Income Tax Return

There are up to 8 types of Income Tax Return Forms, currently. We have divided them into 2 parts:

ITR Forms for Individuals

ITR Forms for Non-Individuals

Many investors have very low or zero tax liability and therefore this section does not have to file returns mandatorily. Even though they have some sort of income occurring.

And there is another section that only file returns when something urgent requirement comes up asking for their last few years of ITR. They approach a nearby CA and file their old tax returns.

There has been low-Income Tax filing Compliance in India. However, in recent years, the Govt. of India has taken some stringent measures to enforce the Income Tax Law by linking various benefits for prompt tax filers.

Advantages of tax filing are, but not limited to:

Processing of Loans & Visa:

If you apply for any loans such as a home loan, car loan, etc., the eligibility and quantum of loan would depend on your income. This can be established through filed ITRs. ITR will help your lender to assess your repayment capacity.
If you plan to travel overseas, proof of earning is required. If you are salaried then a certificate from the employer will work. But if you are self-employed then income proof & details need to be submitted.

Claiming Refund:

There could be some TDS cut on some investment. And you will have to file the ITR to claim a refund of the same. Or you may have paid excess tax on your income. To get this refund, you must file ITR.
Many salaried individuals don’t file ITR as they think that the tax on their income has already been deducted and they have Form 16. But your employer may have paid more tax on your behalf. Not taking into consideration your actual house rent, children’s school fees, tax-saving investments, or insurances. So, the filing of ITR will enable you to get a refund from the IT department.

Carry-forward Losses:

As per Income tax rules, losses are allowed to be carried forward and set off against capital gains. But this applies only to those individuals who file ITR in the relevant assessment year. If you have incurred losses for a year and you have earned below the exemption limit. You must file your returns to be able to carry forward the losses you have incurred. And it gets balanced against future gains and income.
The capital losses can be carried forward for 8 consecutive years, as per the IT Act.

Establishing Income in Compensation Cases:

Although the Motor Vehicles Act does not make it compulsory to present the ITR while calculating the compensation in case of accidental death or disability, the procedures approved by Delhi High Court mention the need for ITR for self-employed persons.
This helps to establish the income of the person to arrive at appropriate compensation.

Self-Employed Individual Filing for Tenders:

Businessmen, consultants, and partners do not get any Form 16. For such self-employed individuals, ITR receipts become an important document. ITR is the only proof of income and tax payment for them, in all sorts of financial transactions. And if they want to take up some contract or tender, they may be asked to show their tax return receipts of the previous 3 to 5 years.

Being a Responsible Citizen:

Staying on the right side of law helps. Similarly, keeping the income tax department informed about your income and taxability helps too. This is only possible when you file your ITR. Those who earn less than the prescribed slab of income can file returns voluntarily. Filing returns are a sign that you are a responsible taxpayer.

Different penalties have been directed for various defaults committed by the taxpayer, under the Income Tax Act. Some of them are mandatory and a few are at the consideration of the tax authorities. Given below are the provisions relating to various penalties leviable.

Incorrect Form

In case an incorrect form has been used to file the returns, then it will be treated as “defective” and the assessee will be asked to file a revised ITR using the correct form.
Now, the taxpayer gets some time to amend the mistake. And the return must be filed within 15 days from the date of receipt of the intimation, as per Section 139(9). This time limit may be extended by the assessing officer (AO) on an application by the assessee. If the defect is not corrected within the stipulated time, then it will be treated as an invalid return. That is the same as not filing a return at all.
Therefore, the person will be facing all the penalties prescribed to not filing ITR. As well as, interest will get charged, u/s 234A, for the delay.

Under-reporting

If it is found that the actual income exceeds the income declared by the person. Or when no return has been filed despite income exceeding the basic exemption limit. Penalty at 50% of tax payable on such under-reported income shall be payable.
200% of the tax will get if under-reporting results from misreporting of income.

Late Filing

As per Section 234F of the Income Tax Act, if you file after 31st July (it was extended to 31st August for AY 2019-2020) but before December, a penalty of Rs. 5000 will be levied. For returns filed after December, the penalty will be Rs. 10,000.
However, to provide relief to small taxpayers, the IT department has stated a maximum penalty of only Rs. 1,000 will get levied. The condition is that your total income is less than Rs 5 lakh.

