A comprehensive guide to file personal income tax return in India

Income tax return (ITR) filing in India is the process through which individuals and businesses report their income, expenses, and tax liabilities to the Income Tax Department. 

Filing income tax returns (ITR) in India is an important responsibility for individuals and businesses. Filing income tax returns helps in legal compliance, claiming tax refunds, applying for loans, and tax assessment.

In this article, we will help you to know the income tax return filing process in India.

Determine Your Income Tax Slab and Rates in India

Understanding your income tax slab and rates is essential for effective financial planning, compliance, and making the most of tax-saving opportunities.

Income tax slabs refer to the system of tax rates applicable to different levels of income in India. 

The Indian government categorizes taxpayers into different slabs based on their income, which determines the percentage of tax they need to pay.

The slabs can differ based on age (e.g., senior citizens, super senior citizens) and the income tax regime chosen (old or new).

Knowing your income tax slab helps you understand how much tax you are liable to pay based on your income.

For the financial year 2024-25 (assessment year 2025-26), here is the income tax slab applicable to an individual who is below 60 years:

For the financial year 2024-25 (assessment year 2025-26), Income tax slab applicable to an individual who is a senior citizen (60 years or above but not more than 80 years old) decided to pay taxes under the old regime:

For the financial year 2024-25 (assessment year 2025-26), Income tax slab applicable to an individual who is a super senior citizen (above 80 years of age) decided to pay taxes under the old regime:

In all the three cases as taxpayers have opted to pay taxes under the old regime,  they can claim various deductions (e.g., under sections 80C, 80D, etc.) to reduce your taxable income.

For the financial year 2024-25 (assessment year 2025-26), the income tax slabs under the new regime in India for individuals are as follows:

In addition to above tax, a surcharge may apply on incomes above ₹50 lakh.

An additional 4% cess towards health and education on the total tax payable will be levied.

Important Deadlines for income tax return filing

The deadline for filing ITR for individuals is generally July 31 of the assessment year, with provisions for late filing.

If the individual has business income and is required to be tax audited under section 44AB, the income tax filing deadline will be 31st October of the assessment year.

In case the above due dates are missed, a belated return can be filed on or before 31st December of the relevant assessment year.

In case of errors or omissions in the original income tax return, the taxpayer can revise the ITR under section 139(5) to correct the mistake on or before 31st December of the relevant assessment year. There is no limit to such revision. Taxpayers can revise it multiple times.

In order to provide a more flexible way to ensure compliance and accuracy, ITR-U (Updated Income Tax Return) is introduced. It allows taxpayers to correct errors or omissions in their previously filed income tax returns even after the 31st December date. ITR-U can be filed within 2 years from the end of the relevant assessment year. For example, for the assessment year 2024-25 (financial year 2023-24), taxpayers can file ITR-U until March 31, 2027.

Payment of tax before filing income tax return

In India, taxpayers are required to ensure that their tax dues are settled before filing their income tax returns (ITR).

If your net tax liability exceeds Rs 10,000 in a financial year, you must pay advance tax in installments throughout the year.

Keep the payment receipt as proof of tax payment, which you’ll need to reference when filing your ITR.

Ensure that all tax payments are made before the deadline for filing your ITR. Paying your taxes before filing your income tax return is crucial for compliance and to avoid penalties.

Gather Necessary Documents

Gathering the necessary documents is a crucial step in filing your income tax return (ITR) in India.

Here’s a comprehensive list of documents a taxpayer should collect before preparing to file income tax return in India:

• Permanent Account Number (PAN): mandatory for filing ITR
• Aadhaar Card: For e-verification and linking purposes.
• Form 16 issued by your employer: it details your salary and tax deductions
• Form 16A: For TDS on income other than salary (e.g., interest income, rent).
• Form 16B: For TDS on sale of house property.
• Bank Statements: to calculate interest income and other transactions.
• Salary Slips
• Investment Income Statements: Such as dividends from stocks or mutual funds.
• Profit and Loss Statement: Required for self-employed individuals or freelancers.
• Form 26AS: It’s a consolidated tax statement showing TDS and tax credits helps to file ITR.
• Investment Proofs such as Receipts for investments in PPF, NSC, ELSS, life insurance premiums: to claim section 80C tax deduction
•  Health insurance premium receipts: to claim section 80D tax deduction
• Home Loan Interest Certificate: If applicable, for deductions on home loan interest.
• Receipts for donations: made to charitable institutions eligible under Section 80G.
• Rental Agreements: If you earn rental income
• Capital Gains Statements: If you have sold assets like stocks or property
• Tax Payment Challans: Details of any advance tax or self-assessment tax paid are to be filled up in ITR.
• last year’s ITR copy: help ensure consistency and accuracy in your current filing.
• Bank Account Information: For refunds, include your bank account number and IFSC code.

Collecting these documents beforehand can streamline the process of filing your ITR and help you avoid last-minute hassles. Ensure that all documents are accurate and up-to-date to facilitate a smooth filing experience.

Calculate taxable income and tax liability

Calculating taxable income and tax liability in India involves understanding the five heads of income defined by the Income Tax Act. Here’s a step-by-step guide.

