What is ITR & Why Is It Necessary to File an ITR?
ITR is a prescribed form through which you report the details of your income earned, deductions claimed, and taxes paid in a financial year to the Income Tax Department. It also allows you to carry forward the losses and claim a refund from the Income Tax Department.
The department has notified seven various form types prescribed for different categories of taxpayers (individual, HUF, company, LLP, Partnership firms, etc). The department has notified 7 various forms, i.e., ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6 & ITR-7, till date. The selection will depend upon the Taxpayer’s status, Nature of income, Residential Status in India, etc.
Filing an Income Tax Return (ITR) is more than just a legal obligation; it has several important benefits and implications:
-
Legal Compliance
- Filing ITR is mandatory if your income exceeds the basic exemption limit.
- Non-filing can lead to penalties or legal consequences.
- Claim Refunds
If excess tax has been deducted (TDS), you can claim a refund only by filing your ITR.
- Proof of Income
ITR serves as a credible income proof for loans, credit cards, or visas.
- Carry Forward Losses
Losses, such as capital or business losses, can be carried forward to offset future income, provided you file your return on time.
- Avoid Penalties
Filing late or not filing at all can attract fines and interest, even if you owe no taxes.
- Facilitates Investments
Many financial instruments, like high-value fixed deposits or mutual funds, require ITR as proof of income.
- Stay Compliant and Avoid Notices
Regularly filing ITR keeps you on the good side of tax authorities and reduces the risk of receiving notices.
File your ITR with the Tax2win portal, which is AI-powered, and select the correct ITR Form automatically based on your income source with a pre-filled data feature.
What are the Important Documents Required for Filing ITR?
Income Tax Return (ITR) documents differ according to the tax filer's earning sources. But, certain documents are mandatory for every taxpayer, irrespective of income sources. Here is a list of such common ITR documents that are required to file ITR
PAN Card
This is the first and foremost prerequisite if you are filing an income tax return. PAN is also required to deduct TDS and should be linked with your bank account for direct credit of income tax refund (if any). It is issued by the Income Tax Department, and a salaried employee can find the PAN number either on a PAN card, Form 26AS, Form 16, Form 12BB, etc. However, as per the recent amendment by the Govt, taxpayers can also file the ITR with their Aadhaar number instead of their PAN number.
Aadhaar Card
According to Section 139AA of the Income Tax Act, individuals need to provide his/her Aadhaar card details while filing the returns. If you do not have your Aadhaar card but have applied for the same, you must provide the enrolment ID in your IT returns. Linking PAN and Aadhar helps in verifying your income tax return online through an OTP. The income tax return last date every year is 31st July for individuals.
UIDAI issues Aadhar card. In case you have lost it or couldn’t find your Aadhaar card, then you can also download it online.
Form 16
This form consists of the details of the employee's salary and the amount of TDS deducted from the salary. Form 16 consists of two different parts, Part A and Part B. Part-A contains the details of the amount of tax deducted by the employer during the financial year, along with the PAN and TAN details of the employer. The Part B of the form consists of TDS calculations like gross salary breakup, exempt allowances, perquisites, etc.
Please note that Form 16 is issued by the employer. It is a vital document for filing ITR by a salaried individual. If you do not have Form 16, know how to file your ITR without Form 16.
Form-16A/ Form-16B/ Form- 16C
Form-16A is issued for TDS deducted on payments other than salaries, such as income from recurring deposits, fixed deposits, etc. If a person sells his property, then Form-16B is issued. It has details about TDS deducted from the amount paid to the seller. Form 16C is a TDS certificate that reflects the TDS deducted on rent @5% by an individual or HUF under section 194IB.
Form 16A is issued by deductors like banks, contractors, etc. Form 16B, on the other hand, is issued by the buyer. Further, a person deducting TDS on rent is required to furnish Form 16C to the payee within a period of 15 days from the date of furnishing the Challan cum statement in Form 26QC.
The details of TDS can alternatively be fetched from your Form 26AS.
Bank Account details
Disclosures of all active bank accounts are mandatory in the ITR. Bank account details like your bank name, account number, IFSC, and number of accounts you hold must be quoted in the income return. Also, one account shall be selected as primary to assist the Income Tax Department in refunding your tax refund by electronic transfer to such account. Bank details are used to check your income disclosures, high-volume transactions, etc. These details can be easily found in bank passbooks, cheque book, statements, net banking accounts, etc.
Bank Statement/ Passbook
Bank statements show the information of the interest earned on a savings account, interest income on fixed deposits, etc, during a financial year. This information are required while filing ITR.
Form 26AS and AIS/TIS
It is an annual tax statement like a tax passbook that has details of all the taxes you have deposited against your PAN. These include:
a.) TDS deducted by the bank
b.) TDS deducted by the employer
c.) TDS deducted by other organizations from the payments done by you
The individual should ensure that all the taxes deducted in the financial year are reflected against the PAN in Form-26AS. In case of a mismatch, you will not be able to claim the tax credit for the TDS deduction. Therefore, the same should be rectified by getting in touch with the deductor.
You can view Form 26AS for the relevant Assessment Year by signing into your account on the Income Tax India e-filing website. Recently Annual Information Statement (AIS) app has been launched for taxpayers where you can access all information related to TDS, TCS, interest, etc, on one app.
