INCOME TAX RETURN FOR FINANCIAL YEAR 2020-2021(A.Y 2021-22)

Topics covered –

Tax liability

According to Article 265 of the Constitution of India, Tax shall be levied or collected only by the authority of law. Tax is one of the major sources of Income of Government.

Income Tax Return

ITR stands for Income Tax Return. As the name suggests, Income Tax is a tax levied by government on person’s total taxable Income.

Income Tax Return is a type of Form which every taxable person has to file to give information about the total Income earned during a financial year and to inform whether the person has paid required Tax thereon or not to the Department of Income Tax. In case a person pays excess tax then he can claim Income Tax Refund under the IT Act, 1961.

Income Tax is governed by Income Tax Act, 1961. As per the Income Tax Act, every person shall be liable to pay Income Tax at a prescribed Income Tax Rate if his/her total income is more than the prescribed income. Income Tax Rates are prescribed by the Ministry of Finance each year in the Finance Act.

Taxpayers

Following persons are required to file Income Tax Return mandatorily if their total taxable income exceeds the prescribed threshold limit in a financial year-

Individuals
Hindu Undivided Families (HUF’s)
Firms
Limited Liability Partnership
Association of Persons
Body of Individuals
Companies
Local authorities
Any other Juridical Person

**Tax Liability depends upon the residential status of a person. Any person who is a resident of India is required to pay tax on his total global income.

Due-Dates for Filing ITR

Different due-dates are applicable on different category of taxpayers. Tax Returns have to be filed before due date otherwise tax payer has to pay a penalty.

PARTICULARS	DUE-DATE
Filing of ITR in Non- Audit cases (Individuals/HUF/Partnership Firm)	31^st July
Furnishing Audit Report	30^th September
Filing of ITR in Audit Cases	31^st October

Sources/ Heads of Income – Section 14 of the Income Tax Act, 1961

Income from Salary
Income from House Property
Income from Capital Gain/Loss
Income from Business & Profession
Income from Other Sources

Documents Required for ITR Filing

Form 16 (A/B/C/D)
Latest Bank Statement
Form 26 AS
Bank Account Details
Deduction Certificate (if any)
Login User ID & Password (Income Tax e-filing Portal)
PAN
Aadhar
Interest Certificate (if any)
Latest Financial Statement (In case of Company)
Investment Detail (if any made u/s 80)
Statement of Capital Gain or Loss

Types of ITR Forms

ITR Forms

Applicability

ITR-1

A Resident Individual having Income less than Rs 50 Lakh, From

· Salary/Pension

· One House Property

· Other Sources

ITR-2

Any individual or a Hindu Undivided Family (HUF)

· All Income from ITR 1, if it is more than Rs 50 Lakh or

· All Income from ITR 1, having

· More than one House Property

· Capital Gains

· Foreign Income / Holding Foreign Assets

· Holding Equity Shares of Private Company

· Holding Directorship in a Company

ITR-3

Any individual or a Hindu Undivided Family (HUF), having Income

· All Income of ITR 2

· Under the head “Business or Profession

· Maintains Full Books of Accounts

ITR-4

Any individual (Being Resident), Hindu Undivided Family (HUF) or Firm

· All Income of ITR 1

· Income from Business / Profession Computed under Presumptive Taxation Scheme

ITR-5

· Firms,

· LLPs,

· AOPs / BOIs,

· Artificial Juridical Person Estate of deceased,

· Estate of Insolvent,

· Business Trust and Investment Fund

ITR-6

For Companies Other Than Companies Claiming Exemption Under Section 11 of the Income Tax Act, 1961

ITR-7

Persons / Companies required to furnish Return Under

· Section 139(4A) or

· Section 139(4B) or

· Section 139(4C) or

· Section 139(4D) or

· Section 139(4E) or

· Section 139(4F)

Is it Mandatory to file ITR?

According to the Income Tax Act, 1961, it is mandatory for every person to file Income Tax Return and to pay taxes at prescribed tax rates on the Income earned in a Financial Year if the income exceeds the prescribed limit.

Implications of not filing ITR

Every person who is legally required to file ITR and if he/she fails to file ITR shall be liable to pay penalties prescribed under the law for the time being in force.

Click here to read in detail about Penalties under IT Act, 1961

Benefits of Filing ITR

Nation Building

As we know Tax is one of the major sources of income of government. Thus, the money collected and accumulated through tax receipts are used by the government for Healthcare, Infrastructure, Education, various nation welfare schemes or for other Nation Building activities.

Avoid Penalties

Income Tax Act, 1961 imposes a penalty on taxpayers (who are mandatorily required to file ITR) for not filing Income Tax Return on or before due date. This penalty can extend up to Rs. 10,000.

