Salaried and Stressed: A Step-by-Step ITR Filing Guide

Salaried

Salaried and Stressed: A Step-by-Step ITR Filing Guide

Salaried

Filing your Income Tax Return (ITR) is more than a statutory requirement—it’s a crucial step toward responsible financial management. For salaried individuals, filing returns not only ensures legal compliance under the Income Tax Act, 1961, but also helps in claiming refunds, maintaining financial records, and staying eligible for loans and visas.

Who Needs to File ITR?

According to Section 139(1) of the Income Tax Act, every individual whose total income exceeds the basic exemption limit must file an income tax return.

Exemption Limits for AY 2024–25

Age GroupBasic Exemption Limit
Below 60 years₹2.5 Lakhs
60 to 80 years (Senior Citizens)₹3 Lakhs
80 years and above (Super Seniors)₹5 Lakhs

In addition, return filing becomes mandatory if you:

  • Want to claim a refund of TDS or advance tax

  • Are a director in a company

  • Hold foreign assets or income

  • Have deposited ₹1 crore or more in a bank account

  • Incurred ₹2 lakh or more on foreign travel (Rule 12AB)

Which ITR Form Should Salaried Individuals Use?

The appropriate ITR form depends on your income composition and other financial details:

  • ITR-1 (Sahaj): For resident individuals with total income up to ₹50 lakh from salary, one house property, and other sources (excluding lottery winnings or race income)

  • ITR-2: For income above ₹50 lakh, or if you have capital gains, foreign income/assets, or multiple properties

Understanding Salary Income Components

Under Section 17(1) of the Income Tax Act, salary includes:

  • Basic salary

  • Dearness allowance (DA)

  • House Rent Allowance (HRA)

  • Leave Travel Allowance (LTA)

  • Perquisites (as per Sec 17(2))

  • Bonus/Commission

  • Pension, Gratuity, etc.

Note: Salary is taxable on the earlier of due or receipt basis.

Key Deductions for Salaried Taxpayers

Salaried employees can avail of several deductions under the Income Tax Act:

SectionDeduction TypeMaximum Limit
16(ia)Standard Deduction₹50,000
80CLIC, PPF, EPF, ELSS, etc.₹1.5 Lakhs
80DMedical Insurance₹25,000 – ₹50,000
80CCD(1B)Additional NPS Contribution₹50,000
80EEducation Loan InterestNo Limit
80TTAInterest on Savings Account₹10,000

Section 87A Rebate: Individuals with net taxable income ≤ ₹5 lakh are eligible for a rebate of up to ₹12,500 (effectively zero tax).

Tax Slabs for AY 2024–25

Old Tax Regime

Income SlabTax Rate
0 – ₹2.5 LakhsNil
₹2.5L – ₹5L5%
₹5L – ₹10L20%
Above ₹10L30%

New Tax Regime (Default) – Section 115BAC(1A)

Income SlabTax Rate
0 – ₹3 LakhsNil
₹3L – ₹6L5%
₹6L – ₹9L10%
₹9L – ₹12L15%
₹12L – ₹15L20%
Above ₹15L30%

⚠️ Important: Under the new regime, most deductions (80C, 80D, HRA, LTA) are not allowed, except:

  • ₹50,000 Standard Deduction

  • NPS (Employer’s contribution) – Section 80CCD(2)

  • Agniveer Corpus – Section 80CCH

Old vs New Regime – A Real Example

Case: Mr. Arjun (Age: 35)

  • Gross Salary: ₹9,00,000

  • Investments: ₹1.5L in PPF, ₹50K in NPS

  • HRA Exemption: ₹1L

  • Medical Insurance Premium: ₹25,000

Under Old Regime:

  • Deductions & exemptions reduce taxable income to ₹5,25,000

  • Tax before rebate: ₹17,500

  • Less: ₹12,500 rebate under 87A

  • Final Tax: ₹5,000 + 4% cess = ₹5,200

Under New Regime:

  • No deductions except standard deduction

  • Taxable income: ₹8,50,000

  • Tax: ₹40,000 + 4% cess = ₹41,600

➡️ Conclusion: Old regime is beneficial due to available deductions.