Penalty for Default

In case a demand notice u/s 156, has been issued to the taxpayer for payment of tax (other than notice for payment of advance tax). Then such amount, as per section 220(1), shall be paid within 30 days of the service of the notice at the place and to the person mentioned in the notice. If the taxpayer defaults in payment of any tax due, then apart from other penal provisions, he is treated as an assessee in default. For an assessee in default, the penalty will get levied as decided by the AO. However, the penalty cannot exceed the amount of arrears in tax.
Before penalizing, the taxpayer is given a reasonable opportunity of being heard. No penalty is levied if the taxpayer can prove that the default due to a good and sufficient reason.

Delay in filing the TDS/TCS statement

Every person liable to deduct tax at the source is liable to furnish the statement of TDS, as per Section 200(3). It is termed as TDS Return. And every person liable to collect tax at the source, as per Section 206C (3), has to file a statement in respect of TCS, i.e. TCS Return.
If a person fails to file the TDS/TCS return on or before the due date prescribed, then he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day of the delay, as per Section 234E. This amount, however, shall not exceed the amount of TDS/TCS. A late TDS/TCS return cannot be filed this late fee.

Penalty in case of income from undisclosed sources

The AO may make an addition to the income of a taxpayer as per Section 68, 69, 69A, 69B, 69C, or 69D if the explanation about the nature and source of his income is not satisfactory.
The AO is empowered to levy penalty at the rate of 10% of the tax payable if any addition is made. However, no penalty shall be levied if this income has been disclosed in the ITR and tax paid, u/s 115BBE, on or before the end of the relevant previous year.

Fee for default in furnishing return of income

The taxpayer, who is required to furnish ITR u/s 139 failed to furnish a return of income within the due date as prescribed under section 139(1) then as per section 234F, he will be liable to pay penalty same as delayed filing.

That is:

• 5000 if ITR is filed on or before 31 December of the assessment year.
• 10,000 in any other case.

However, if the total income of the person is less than Rs. 5 lakh then the fee payable shall be Rs. 1000.

Listed below are some of the most common tax filing mistakes you can avoid.

Selecting an Incorrect Form

The appropriate ITR form for filing of returns must be selected. Failure can result in your return not getting processed by the income tax department. Which form is to be selected depends on the sources from which income is earned in the financial year and the category. All incomes that are taxable and/or tax-exempt are to be reported using the correct ITR form applicable. If the ITR is filed in the wrong type of Form, then the return will be termed as “defective”. Then, you will have to file a revised return using the correct form, within a certain time frame.

Not reporting all sources of income

A common mistake taxpayers make is failing to disclose all the sources of their income. The income must be disclosed whether it is taxable or exempt. All incomes, not only the primary one earned from employment, profession, or business, are to be reported. Whether they are savings account interest, fixed deposit interest, rental income from house property, income from short-term capital gains, and any other source. Remember, any income earned by a minor from interests, investments, etc. is taxable for the parent. According to the tax slab, an exemption up to Rs. 1,500 u/s 10(32) can be claimed when a minor’s income gets clubbed with the parents. Not reporting such incomes might attract notice from the income tax department.
If you have switched jobs, make sure you report the income earned through your previous employer also. Not reporting such incomes might attract notice from the income tax department.

Providing incorrect personal information

Because all information will get recorded in the Department’s databank and may be verified, it is extremely important to enter the personal details correctly before filing your taxes. PAN number, name, address, mail id, phone number, date of birth, bank account number, IFS Code, etc. must be accurately mentioned. A minor mistake in these details means that you may miss your refund claim or some other important notifications. So check and re-check before filing.

Failure to Reconcile TDS with Form 26AS

It is important to compare ITR with Form 26AS before filing. Form 26AS includes all the income details, Tax Deducted at Source (TDS), advance tax paid by you, self-assessment tax, etc. TDS may have been deducted from your salary. You must verify the details of Form 16, issued by the employer, with the Form 26AS.
If the TDS is not reflected in Form 26As, your refund and tax deduction credit will be lost. The mismatched would lead to more tax being paid.

Not including exempt income

Income tax laws require all income to be reported, whether exempt or not. Many types of incomes are exempt from tax. For example, long-term gains, dividends, etc. Although you do not have to pay any taxes on them, you still need to report them.
Also, though your gross total income may not exceed the basic exemption limit, you are to file ITR in certain situations.