Understand the Five Heads of Income:

• Income from Salary: Earnings from employment, including salary, bonuses, and allowances.
• Income from House Property: Rental income from property owned, after accounting for municipal taxes and a standard deduction.
• Income from Business or Profession: Profits from business activities or professional services.
• Capital Gains: Profits from the sale of capital assets (e.g., stocks, real estate).
• Income from Other Sources: Interest income, dividends, and any miscellaneous income.

Here are the steps to calculate Total Income:

Step 1: Calculate Each Head of Income

• From Salary: Use Form 16 from your employer to determine your total salary, bonuses, and allowances, minus any exemptions (e.g., Section 10 exemptions).
• From House Property: Calculate the Net Annual Value (NAV), deduct municipal taxes paid, and apply the standard deduction of 30%.
• From Business/Profession: Maintain records of all income and expenses. The net profit is taxable.
• Capital Gains: Determine the gains based on the sale price minus the purchase price. Apply the appropriate tax rate (short-term vs. long-term).
• From Other Sources: Sum up all incomes, such as interest from savings accounts and fixed deposits.

Step 2: Aggregate the Total Income

Total Income = Income from Salary + Income from House Property + Income from Business/Profession + Capital Gains + Income from Other Sources

Step 3: Deductions and Exemptions

• Identify eligible deductions under various sections (e.g., Section 80C for investments, 80D for health insurance premiums).
• Subtract these deductions from your total income to arrive at the Net Taxable Income: Net Taxable Income = Total Income − Deductions

On taxable income, apply tax rates as per income tax slab and rates applicable. Check which tax regime is beneficial to you.

Step 4: Calculate Tax Liability

• Calculate Tax: Apply the tax rates based on the net taxable income.
• Add Cess: Add Health and Education Cess (4%) on the calculated tax.
• Adjust for TDS: If tax has been deducted at source (TDS), subtract this from the total tax liability to determine if you owe additional tax or are eligible for a refund.

By following these steps and understanding the five heads of income, you can accurately calculate your taxable income and tax liability in India. For complex situations, consider consulting a tax professional.

Choose the Right ITR Form

Choosing the right Income Tax Return (ITR) form is essential for accurate and compliant filing in India. The form you need to use depends on your income sources, the nature of your business (if any), and your residency status.

Out of 7 forms, only 4 forms are applicable to an individual for tax filing. These income tax return forms applicable to an individuals are;

• ITR-1 (Sahaj)
• ITR-2
• ITR-3
• ITR-4 (Sugam)

Here is a comparison to know which one applicable to a taxpayer and when:

Make sure to choose the appropriate form based on your specific income situation.

Income tax filing process

After choosing the right income tax return form, complete the required fields in the form with your income, deductions, and other relevant information. Ensure all details match your Form 16 and Form 26AS.

The portal will automatically calculate your tax based on the information provided. Check for any discrepancies.

If you owe taxes, make the payment using the “e-Pay Tax” option before submitting your return.

Carefully review all the information entered. Once confirmed, submit the return.After submission, you’ll need to e-verify your return to complete the process.

After successful filing and verification, you will receive an acknowledgment (ITR-V). Keep it for your records.

Post-Filing compliance

Keep copies of your filed return, supporting documents, and any communication with the tax authorities for at least six years, as they may be required for audits or future reference.

If you are due a refund, track its status through the Income Tax e-filing portal. Refunds are typically processed within a few weeks after e-verification.

In case of any error or omission found after filing ITR, it can be rectified by filing a revised income tax return under section 139(5) on or before 31st December of the relevant assessment year.

After 31st December, if you want to revise your ITR, you can do so by filing an updated income tax return (ITR-U) on or before the end of 2 years from the relevant assessment year.

Be vigilant for any communication from the income tax department. If you receive a notice regarding discrepancies or additional information, respond promptly.

If there are any changes to your personal information (like address or bank details), update them on the Income Tax portal.

Regularly check your Form 26AS for the current financial year to ensure that all TDS and tax payments are accurately reflected. Use insights from your current filing to plan for the next assessment year. Consider your investments and eligible deductions to optimize your tax liabilities.

If you have significant income, keep track of advance tax payments due in the following financial year to avoid interest penalties.

Common Mistakes to Avoid

Filing income tax returns in India can be complex, and avoiding common mistakes can help streamline the process.

Here are some pitfalls to watch out for:

• Ensure that your name, PAN (Permanent Account Number), and other personal details are accurate. Mistakes can lead to processing delays.
• Choosing the Wrong ITR Form
• Omitting Income in tax return
• Calculation mistakes
• Not Claiming Deductions and Exemptions
• Failing to verify bank details
• Ignoring TDS Credits
• Not keeping records to calculate correct income, TDS and tax payments

By being aware of these common mistakes, you can file your income tax returns in India more effectively and avoid potential complications.

Filing your income tax return in India doesn’t have to be daunting. By understanding the requirements, organizing your documents, and following the steps systematically, you can ensure compliance and possibly save on taxes. 

Tax laws can change frequently. Stay informed about new regulations, deductions, and exemptions for future filings. Consider consulting a tax professional or using online tax filing services if you find the process overwhelming.