What is income tax return and its components?

In the previous newsletter, we discussed what income tax is and explored key terms used in income tax. Now, let’s delve into Income Tax Return (ITR).

ITR is a form that individuals are required to submit to the Income Tax Department of India. It includes information about the person’s income and the corresponding taxes to be paid during the year. The information filed in the ITR should relate to a specific financial year, starting on April 1st and ending on March 31st of the following year.

How can I calculate my income tax?

To determine your income tax, analyze the nature of your earnings or incomes. Salaried individuals can make use of eligible exemptions for allowances, while individuals/HUF can make deductions under Sections 80C to 80U. This involves adjusting the gross total income to calculate the tax liability. Furthermore, the overall tax liability should be offset by payments like advance tax, TDS, etc. Apply rebates under Section 87A and seek relief under Sections 89, 90, and 91 to determine the net income tax payable.

Include all incomes in your return, and follow these steps:

1. List all sources of income (salary, rental, capital gains, interest, business profits).
2. Exclude incomes exempted by law.
3. Claim applicable deductions (e.g., standard deduction, municipal taxes, business expenses).
4. Leverage exemptions under each income category (e.g., reinvested amounts in another house property for capital gains).
5. Apply relevant deductions (e.g., 80C, 80D, 80TTA, 80TTB) to arrive at taxable income.
6. Ascertain the applicable tax slab and calculate the income tax payable.

Stay updated with government changes in tax slabs, schemes, and benefits by monitoring and keeping track of the Budget. Enhance your tax planning strategy with these guidelines.

What is computation of income?

The computation of income refers to the process of calculating taxable income by considering earnings from all five heads (salary, house property, capital gains, business or profession, and other sources), along with factoring in exemptions, deductions, rebates, and the set-off of losses. After completing the computation of income, the taxpayer can then determine their income tax liability in accordance with the provisions of the Income Tax Act

Rebate under Section 87A

Section 87A allows residents with a total income below Rs 5 lakh to claim a rebate of up to Rs 12,500. In Budget 2023, a tax rebate on income up to Rs 7 lakhs has been introduced under the new tax regime.

E-Filing of Returns:

Taxpayers are required to electronically file returns using the IT department’s e-filing platform. Registration at www.incometax.gov.in is necessary, and e-verification methods eliminate the need to manually send acknowledgments to the income tax department.

Understanding ITR-V

Form ITR-V is a verification form generated after submitting the income tax return. It must be e-verified or sent to CPC Bangalore for verification at the specified address. The ITR processing proceeds only after successful verification

Income Tax Saving Instruments

Taxpayers can effectively reduce their tax liability through strategic tax planning. Investing in tax-saving instruments is a key aspect of such planning. These investments help in lowering the overall income tax burden. Sections 80C to 80U of the Income Tax Act provide deductions for specific expenditures and investments from the total computed income

Popular Section 80C Investments:

Particulars	ELSS	PPF	NSC	5-Year Tax Saving FD	SCSS
Section 80C Benefit	Yes	Yes	Yes	Yes	Yes
Type of Investment	Equity	Fixed Income	Fixed Income	Fixed Income	Fixed Income
Lock-in Period	3 Years	15 Years	5 Years	5 Years	5 Years
Maximum Investment	No Maximum Limit	Rs 1.5 lakh	No Maximum Limit	Rs 1.5 lakh	Rs 15 lakh

*Note: ELSS and NSC have no upper investment limit. However, tax benefits under Section 80C are applicable only up to Rs 1.5 lakh per financial year.

This approach not only aids in tax saving but also provides a diverse range of investment options catering to different risk appetites and preferences.

Health Insurance and Medical Expense Deduction

In addition to the 80C deduction, taxpayers can avail tax benefits under Section 80D for health insurance premiums and medical expenses incurred for themselves, their families, and parents.

Person Insured	Maximum Deduction (Below 60 years)	Maximum Deduction (60 years or older)
You, your spouse, your children	Rs. 25,000	Rs. 50,000
Your parents	Rs. 25,000	Rs. 50,000
Preventative Health Checkup	Rs. 5,000	Rs. 5,000
Maximum Deduction (includes preventive health checkup)	Rs. 50,000	Rs. 1,00,000

 

This provision encourages individuals to prioritize health and well-being by offering deductions based on health insurance premiums and medical expenses. It provides financial relief while promoting a proactive approach to healthcare through preventive checkups.

Education Loan Deduction

Section 80E allows taxpayers to claim a deduction for the interest paid on a loan taken for higher education. Notably, there is no limit to the amount that can be claimed as a deduction in the income tax return. This provision aims to support individuals pursuing higher education by providing financial relief through the deduction of interest payments.