Step-by-Step Guide to File Your ITR Online

  • Visit: https://www.incometax.gov.in

  • Log in using PAN credentials

  • Navigate to e-File → Income Tax Return → File Now

  • Choose AY 2024–25, Individual, and Online Mode

  • Select the correct ITR Form (ITR-1 or ITR-2)

  • Verify pre-filled details using Form 16 and Form 26AS

  • Choose your tax regime (Old or New)

  • Enter eligible deductions if opting for old regime

  • Validate tax computation

  • Submit return and e-verify via Aadhaar OTP, Net Banking, Demat, or DSC

Important Deadlines & Penalties

ActionDue Date
Regular Return (Non-Audit Cases)1st July 2025
Belated Return Filing31st December 2025

Late Filing Fee (Section 234F):

  • ₹5,000 if income > ₹5 Lakhs

  • ₹1,000 if income ≤ ₹5 Lakhs

Read More: Top 7 Income Tax Errors That Invite IT Notices

Final Checklist Before Filing

✅ Reconcile Form 16 with Form 26AS, AIS, and TIS

✅ Report all sources of income: salary, interest, capital gains, etc.

✅ Choose the tax regime carefully after benefit comparison

✅ File your return before the due date to avoid late fees and interest

Filing your ITR can seem overwhelming, but with proper understanding and timely action, you can sail through it smoothly. If in doubt, consult a Chartered Accountant or tax advisor to ensure accurate filing.

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Top 7 Income Tax Errors That Invite IT Notices

Tax Errors

Top 7 Income Tax Errors That Invite IT Notices

Tax Errors

Filing your Income Tax Return (ITR) might seem like a routine task, but even small mistakes can raise red flags with the Income Tax Department. With increasing data integration and cross-verification tools like Form 26AS and AIS (Annual Information Statement), the department is better equipped than ever to identify mismatches and discrepancies. Here’s a look at seven common mistakes that taxpayers in India often make—mistakes that can potentially lead to scrutiny, notices, or even penalties.

1. Missing Out on Income Beyond Salary

One of the most frequent mistakes is failing to report all income sources. This includes not just your salary or business income, but also:

  • Interest from savings accounts or fixed deposits

  • Rental income

  • Capital gains (including exempt LTCG up to ₹1.25 lakh)

  • Dividend income.

Even tax-exempt income must be disclosed in your ITR. The IT Department compares your return against AIS and Form 26AS, so any omission may result in a notice.

2. Filing Under the Wrong Income Tax Category

Choosing the incorrect ITR form based on your income type or taxpayer status is a technical error that can invalidate your filing. If you file the wrong form, your return may be treated as defective under Section 139(9), requiring correction within a time limit. If not rectified, it may be considered as if no return was filed at all.

3. Ignoring Discrepancies in TDS Records

The TDS (Tax Deducted at Source) shown in your ITR must match exactly with what’s reflected in Form 26AS or Form 16/16A. If there’s even a small mismatch—due to clerical errors, wrong PAN, or misreported income—it can flag your return for review and result in delays or demands.

4. Failing to Declare Overseas Holdings

If you’re a Resident and Ordinarily Resident (ROR) in India, you’re obligated to report foreign bank accounts, shares, mutual funds, or real estate under Schedule FA of your ITR. Omitting this crucial detail—even unintentionally—can lead to severe consequences under the Black Money Act.

5. Claiming Deductions Without Proper Justification

Incorrect or exaggerated deduction claims—like fake rent receipts for HRA or unsupported 80C investments—can lead to your return being selected for scrutiny. Keep supporting documents ready for every deduction you claim, especially under Chapter VI-A sections like 80C, 80D, and 80G.

6. Engaging in Big Transactions Without Filing ITR

The Income Tax Department gets direct reports of your high-value financial activities (like large deposits, credit card payments, or big-ticket purchases) from banks and institutions via SFT filings. If you don’t file a return despite engaging in such transactions, you may receive a compliance notice asking for explanation.

7. Skipping the Return When You’re Supposed to File

Many people assume they don’t need to file ITR just because no tax is payable. But certain thresholds or activities mandate filing—like annual income above the basic exemption limit, TDS/TCS over ₹25,000, or foreign travel expenses above ₹2 lakh. Ignoring this rule may result in penalties or loss of refund and carry-forward benefits.

Read More: Resident’s Guide to Buying NRI Property in India

✅ Avoid Notices with Accurate Filing

Accuracy and completeness are key to smooth ITR processing. As compliance systems get tighter, make sure you’re reporting every detail truthfully. When in doubt, seek professional help to avoid missteps that could lead to notices, delays, or penalties.