AIS: Annual Information Statement (AIS) is a comprehensive view of information for a taxpayer displayed in Form 26AS. Taxpayers can provide feedback on information displayed in AIS. AIS shows both reported value and modified value (i.e., the value after considering taxpayer feedback) under each section (i.e., TDS, SFT, and Other information).
Note: A new feature has been added to AIS that will allow the taxpayers to see if their feedback has been addressed by the department, either fully, partially or rejected.
TIS: Taxpayer Information Summary (TIS) is category-wise aggregated information summary for a taxpayer. It shows the processed value (i.e., the value generated after deduplication of information based on pre-defined rules) and derived value (i.e., value derived after considering the taxpayer feedback and processed value) under each information category (e.g., Salary, Interest, Dividend, etc.). The derived information in TIS will be used for prefilling of return, if applicable.
Home Loan Statement
The individuals are provided with the details like principal and interest that they repay in their loan statement. This breakup of information is needed as proof and to provide information while filing your income tax returns.
If the individual has taken a home loan from financial institutions like banks, etc., then he/she should collect the statement for the last financial year. Have you taken a home loan or sold a property and need capital gain tax consultancy? Reach out to our tax experts.
Tax Saving Instruments
If you have invested in any tax-saving schemes like tax-saving FDs, ELSS, investment receipts, etc., you should have the relevant documents ready when you file your taxes. Calculating all the tax deductions manually can be time-consuming. Use the 80C calculator to get an accurate calculator of your 80C deductions.
Capital Gains Details
If you have sold shares, securities, or property, it will result in a capital gain or losses. For the same, you need to have documents like broker statements, property sale deeds, etc. If you find capital gains taxation complicated and need assistance with capital gains ITR filing, contact our tax experts.
Rental Income
If you are earning an income from your house or property, it should be reported while filing ITR. Also, in case you are paying rent, don't forget to collect receipts from the landlord. However, these documents are not required to be given with the ITR but should be kept safe to be submitted to your employer or Income Tax Department in case required in the future. Generate Rent receipts for Free!
Foreign Income
The documents for any income earned in or from a foreign country during a job deployment or for part of the year should be furnished with your tax consultant to help you claim the benefit of tax credits and DTAA. The documents for any foreign income need to be arranged with the employer or contractor.
Dividend Income
If you have invested in shares or mutual funds and have earned dividend income on the same, it should be reported while income tax return e filing.
Details of dividends earned during the financial year can be taken from your broker statement or Demat account summary.
Interest certificate
Taxpayers claiming tax benefits on interest on home loans, etc., would be required to maintain interest certificates pertaining to the same.
Remember that not submitting the right documents can result in a penalty of up to 200% for filling out incomplete information in the ITR. Know which document to submit on your case, connect with the experts.
What Documents are Required to Claim a Deduction u/s 80C to 80U of Income Tax While filing ITR?
The following documents are important and should be compiled by the taxpayer to avoid last-minute hassle:
Home Loan statement from Bank
The statement becomes important so you can claim a deduction for the principal amount repaid during the year u/s 80C for a maximum of Rs.1.5 lakhs. Deduction on interest can also be claimed up to Rs.2 lakhs if your house property is self-occupied. In the case of let-out house property, a loss can be claimed up to 2,00,000, and the remaining loss can be carried forward to the succeeding 8 Assessment Years. Interest deduction is allowed on a due basis, i.e., whether paid or payable during the year. Section 80EE and 80EEA give the additional benefit of interest paid to first-time home buyers subject to certain conditions.
School fee receipt for tuition fees
Fee receipt shows a breakdown of tuition fees paid and the amount charged for other activities. The tuition fee component is allowed as a deduction under section 80C of the Income Tax Act for a maximum of two children. You should have these details to claim deduction under these sections while filing ITR.
Contribution to PPF, Life Insurance Premium Receipts
The major tax-saving instruments used in India include contributions to PPF, investments in LIC, 5 Year tax saving FD, etc. Amount invested in all such tax-saving funds is eligible for deduction under section 80C, aggregating to a maximum deduction of Rs.1.5 lakhs. If you have made any such contribution, you must furnish documents related to the same.
Investment in NPS
Amount invested in NPS deduction subject to a ceiling of Rs. 1.5 lakhs and Rs 50,000 is allowed under section 80CCD and 80CCD (1B), respectively. So, if you have exhausted your 80C limits and desire to save more taxes by investing your money, you can choose NPS.
Donation Receipts
Donations made to the institutions that qualify for deduction @ 50% or 100% u/s 80G will be required. The donation shall be made via any mode other than cash if the amount donated exceeds Rs 2000 from FY 2017-18 onwards.
Details of Medical Insurance
Section 80D gives you a deduction from your total gross income for the amount paid as medical policy premiums. The policy can be taken for self, spouse, children, and parents. If the member insured is a senior citizen- the amount eligible for deduction u/s 80D will be Rs. 50,000, and in all other cases, it will be restricted to Rs 25,000 per year. For senior citizens' parents, the deduction is also available for medical expenditures up to Rs 50,000 if your parents are not health insured. 80D is provided separately for parents and self, spouse, and dependent children.
Education loan
If you are paying interest for an education loan taken for higher studies of yourself, spouse, or children, you can claim a deduction under section 80E without any limit subject to the actual interest paid from the first year scheduled for repayment to a total of 8 years.
Receipts of any other investments
The taxpayers need to collect the receipts of other investments, if any.
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