CMA Inter- Income-tax Return filing

Hi, Friends. Welcome back to the CMA knowledge blog website.

Today in this article I am going to discuss the Income-tax Return filing. By reading this article you will come to know the information regarding the income tax provision to file an income tax return, for an individual person.

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So, let's start with the basics of the tax.

As the government is taking responsibility for the welfare of all the Citizens i.e. Social security, Health care, education, employment, infrastructure, and all the emerging development needs. To fulfill all these commitments the government requires lots of revenue. So, as we all know taxation is the primary source of revenue for incurring all the public welfare expenditures.

The government may levy the tax on all incomes, business profits, services, and other transactions.

Taxes constitute the basic source of revenue to the Government, which are utilized for meeting expenses of the Government like defense, provision of education, health care, facilities like roads, dams, other development projects, etc. 

Taxes are levied & collected to fulfill the social-economic objectives of the government.

What is the Income-Tax?
Why do we need to pay Income-tax?
What are the types of Incomes?
What are the income tax rates for an individual A.Y.2020-21?
How to calculate the Tax amount?
What are the types of forms for the return of income?
What is the process of filing the Income-tax returns?

What is the Income-Tax?

Income tax is levied and collected directly from the taxpayers on the Income/wealth. Income tax needs to be payable on the annual total income 

(e.g. income from 1. Salary, 2. House property, 3. Profits & Gains of the Business Profession, 4. Capital Gain, 5. income from other sources). 

Income tax is directly burned by the taxpayer. The taxpayer needs to pay all the dues on a yearly basis. One who earns income need to pay the tax to the government, there is no shifting of burden. 

Why do we need to pay Income-tax?

The Constitution of India gives the power to levy & collect taxes to the Central Government (CG) & State Government (SG). Entry, 82 of Union List (List I to Seventh Schedule of the Constitution of India) gives power to Parliament to levy taxes on income other than Agricultural Income. 

So, as we are the citizen of the country all of us need to follow the rule and regulations and need to pay income tax as per the rate applicable to the total income earned in the previous year. Previous year means in which year you earned this income and assessment year means in which year you need to file the return of income tax to the Income-tax authorities.

What are the types of Incomes?

As per the income tax Section 14, all income of a person is classified under the following Five (05) heads of income:

1 Income from Salaries (Section 15-17) 
2 Income from House Property HP (Section 22-27) 
3 Profits and Gains of Business Profession (Section 28-44DB) 
4 Capital Gains (Section 45 – 55A) 
5 Income from Other Sources (Sections as applicable for PGBP)

for the purpose of the income tax calculation, all taxable income should fall under any of the five heads of income, if any of the income does not become part of any of the first four heads of the income, then it should be part of the fifth head i.e. Income from the other sources.

What are the income tax rates for an individual A.Y.2020-21?

Income tax charges & rates are charges as per section 4 of the income tax Act. (Note: Tax rates are fixed by the Annual Finance Act & not by the Income Tax Act. )

Total income means total income from all sources after All Permissible Deduction Except for Incomes Taxable at Specified Rates. 

A. INDIVIDUAL/ HUF/ AOP/ BOI/ AJP [Resident or Non-Resident] 

Total Income Rate of Tax 

Upto Rs. 2,50,000 [Basic Exemption Limit] Nil 

From Rs. 2,50,001 to Rs. 5,00,000 5% 

From Rs. 5,00,001 to Rs. 10,00,000 20% 

Above Rs. 10,00,000 30% 

B. Resident Senior Citizen (60 years or more but < 80 years at any time during the Previous Year) 

Total Income Rate of Tax 

Upto Rs. 3,00,000 Nil 

From Rs. 3,00,001 to Rs. 5,00,000 5% 

From Rs. 5,00,001 to Rs. 10,00,000 20% 

Above Rs. 10,00,000 30% 

C. For Resident Super Senior Citizen (80 years or above at any time during the Previous Year) 

Total Income Rate of Tax Upto Rs. 5,00,000 Nil 

From Rs. 5,00,001 to Rs. 10,00,000 20% 

Above Rs. 10,00,000 30%

How to calculate the Tax amount?

As discussed above the Income tax is a tax which is levied on the Total Income of a person for the Previous Year ( e.g. current P.Y. is 2019-2020).

Steps/Procedure for computation of TI of the person for levy of Income tax is as follows: 

Step 1 - Determination of Residential Status. It is important to determine the scope of the changeability of income of an individual.  

Step 2 - Classification of Income under 5 different heads of Income. 

Step 3 - Computation of Income under each head of the income. 

Step 4 - Clubbing of income of spouse(wife), minor children, etc. for the calculation of tax 

Step 5 - Set-off or carry forward (Intra head adjustments u/s 70/ & inter-head adjustments u/s 71) & set-off of losses. 

Step 6 - Computation of Gross Total Income 

             [Net Results of Step 1 to Step 5]. 

Step 7 - Deductions from Gross Total Income. 

             [Payment based/Income Based deductions as the case may be]. 

Step 8 - Total Income 

             [GTI – Deductions under Step 7]. 

Step 9 - Application of Rates of Tax on the total income (need to break income slab-wise and then apply the applicable tax rate. 

Step 10 - Surcharge / Rebate u/s 87A. 

Step 11 - Health & Education Cess on Income Tax (currently it is 4%). 

Step 12 - Advance tax & TDS (need to update all the tax deducted by the customers or advance tax paid if any, to claim the tax deductions). 

Step 13 - Tax Payable/Tax Refundable

What are the types of forms for the return of income?

All the persons need to file an income tax return as per the provisions of Section 139 (1), in the prescribed form and within the prescribed time. As per rule, 12 of the income tax the following form is for filing of income for different assessees/taxpayers.

1 ITR-1, (Sahaj) an individual can use ITR-1 to file this IT return, who has income from salaries, one house property, other sources, income up to 50 Lakh.

2. ITR-2, for individuals and the HUFs who not carrying out business or profession under any partnership

3. ITR-3 for individuals and HUFs having income from a proprietary  business or profession

4. ITR- 4 (Sugam) for presumptive tax on income from Business & Profession

5 ITR- 5 is applicable for a person other than 1. Individual 2. HUF, 3 Company,& 4. Person filing form ITR 7.

6. ITR- 6 for companies other than companies claiming exception under section 11

7. ITR- 7 is applicable for persons including the companies, who are required to furnish returns 

                under section 139 (4A, B, C, D, or F)

8. ITR - V income tax return verification form.

What is the process of filing the Income-tax returns?

Mode of furnishing income tax return.

1. Paper Return

2. Electronic Return with digital signature

3. Transmitting the data in the return electronically and verification of the return in form ITR-V

4. Transmitting the data electronically in the return under the electronic verification code

So, friends, as you all know due to this covid19 pandemic, the Income tax department, has extended the tax return filing date. so, till now you did not file your income tax return for the P.Y. 2019-20, then file your tax return before the extended due dates.

So, thanks for the reading article. if you have any queries regarding the Income-tax please do mention the comment box, and I will reply to all your queries.

Thank

CMA Knowledge Blog Team.