Income Tax Return Filing In India- A Brief Overview

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Income Tax Return filing in India

Every assessee in India are required to prepare and file their Income Tax return for the income earned in the financial year on or before the due date prescribed under the Act.

Income tax return filing is an annual affair and is major source of revenue for the government as all the assessee has to make final computation of their tax liability and pay the same to the government before or at the time of their Income Tax Return filing if already they have not made full payment of tax by way of advance tax or TDS.

Normally, for an individual and HUF assessee, the due date for filing the tax return is 31st July every year. Also, the due dates for company assesses are 30th October. However, for those company’s on which transfer pricing provisions are applicable, the due date is 30th November.

However, at the time of COVID pandemic or some other unforeseen circumstances, CBDT may also extend the due date of tax return filing. For instance, during FY 2020-21, the due dates of ITR Filing have been extended many a times.

Computation of Tax liability

For individual ...
... tax payers, there are 2 types of regimes for computation of tax liability i.e. old regime and new regime.

Old or Existing Tax Regime for tax computation

As per existing regime, tax liability is computed as under:

1. For up to Rs.250,000: Tax rates are nil.
2. For Rs.250,000- Rs.500,000: 5%
3. For Rs.500,000- Rs.1,000,000: Rs.12,500+20%
4. For Above Rs.1,000,000: Rs.1,12,500+30%

New Tax Regime for tax computation

The new tax regime is introduced under Section 115BAC of the Income Tax Act, 1961. The tax rate under different income slabs will be applicable for the Assessment Year 2021-22. This regime is for all the taxpayers including the Resident Indians as well as the Non-Resident Indians that are below 60 years in last financial year.

1. For up to Rs.2,50,000: Tax rates are nil.
2. For Rs.2,50,001- Rs.5,00,000: 5%
3. For Rs.5,00,001- Rs.7,50,000: Rs.12,500+10%
4. For Rs.7,50,001- Rs.10,00,000: Rs.37,500+15%
5. For Rs.10,00,000- Rs.12,50,000: Rs.75,000+20%
6. For 12,50,001- Rs.15,00,000: Rs.1,25,000+25%
7. For Above Rs.15,00,000: Rs 1,87,500 + 30%

Points to be kept in mind:

While ITR Filing, any individual or taxpayer must be aware about the following points worth remembering-

1. Under Section 115BAC of the Income Tax Act, 1961 the individuals or Hindu Undivided Families (HUFs) can opt for a lower taxation rate from either the existing taxation regime or the newly introduced taxation slab.

2. Also, if a taxpayer opts for a concession rate given in the new tax regime, then they will not be allowed to be exempted from the following benefits given under the existing tax slab as per the Income Tax Act, 1961 such as-

a. Section 10(13A): Exemption on House Rent Allowance (HRA). For most of the salaried persons the HRA is part of the salary structure. But unlike the basic salary, HRA is not fully taxable as the said Act. This section allows certain part of HRA to be exempted from tax under certain conditions.

b. Section 80C: It allows the taxpayers to reduce the taxable income by making deductions of up to Rs.1.5 Lakh per year from the total income by making investments that save taxes or incurring expenses that are eligible under the section.

c. Section 80D: This section allows the HUFs or individuals to claim a deduction from the total income on account of any premium paid for a medical insurance in a particular financial year. It includes plans for critical illness as well as any health top-up plans.

d. Section 80TTB: It allows any senior citizen or resident to claim a deduction on accrued interest on any savings account and fixed deposits.

Accordingly, a tax payer needs to decide very carefully whether they want to pay tax under old regime or under new regime. On basis of such decisions, proper tax payable may be computed and finally, income tax return may be filed.