Entering the details manually

There is a set format for filing returns. All details are to be entered in a particular format, in the rows and columns provided. If incorrectly put in this complicated format, the returns will have errors. This is where taking professional assistance from LegalRaasta is recommended.

TDS paid then no need to file ITR

Employers are required to deduct tax at source from salary, and interest income respectively. It is mandatory to file an income tax return when your annual income exceeds Rs. 2.5 lakh. And report the interest income in those returns. You should disclose the income on which tax has been deducted and claim credit for TDS in the income tax return.
The interest on deposits with banks is provided after deducting a flat tax rate of 10%. You can claim a deduction under section 80TTA up to Rs 10,000 for interest earned on your deposits. For senior citizens, a deduction of interest up to Rs 50,000, can be claimed u/s 80TTB.

Missing out on the Deductions that can be claimed

A deduction of up to. Rs 1.5 lakh in a financial year by investing in certain funds and schemes. But how much can be claimed from these schemes is complex. Similarly, most taxpayers are not aware of some expenses that are eligible as deductions.

Form 16 can be termed as Salary TDS (Tax Deducted at Source) Certificate that an employer issue to you for the TDS deducted. Form 16 is an Income tax form, used by the companies to provide their salaried employee’s information on the tax deducted.

As soon as the income from your salary for the financial year exceeds the basic exemption limit, the employer is required to deduct TDS. The deducted amount is to be deposited to the Government.

After deducting TDS from the salary, the employer is required to give a certificate to the employee consisting of the details. This certificate is known as Form 16.

It consists of two parts i.e. Part A and Part B. Part A consists of details about the employer & employee, name and address, PAN and TAN details, TDS deducted & deposited, etc. And Part B consists of details related to other income, deductions allowed, etc.

• If no TDS has been deducted, you may not be issued Form-16.
• The employees need this at the time of filing for tax returns.
• You can directly upload your Form 16 and file your income tax return quickly.
• Form 16 is annually issued by the employer by June 15th.

About Income Tax Returns

Who needs to pay Income Tax?

Every person or entity is liable to pay tax in India if his total income is more than the income notified by the government in the slab rates.

• Individual – Salaried, Self-employed or Professional
• Hindu Undivided Family (HUF)
• Company
• Firm
• Association of Persons (AOP)
• Local Authority
• Artificial Juridical Person
• Body of Individuals (BOI)
• Political Party
• Educational or medical institution
• Trade Union, etc.

Do I need to pay income tax?

It is mandatory to file income tax returns in India if any of the below conditions apply to you, whether you are a man, woman or NRI, for the Assessment Year 2019-2020 (as per the Income Tax Act):

• Earn gross annual income (before deductions u/s 80C to 80U) more than
      (i) Rs. 2.5 Lakhs – For individuals below 60 years
      (ii) Rs. 3 Lakhs – For individuals above 60 years but below 80 years
      (iii) Rs. 5 Lakhs – For individuals above 80 years
• Earn income other than salary like house property, etc.
• Want to claim an income tax refund of taxes already paid. Such as TDS, Advance Tax, etc.
• Earn from or have invested in foreign assets
• Looking to apply for visa or loan applications
• Company or a firm, irrespective of profit or loss
• Having Bank Deposits of over Rs. 1 crore
• Bought foreign exchange of more than Rs. 2 lakh
• Paid an electricity bill of more than Rs. 1 lakh.

On what amount is Income Tax calculated?

Taxable income is to be calculated as per the provisions and rules contained in the Income Tax Act, 1961.
For calculating income tax, slab rates are applied to the taxable income earned during the previous year. These slabs are notified in the budget at the end of each financial year. The income is calculated under various heads of Income and added. Next, deductions and/or exemptions available under Chapter VI-A, are deducted to get the Net Income Chargeable to Tax.

What documents are to be attached with Income Tax Return?