Deductions

A taxpayer who regularly files ITR can claim deductions on his overall tax liability if he fulfils the criteria of claiming deductions under the Income Tax Act.

Easy to get Loan Approval

It is comparatively easy for persons filing ITR to get Bank Loans as Banks can rely on the person in terms of repayment of Loan or payment of interest rates.

Acts as Income proof & Address Proof

Since Income and Address of the taxpayer are stated on the ITR, therefore it can be used as Income and Address Proof.

Fast and Smooth VISA Processing

Many Embassies ask for the copy of ITR before issuing VISA. Thus, it is required to get quick VISA.

Count Losses in subsequent year

In case a taxpayer has incurred losses and has filed ITR for that year then he can carry forward the amount of losses to subsequent years.

Investments

When any person makes investments then it is reported to the Income Tax Department. Thus, if any person who is making heavy Investments files ITR then his heavy investments get substantiated and reported to the IT department.

Become a Law Abiding Citizen

As filing Income Tax Return is a legal requirement thus any person who regularly files ITR helps not only in nation building but also in becoming a law abiding citizen.

Income Tax Slab

Income Tax is levied on the basis of Tax Slabs as prescribed by the Union Government in budget every year. Tax Slabs specifies different tax rates as per the ranges of income. Thus, Income Tax Rates increase as the Income increases. This is why, Indian Taxation system is considered as progressive and fair tax system.

Income Tax Slab Rates for Financial Year 2020-2021 (Annual Year 2021-2022)

Finance Act, 2020 inserted new Section 115BAC (effective from Financial 2021) in the Income Tax Act, 1961. This section deals with the new tax regime. Taxpayers have been given 2 options of Tax Slab. This section is applicable on Individuals and Hindu Undivided Family only. This section gives optional tax slab rates to eligible taxpayers.

TAX SLAB RATES AS PER SECTION 115BAC OF INCOME TAX ACT, 1961

Total Annual Income	Tax Rates
Up-to Rs.2.5 Lakh	Nil
Above Rs.2.5 Lakh to Rs. 5 Lakh	5%
Above 5 Lakh to Rs. 7.5 Lakh	10%
Above 7.5 Lakh to Rs.10 Lakh	15%
Above Rs. 10 Lakh to Rs. 12.5 Lakh	20%
Above Rs.12.5 Lakh to Rs. 15 Lakh	25%
Above Rs.15 Lakh	30%

Eligibility Criteria for New Tax Slab Rate

Only the Individuals and Hindu Undivided Family (HUF’s) have 2 options of slab rates for financial year 2020-21. It means either they can opt for existing tax slab rates along with the applicable tax deductions and exemptions or they can choose new tax rates under section 115BAC without any deductions and exemptions.

The declared income of the taxpayer shall not include any business income.
No carry forward of losses from previous assessment year shall be allowed.
Taxpayer shall not be allowed to claim depreciation under section32(iia).
No Exemption or deduction shall be allowed for allowances or perquisites.
The taxable income shall be calculated without any deductions or exemptions specified under –
- Chapter VI-A of the Income Tax Act, 1961 (excluding Section 80CCD or Section 80JJAA)
- Section 24b
- Clause (5) or (13A) or (14) or (17) or (32) of Section 10/10AA/16
- Section 32(1)/ 32AD /33AB / 33BA
- Section 35/35AD/35CCC
- Clause (iia) of Section 57

TAX SLAB RATES AS PER EXISTING TAX REGIME

1. For Individuals, NRI & HUF

Age Group – below 60 Years

TAXABLE INCOME	TAX RATES
Up-to 2.5 Lakhs	NIL
Above Rs. 2.5 Lakhs to Rs. 5 Lakhs	5%
Above Rs. 5 Lakhs to Rs. 10 Lakhs	20%
Above Rs. 10 Lakhs	30%

2. For Individuals between the age of 60 and 80 years

TAXABLE INCOME	TAX RATES
Up-to 3 Lakhs	NIL
Above Rs. 3 Lakhs to Rs. 5 Lakhs	5%
Above Rs. 5 Lakhs to Rs. 10 Lakhs	20%
Above Rs. 10 Lakhs	30%

3. For Individuals above the age of 80 years

TAXABLE INCOME	TAX RATES
Up-to 5 Lakhs	NIL
Above Rs. 5 Lakhs to Rs. 10 Lakhs	20%
Above Rs. 10 Lakhs	30%

4. Income Tax Slab Rates for Domestic Companies

COMPANY TURNOVER	TAX RATES
Up-to Rs.400 Crore	25%
More Than Rs. 400 Crore	30%
Under Section 115BA	25%
Under Section 115BAA	22%
Under Section 115BAB	15%