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Resident’s Guide to Buying NRI Property in India

NRI Property

Resident's Guide to Buying NRI Property in India

NRI Property

India sees a high volume of property transactions involving Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). While such deals are legally permitted, they come with added compliance requirements—especially for resident Indians purchasing property from non-residents. Even minor procedural lapses can trigger heavy penalties or tax demands. This guide outlines the key legal, tax, and procedural aspects that resident buyers must understand before entering into a property transaction with an NRI/OCI seller.

1. Payment Guidelines: Only Through Indian Banking Channels

When buying property from a non-resident, all payments must be made through legal banking channels—via direct bank transfer, crossed cheque, or crossed demand draft. Cash transactions are strictly prohibited.

Buyers must ensure:

  • The payment is made from a resident Indian bank account.

  • Funds are not sent from any foreign bank account.

  • If a relative is contributing funds, they must be routed through an Indian bank account.

Any deviation from this can lead to scrutiny under FEMA and Income Tax laws.

NRI Property

2. TDS Obligations under Income Tax Act

A. When Buying from a Resident Seller

Under Section 194-IA, 1% TDS is to be deducted on the total sale consideration if it exceeds ₹50 lakhs. This must be:

  • Deposited using Challan-cum-Statement Form 26QB

  • Paid within 30 days from the end of the month in which the deduction is made (typically the date of registration or payment)

  • Also applicable on advance payments.

B. When Buying from an NRI Seller

Section 195 of the Income Tax Act governs TDS for payments to non-residents. Key provisions:

  • TDS must be deducted at 20% (plus applicable surcharge and cess) on the total sale consideration.

  • TDS applies on every advance payment as well.

  • The buyer must:

    • Obtain a TAN (Tax Deduction Account Number)

    • Deposit TDS via Challan ITNS 281

    • File Form 27Q, the quarterly TDS return for payments to non-residents.

Due Dates for Form 27Q Filing:

  • Q1 (Apr–Jun): 31st July

  • Q2 (Jul–Sep): 31st October

  • Q3 (Oct–Dec): 31st January

  • Q4 (Jan–Mar): 31st May

⚠️ Common Pitfall: Many resident buyers wrongly deduct 1% TDS under Form 26QB instead of 20% under Form 27Q—leading to serious complications for the NRI seller.

3. Capital Gains Tax Implications for NRI Sellers

An NRI or OCI seller is liable to pay capital gains tax in India on property sales:

  • Long-term capital gains (property held >2 years): Taxed at 20% with indexation

  • Short-term capital gains: Taxed at applicable slab rates (may go up to 30%)

The seller is required to file an Income Tax Return (ITR) in India.

Lower/Nil TDS Certificate

The seller can apply to the Income Tax Department under Section 197 for a certificate of lower or nil deduction of TDS, based on projected capital gains. This helps avoid excess TDS deduction.

4. Case Law: Parag Keshav Bopardikar v. ITO (2025)

In this landmark case, the buyer correctly deducted ₹18.68 lakhs in TDS but mistakenly used Form 26QB (meant for resident sellers) instead of Form 27Q. As a result, only 1% TDS was reflected in the seller’s Form 26AS, and the Income Tax Department raised a huge tax demand of ₹46 lakhs on the NRI seller.

Court Ruling:

  • The Delhi High Court held that substance must override procedural formality.

  • The actual TDS payment was made; hence denying credit due to the buyer’s error was unjust.

  • The Court directed the authorities to:

    • Grant full TDS credit

    • Rectify the AIS records

    • Reprocess the seller’s ITR

    • Issue refund promptly

Takeaway: Buyers must ensure correct form-filing and timely TDS payment—any lapse can harm both parties.

5. Key Compliance Checklist for Resident Buyers

StepCompliance
✅Ensure full payment is made via Indian bank account
✅Deduct TDS @ 20% (plus surcharge) on entire sale value
✅Obtain TAN
✅Deposit TDS via Challan ITNS 281
✅File quarterly TDS return in Form 27Q
✅Obtain lower/nil TDS certificate from seller if applicable
❌Avoid using Form 26QB for NRI transactions

Read More: Flipkart ESOP Compensation: ₹11 Crore Payout – Salary or Capital Receipt?

Purchasing property from an NRI or OCI can be a smooth transaction if the buyer follows proper tax and legal procedures. Incorrect TDS deduction, missed filings, or payment through unauthorized channels can lead to serious complications. Given the high stakes involved—both financially and legally—it is strongly advised that buyers consult experienced tax and legal professionals before finalizing the deal.

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