What is Income Tax Return (ITR)?
Income Tax Return (ITR) is a form through which taxpayers submit information about their income and the applicable taxes to the Income Tax Department. There are currently seven forms notified by the department, namely ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. Each form applies to different categories of taxpayers, based on their income sources, the amount of income earned, and their taxpayer category, such as individuals, Hindu Undivided Families (HUF), or companies. Taxpayers must file their ITR on or before the specified due date.
Why Should You File ITR?
Filing an ITR is essential for several reasons:
- Claiming an Income Tax Refund: If you are eligible for a refund, you must file an ITR to claim it.
- Foreign Assets: If you have earned income from or invested in foreign assets during the financial year, you need to file an ITR.
- Applying for a Visa or Loan: Filing an ITR can be beneficial if you plan to apply for a visa or a loan.
- Companies and Firms: It is mandatory for companies or firms to file an ITR, irrespective of profit or loss.
- Carrying Forward Losses: If you have a business or professional loss, or a loss under the capital gains head, filing an ITR allows you to carry forward these losses to the next financial years.
When is it Mandatory to File Income Tax Returns (ITR) in India?
You must file an ITR if your gross total income exceeds the basic exemption limit. The exemption limits are as follows:
- Individuals below 60 years: Rs 2.5 lakh
- Individuals between 60 and 80 years: Rs 3.0 lakh
- Individuals above 80 years: Rs 5.0 lakh
Even if your income is below the basic exemption limit, you are required to file an ITR if you meet any of the following conditions:
- Large Deposits in Current Bank Account: Deposited more than Rs 1 crore in one or more current accounts with a bank.
- Large Deposits in Savings Bank Account: Deposited more than Rs 50 lakh in one or more savings bank accounts.
- High Expenditure on Foreign Travel: Incurred more than Rs 2 lakh on foreign travel for yourself or any other person.
- High Electricity Consumption: Incurred more than Rs 1 lakh towards electricity consumption during the previous year.
- High TDS or TCS: TDS or TCS exceeds Rs 25,000 in the previous year (Rs 50,000 for senior citizens above 60 years).
- High Business Turnover: Business turnover, sales, or gross receipt exceeds Rs 60 lakh during the previous year.
- High Professional Income: Gross receipts from a profession exceed Rs 10 lakh during the previous year.
By ensuring compliance with these requirements, taxpayers can avoid penalties and legal issues, and can also take advantage of various financial benefits offered by the tax system.
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