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Income Tax Returns & Filing

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Understanding Income Tax Returns in India

“We have two types of taxes in India – Direct Tax and Indirect tax“


Direct Tax is a tax that is calculated directly on your Income e.g. tax on salary etc. Income tax is a Direct Tax.

Indirect Tax is a tax that is indirectly charged. And is put on goods or services. So if you are purchasing a mobile phone or a new suit. Most indirect taxes have now come under Goods and Services Tax (GST).


Income Tax (Direct Tax)

Anyone earning an income above a certain amount is subject to income tax. The income could be from salary, rent, and interest income from savings, income from mutual funds, sale of property or business or professional income. Income tax rates are decided at the start of the financial year in the Union Budget (in the Parliament of India). The tax paid on these incomes is called the income tax.

Income Tax Return

It is simply a Form to be filed with the Income Tax Department. A Form to be filed as a statement of income earned. It is arranged in such a way that calculating tax liability, scheduling tax payments or requesting refunds for the overpayment of taxes has been made convenient for the taxpayers. They must, first, determine the type of Income Tax Return (ITR) Form they need to fill before actually filing their Returns. Which Form is to be filled, depends on the income that the taxpayer earns. Its purpose is to report our income and taxes paid thereon to the government.


Benefits of Filing Income Tax Returns
  • Many investors have very low or zero tax liability and therefore this section does not have to file returns mandatorily. Even though they have some sort of income occurring.
  • And there is another section that only file returns when something urgent requirement comes up asking for their last few years of ITR. They approach a nearby CA and file their old tax returns.
  • There has been low-Income Tax filing Compliance in India. However, in recent years, the Govt. of India has taken some stringent measures to enforce the Income Tax Law by linking various benefits for prompt tax filers.

  • Penalties

    Different penalties have been directed for various defaults committed by the taxpayer, under the Income Tax Act. Some of them are mandatory and a few are at the consideration of the tax authorities. Given below are the provisions relating to various penalties leviable.

    Incorrect Form

    In case an incorrect form has been used to file the returns, then it will be treated as “defective” and the assessee will be asked to file a revised ITR using the correct form. Now, the taxpayer gets some time to amend the mistake. And the return must be filed within 15 days from the date of receipt of the intimation, as per Section 139(9). This time limit may be extended by the assessing officer (AO) on an application by the assessee. If the defect is not corrected within the stipulated time, then it will be treated as an invalid return. That is the same as not filing a return at all. Therefore, the person will be facing all the penalties prescribed to not filing ITR. As well as, interest will get charged, u/s 234A, for the delay.


    Late Filing

    As per Section 234F of the Income Tax Act, if you file after 31st July (it was extended to 31st August for AY 2019-2020) but before December, a penalty of Rs. 5000 will be levied. For returns filed after December, the penalty will be Rs. 10,000. However, to provide relief to small taxpayers, the IT department has stated a maximum penalty of only Rs. 1,000 will get levied. The condition is that your total income is less than Rs 5 lakh.