The ABCs of ITR & How to File Income Tax Return

Filing income tax returns is a major milestone in every adult citizen’s life. And if you have googled ‘how to file income tax return,’ it must have already made your head spin. 

As we step into the world of ‘adulting’, we realise how little we know about how everything works. And if you have been wondering why you were not taught how to file income tax return in school instead of algebra, you are not alone. There are many more clueless adults out there, and that is why we are here to help you out!

Basics of Income Tax

From having the basic knowledge of how to file income tax return to understanding the ground rules for income tax in India, first-time taxpayers must familiarise themselves with the terminology and learn the basics. 

What is the Financial Year and Assessment Year?

To understand how to file an income tax return, you must first understand the difference between the financial year and assessment year. 

• Financial Year

Financial or previous year is the 12-month period that begins in April of the current year and ends in March of the next year. The tax year remains fixed, irrespective of the taxpayer’s employment date.

• Assessment Year

The assessment year is the year after the previous year, that is, the year in which you will be required to file your income tax return for the year before. 

Understanding your Salary

It is important that you understand your salary structure before you learn how to file income tax return on its basis. On the basis of your company policy and salary structure, your pay slip will include all the segregations like your basic salary, house rent allowance, special allowance, etc., along with other details regarding tax deductions, professional tax, provident fund deductions etc. On the basis of all this, you can get an idea about how much tax would be deducted as per your salary. 

How to Save Tax?

Once you have gotten a good idea about how much tax would be deducted on your salary, the next question is ‘how to save tax’. To achieve that, every taxpayer must make Section 80C their best friend. Thanks to provisions under 80C, taxpayers can take off up to ₹1,50,000 from their gross income. Some of the most used investment tools for saving taxes include:

• Public Provident Fund (PPF)
• Tax Saving FDs
• Equity Linked Savings Scheme (ELSS)
• Premiums for Insurance, etc.

Tax Deducted at Source (TDS)

TDS, short for Tax Deducted at Source, refers to the tax deducted by the person making payment. Based on the guidelines established by the income tax department, the payer is required to deduct a certain amount of tax. For instance, if an employee's taxable income exceeds ₹5,00,000, the employer will estimate the employee's annual income and deduct tax from it. Tax is subtracted depending on the tax bracket you fall under each year. Like this, the bank likewise deducts TDS when you get interest on a fixed deposit. Since the bank does not know your tax slabs, they usually deduct TDS @ 10%, unless you haven’t mentioned your PAN (in that case a 20% TDS may be deducted).

How to File Income Tax Return?

Filing your income tax return may seem like a tedious job, but it is quite simple, especially if you are filing it online. Here’s how:

1. Visit the Income Tax e-Filing portal https://www.incometax.gov.in/iec/foportal/ and login to the e-Filling portal using your credentials.
2. Click on the e-File menu and select ‘Income Tax Return’.
3. From the drop-down menu, select Assessment Year and ITR form number. Next, select the filling type as ‘Original/Revised Return’, and submission mode as ‘Submit Online’.
4. Read all the instructions and fill in all the relevant and required details in the ITR form.
5. Choose a suitable verification option in the ‘Taxes Paid and Verification’ tab.
6. Select the ‘Preview and Submit’ option to review your before submitting the ITR.
7. After submitting the ITR form, you can complete your e-Verification by entering the EVC or OTP.

While most people prefer submitting their ITR online, you can also follow the offline process. Here’s how:

1. To fill your ITR offline, download the appropriate ITR from the Income Tax e-Filing portal https://www.incometax.gov.in/iec/foportal/
2. Fill in all the mandatory and applicable fields on the ITR form, including the calculated ITR amount before saving the XML file.
3. Return to the e-Filing portal, login and enter the security code.
4. Select the ‘Income Tax Return’ from the ‘e-file’ option.
5. Enter required details; choose the filing type as ‘Original/Revised Return’ and submission mode as ‘XML’.
6. Select your preferred option for verification. Press ‘Continue’ and attach the XML file.
7. Depending on the selected verification option, attach the required file and submit. 

While it may seem overwhelming for first-timers, learning how to file income tax returns is essential for every Indian citizen, and postponing it is only going to make it more stressful. So our advice is that you get it done as soon as the time comes.