Deduction for Interest Income

Additionally, taxpayers can claim a deduction for interest earned on deposits from banks under Section 80TTA of the Income Tax Act. Individuals are eligible to claim a deduction of up to Rs 10,000 under this section. This deduction acknowledges the interest income from bank deposits while providing a benefit to taxpayers up to a specified limit.

Key Income Tax Dates for 2023

• 15th June 2023 – Deadline for the initial instalment of advance tax for the financial year 2023-24.
• 31st July 2023 – Last day for filing income tax returns for the financial year 2022-23 for individuals and entities not subject to tax audits, and those without international or specified domestic transactions.
• 15th September 2023 – Due date for the second instalment of advance tax for the financial year 2023-24.
• 30th September 2023 – Submission deadline for audit reports (Section 44AB) for the assessment year 2023-24 for taxpayers subject to audit under the Income Tax Act.
• 31st October 2023 – Deadline for filing income tax returns for taxpayers requiring audit (excluding those with international or specified domestic transactions). Also, the last day for submitting audit reports for the assessment year 2023-24 for taxpayers involved in transfer pricing and specified domestic transactions.
• 30th November 2023 – Final date for filing income tax returns for taxpayers requiring audit (excluding those with international or specified domestic transactions).
• 15th December 2023 – Due date for the third instalment of advance tax for the financial year 2023-24.
• 31st December 2023 – Last day for filing belated or revised returns for the financial year 2022-23.
• 15th March 2024 – Due date for the fourth instalment of advance tax for the financial year 2023-24.

Income Tax Law

The Income Tax Act serves as the comprehensive framework governing the taxation system in the country. Annually, the Finance Minister unveils a budget in February, introducing amendments to the Income Tax Act. The most recent Union Budget, presented by the current Finance Minister, brought about changes in a new tax regime.

In addition to the Income Tax Act, other components of income tax law include income tax rules, circulars, notifications, and case laws. Collectively, these elements facilitate the implementation of income tax law and the collection of taxes.

About the Income Tax Department in India

The income tax department, a government agency, has the authority to collect direct taxes on behalf of the Government of India. The Ministry of Finance oversees the revenue functions of the government, entrusting the administration of direct taxes, such as Income-tax, to the Central Board of Direct Taxes (CBDT). Operating under the control and supervision of the CBDT, the Income Tax Department administers direct tax laws.

In conclusion, income tax is a complex yet integral aspect of a country’s fiscal system. Understanding its various components, regulations, and planning opportunities is crucial for individuals and entities to fulfill their tax obligations efficiently. The ever-evolving tax laws and annual budget announcements necessitate continuous awareness and adaptation to ensure compliance and optimize tax liability.

Top of Form

Income Tax – Frequently Asked Questions (FAQs)

1. When is it compulsory to submit an income tax return?

Companies and firms must file an income tax return. For individuals, HUF, AOP, BOI, filing is obligatory if the income exceeds the basic exemption limit of Rs 2.5 lakh. Distinct limits apply for senior citizens (Rs 3 lakhs) and super senior citizens (Rs 5 lakh).

1. Can I submit a return of income even if my earnings are below taxable thresholds?

Certainly, you can voluntarily submit a return of income even if your earnings fall below the basic exemption limit.

1. Which documents should accompany the return of income?

No documents need to be attached with the return of income. However, it is recommended to retain documents for future presentation if required by competent authorities.

1. Do I need to disclose all my income in the return, even if it is exempt?

Yes, all income, including exempt income, must be disclosed. Exempt income can be specified under Schedule EI.

1. Is e-verification essential to receive an income tax refund?

Yes, e-verification of electronically filed income tax returns is essential to complete the filing process. Various methods, such as Aadhaar OTP, bank ATM, Electronic Verification Code (EVC), and net-banking, can be used for e-verification.

1. Can I claim Section 87A rebate on capital gains if there is no other income?

You can claim a rebate under Section 87A on long-term and short-term capital gains. However, for long-term capital gains from the sale of equity shares or equity-oriented funds (Section 112A), the rebate under Section 87A cannot be adjusted.

1. Can I file a return after the completion of the assessment year?

The Budget 2022 introduced an ‘Updated return’, which can be filed within 24 months of the end of the relevant assessment year by paying additional tax. Even if the original return was not filed by the specified due date, the ‘updated’ return can still be submitted.

I trust that this blog post has provided valuable information. If you have any additional questions, please don’t hesitate to reach out.