomes a member of her husband’s HUF and continues to be a coparcener of her father’s family. she can also dispose of her share in coparcenary property at her own will.

If a Hindu dies, the coparcener property shall be allotted to the daughter as is allotted to sons. If a female coparcener dies before partition, then children of such coparcener would be eligible for allotment, assuming a partition had taken place immediately before her demise. A widow of a pre-deceased son even though remarried is now eligible for a share in property as the legal heir of the pre-deceased son of the family.

o Female as Karta

W.e.f. 6th September 2005, after amendments made by Hindu Succession (Amendment) Act, 2005 the daughter of a coparcener shall by birth become a coparcener in her own right in the same manner as the son.

Powers of Alienation

The power of alienation cannot be exercised except by Karta the joint family property can be alienated for the following three purposes only:

a. Legal necessity (Apatkale)

b. Benefit of the estate of the family (Kutumbarthe)

c. Acts of Indispensable duty (Dharmamarthe)

GST collections for September at Rs 1.17 lakh crore

o Position of Karta

The Karta can alienate the joint family property with the consent of the coparceners even if none of the above exceptional cases exist and if all the coparceners are adult, the alienation is binding on the entire joint family.

Legal Necessity (Apatkale)—

The cases of legal necessity can be so numerous and varied.

Some of the instances of a necessity maybe

  • outstanding revenue dues,
  • ancestral debts,
  • marriage expenses,
  • discharge of outstanding decrees,
  • personal necessities arising from poverty,
  • sickness, incapacity for work, etc., legal expense in defending estate,
  • litigation to protect estate, etc..

Property sold and mortgaged for an unlawful purpose and immoral purposes cannot be said to be legal necessity.

The benefit of Estate–

It includes anything which is done for the positive benefit of the joint family property.

Indispensable Duties –

This term implies the performance of those acts, which are religious, pious, or charitable.

How is HUF taxed?

HUF has its own PAN and files a separate tax return. A separate joint Hindu family business is created since it has an entity separate from its members.

  • Deductions under section 80 and other exemptions can be claimed by the HUF in its income tax return.

  • HUF can take an insurance policy on the life of its members.

  • HUF can pay a salary to its members if they contribute to its functioning of the HUF. This salary expense can be deducted from the income of HUF.

  • Investments can be made from HUF’s income. Any returns from these investments are taxable in the hands of the HUF.

  • A HUF is taxed at the same rates as an individual.

Both HUF and Karta in an Individual capacity (as well as other members of the HUF) can claim a deduction under section 80C. Furthermore, the income of the HUF can be invested by the HUF and will continue to be taxed in the hands of the HUF.