You just need Form – 16, if you are a salaried individual. No other document, like a TDS certificate, proof of investment, needs to accompany your ITR. Still, you must keep them handy, as you may need to submit to authorities if they ask for it.
When you don’t get Form-16, given below is a list of documents that you may have:

• Copy of the previous year’s tax return (to declare any losses or other details)
• Your Bank statements (for the interest paid to your loans, balances, etc.)
• Your TDS certificates (to include taxes that have already been paid)
• Your Savings Certificates, Deductions, Donations, etc. (to include deductions)
• Certificates of Disability in your family (for deductions)
• An Interest statement that shows the interest paid to you, (possibly from Bank and/or Post Office)
• If having business income/loss, have balance sheets, Profit & Loss account statements, and other requisite Audit Reports.

What is Financial Year, Previous Year, and Assessment Year?

The previous year is the same as the Financial Year in which the income is earned. Tax is payable on the income earned during this Previous Year. And this tax is payable in Assessment Year, which is the year next to the Financial or Previous Year. For example, for the Income earned in Financial Year (Previous Year) April 1, 2019, to March 31, 2020, the liability to pay tax will fall in 2020-2021, known as the Assessment Year.

How to pay income tax to the government?

You can pay by either cash/cheque in any designated bank branch or online on the NSDL website. Payment is to be made in Challan-280 in both cases. The Challan must be filed accurately for further processing.

When are income tax returns to be filed?

The due date for filing all ITRs is 31st July for Individuals and 30th September for Businesses. After this deadline, tax returns would be as a “Belated Return” any time before 31st March 2020. With penalty.
It is important to file Income Tax Returns within the stipulated time.

Can I claim the deductions missed out in Form 16 issued by my employer?

Yes. If some exemptions or deductions got left out from Form-16, you can claim the same in ITR. Various deductions u/s 80 such as ELSS, PPF, Life and health insurance, NSC, Children tuition fees, 5-year fixed deposits, donation for charity, repayment of home loan, or even HRA can be claimed.

How to file ITR?

The return can be filed both physically & electronically. For e-filing download the government utility from the Income Tax portal (in excel format or java utility). Complete all the fields with the information required. Pay the taxes due and generate the XML. You can upload this XML on the government portal by logging into your account. Once the XML has been uploaded, download the acknowledgment in ITR-V. This ITR-V can be verified, either by using EVC code or can be couriered to CPC Bangalore for further processing.

How to fill ITR forms?

Here are a few guidelines to keep in mind while filing Income Tax returns.

• If any of the schedules do not apply to you, you are to write —NA— across it.
• Indicate nil figures by “Nil”.
• Put a “-” sign before negative figures.
• All figures are to be rounded off to the nearest Rupee except figures for total income/loss and tax payable. Those are to be rounded off to the nearest multiple of Ten Rupee.

What is 26AS? Why is it required?

26AS is a consolidated statement showing various taxes that are deducted from your income by your employer, bank, or your tenant. It shows how much tax has been received by the government by way of TDS deposited by the deductor (employer, bank), advance tax or any self-assessment tax that has been paid, etc. It also contains the details of income tax refunds that you might have received. It also shows AIR (Annual Information Return) transaction details, which might have been filed by your bank in case you have entered into some specified transaction.
You must match tax payments and TDS deducted with 26AS before filing your ITR to get a tax credit as the tax credit is given only on the items appearing in our 26AS.

Types of Income Tax Return Forms

Who are to file ITR-1 or SAHAJ?

This form is to be used by resident Indians who earn through one of the following:

• Income from Salary
• Pension
• Profit or Loss from a Single House Property (provided no loss was brought forward or is to be carried forward)
• Other Income (excluding Winning from the Lottery or owning & maintaining Race Horses)
• Exempt Income (such as Agricultural Income up to Rs. 5000)
• Total Income combining all the above-mentioned sources does not exceed Rs. 50 lakh.

Taxpayers have to report the gross salary under “Income from Salary”. That is the salary, perks, and profits instead of salary.
The exempt allowances have to be disclosed “Allowance”-wise and deducted from gross salary. For instance, a part of the HRA has been claimed as exempt, that amount should be reported separately. For income earned from other sources, the assessee, also, has to provide a detailed break-up of incomes. For example, Interest earned from savings or fixed deposits, etc.
In case of clubbed income, when the income of another person (spouse or minor child, etc.) is to be clubbed, this Return Form can be used only if the total income falls into the above income categories.

Who cannot use ITR – 1 Form or SAHAJ?

