A step-by-step guide on how to go about e-filing of income tax returns (ITR) and cutting through the clutter of forms to tell you which one you can use
The last month of filing your income tax returns (ITRs) is here. Those who haven’t filed their returns already should do it now to avoid the last-minute rush which can lead to mistakes. The good news is that tax filing is not a tedious process anymore. Gone are the days when you had to physically fill the income tax return (ITR) forms and queue up to submit them at the income tax office and wait for updates. Since the last few years, it has been made mandatory for all assessees (excluding very senior citizens) having income above ₹ 5 lakh or refund to claim need to file their returns online. The best part is it’s now convenient to not only e-file your returns but also track your refunds and processing of returns online.
In the last few years, there has been a significant increase in the number of new return filers. For instance, about 99.49 new tax filers were added during FY18 compared to 85.51 lakh new ITR filers added during FY17. It is expected that many more new taxpayers will file their returns this year.
Here is a step-by-step guide on ITR e-filing:
- Organize documents
While you don’t have to attach supporting documents along with the income-tax return form, you will need them to fill it.
Besides basic documents like your Permanent Account Number (PAN) and Aadhaar number or enrolment ID, you need to have documents related to income, investments, assets, bank accounts and so on.
If you had any income other than salary, like capital gains, rental income, divided income and so on, keep those documents handy too. Also, if you have any foreign income or assets, you need to have documents of that to put in details.
You must maintain a separate file of all the documents you have used to file your return in a particular year.
2. Create your ITR e-filing account
Once you have all the documents, the next step is to login to your e-filing account on the income tax department’s website. To login, you need to enter user ID (your PAN), password, date of birth and captcha code.
However, if you are a first-time filer, you need to create an account on the ITR e-filing website.
3. Select the ITR Form
Once you login to your ITR e-filing account, click on “filing of income tax return” on the dashboard. After that, choose the assessment year (AY) for which you want to file the ITR. The current AY is 2018-19, where you file returns for the financial year (FY) 2017-18. FY is the year in which you earn the income, while AY is the year in which you assess your income and file your return.
Next, choose the applicable ITR form. Even those who have been filing returns since long should remember that ITR forms for AY19 have undergone a few critical changes. “ITR-1 is not applicable to non-residents and not ordinarily residents, ITR-2 form is no longer applicable for individuals or HUF (Hindu Undivided Family) who have profits and gains from any business or profession and are required to file form ITR-3,” said Shailesh Kumar, director- direct taxation, Nangia Advisors LLP.
If you are a professional or a businessman and are filing a return under the presumptive taxation scheme, you need ITR-4, which has also changed. “The old ITR-4 sought only four financial particulars of the business—creditors, debtors, stock-in-trade and cash balance. The new ITR-4 seeks more financial details of businesses such as the amount of secured and unsecured loans, advances, fixed assets etc. It also seeks the assessee’s GSTR no. and turnover as per the GST return,” said Naveen Wadhwa, deputy general manager, Taxmann.com.
4. If you choose the wrong form: “Choosing the correct form is of utmost importance. There are seven forms, out of which only four are applicable to individual taxpayers. Consequences of selecting a wrong ITR form as per tax laws can be formidable,” said Kumar.
Returns filed in wrong ITR forms are considered defective or not filed, except in the case when “moving from ITR-1 to ITR-3 (as) ITR-3 asks for all details that are required to be shown in ITR-1. If due disclosures are made in a subsequent form, it will not make any impact,” said Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP. In this case, you may escape a penalty, but you may need to revise your return.
“But if a person was required to file his return in ITR-2 or ITR-3 but instead files it in ITR-1, then the person would not have disclosed requisite details of income and other detailed information and may suffer penalties for under-reporting of income,” said Maheshwari. For instance, ITR-2 needs to be filed by someone with an income of more than ₹50 lakh or having more than one house property. While ITR-1 has to be filed by someone having income less than ₹50 lakh and not having more than one house property. So, if someone files a return in ITR-1, instead of ITR-2 which is applicable to her, then she must have underreported her income or not disclosed all the house properties she owns.
Penalties depend on the income that escaped assessment because of filing the return in the wrong ITR form. “The penalty, in that case (the example mentioned above) shall be 50-200%,” added Wadhwa.
5. Fill in the details
Besides selecting the right ITR form, ensure you fill in the correct details. “Aadhaar number or enrolment ID is mandatory to file the return electronically. If the taxpayer has no Aadhaar number, then she can’t file a return electronically as the website doesn’t allow the filing of ITR without mentioning Aadhaar number/enrolment ID in ITR,” said Wadhwa. “This year ITR forms are seeking a lot of new information like the break-up of salary and house property income to be furnished in ITR-1 form instead of a single amount of income/loss, as required to be furnished earlier,” said Kumar.
Also, “in new ITR Forms, there is a separate column for claiming capital gain exemption under Sections 54, 54B, 54EC, 54EE, 54F, 54GB and 115F. Further, to avail these exemptions, a taxpayer is required to mention the date of transfer of original capital asset which was missing in the earlier ITR forms,” said Maheshwari.
6. Upload, e-verify return
The last step is to re-check all your details and upload the form. However, your job is not complete until you verify your return.
There is a window of 120 days from the date of uploading the return till which you can e-verify your return or send a signed copy of ITR-V to the tax department’s Central Processing Center, Bengaluru. If you are sending ITR-V physically, make sure you send it through ordinary or speed post and not by any private courier service.