Individuals falling under the below-mentioned categories cannot opt for ITR-1:

• Total income more than Rs. 50 lakh
• Agricultural income over Rs. 5000
• Taxable capital gains
• Income from business or profession
• Income from more than one house property
• You are a Director in a company
• You held investments in unlisted equity shares at any time during the financial year
• Own assets or financial interest in any entity outside India
• For Resident of India (ROI), with foreign assets or foreign income (including signing authority in any foreign account)
• You are a Resident Not Ordinarily Resident (RNOR) or Non-Resident Indian (NRI), Have foreign assets or foreign income
• If you are assessable in respect of income of another person in respect of which tax is deducted in the hands of the other person
• Income taxable at special rates under Section 115BBDA or Section 115BBE
• Income to be apportioned as per the provisions of Section 5A
• Any claim of relief u/s 90 and/or 91
• Any claim of deduction u/s 57, other than deduction relating to family pension
• Claim of credit of TDS in the hands of any other person

What is the structure of the ITR-1 Form?

ITR-1 has 4 parts:

• Part A has Personal Details
• Part B is about Gross Total Income
• Part C has Deductions and Taxable Total Income
• Part D has Tax Computation and Tax Status
• Schedule IT contains details of Advance Tax and Self-Assessment Tax Payments
• Schedule TDS gives details of Tax Deducted at Source

The ITR-1 cannot be used if you are claiming double taxation relief under Section 90/90A/91.

How do I fill out ITR-1?

Documents which you should keep ready before filling out your ITR-1 form are:

• Form – 16: Issued by all your employers for the given Financial Year
• Form 26AS: Remember to verify that the TDS mentioned in Form 16 matches the TDS in Part A of your Form 26AS
• Receipts: If you have not been able to submit proof of certain exemptions or deductions (such as HRA allowance or Section 80C or 80D deductions) to your employer on time, keep these receipts with you to claim them on your income tax return directly
• PAN card
• Bank investment certificates: Interest from bank account details – bank passbook or FD certificate

Is exempt dividend income from shares/mutual funds to be reported in ITR-1?

Yes. In ITR Form – 1, under Part D – computation of tax payable, there is a column for exempt income. Here you are to report your exempt Dividend income. If the dividend is received from stocks of an Indian company, it should be reported under section 10(34). And if the dividend has been earned from mutual funds, it can be reported under the head “others” given under exempt income.

Do I need to report exempt Long Term Capital Gain (LTCG) in ITR-1?

Yes. Under Part D – Computation of Tax Payable, there is a column for exempt income. You have to report your exempt LTCG here. If the LTCG is from the sale of equity shares, it is to be mentioned in the column given for “Sec10 (38)”. For all other LTCG, mention it under the head “others”.

How to report bank accounts in ITR-1?

You have to provide the details of all the savings and current accounts held by you at any time during the FY for which you are filing the return. So if you are filing the return in 2019-20, then mention the detail of all accounts during FY 2018-19. Also, indicate the bank account in which your refund should be credited. Whether you have a refund or not. The account number should be as per the core banking solution (CBS) of the bank.

Who are to file ITR-2?

ITR-2 is for an individual or a Hindu Undivided Family (HUF) who is not eligible to file Form ITR-1 (Sahaj) and who is not having any income under the head “Profits or gains of business or profession. Thus, persons having income from the following sources are eligible to file Form ITR-2:

• Income from more than one House Property
• Capital Gains/loss on the sale of investments/property (Both Short Term and Long Term), Income from Other Sources (including Winning from Lottery, bets on Race Horses and other legal means of gambling)
• Foreign Assets/Foreign Income
• Agricultural income of more than Rs. 5000
• Resident not ordinarily resident (RONR) and a Non-resident (NRI)
• A Director of listed and unlisted companies

Who is not eligible to file ITR-2?

• Individuals whose income includes Income under the head “Profits or Gains of Business or Profession, are not to file ITR-2, for the Assessment Year 2019-20.
• ITR-2 form can also not be filed by a company or LLP or other types of legal entities.
• The ITR-2 Form is also not to be used if you are claiming double taxation relief u/s 90/90A/91.

When is ITR-2 to be filed?

ITR-2 form is to be filed by individuals and HUFs on or before 31st July of every year.

What is the Structure of ITR-2 Form?

ITR-2 is divided into:

• Part A: General Information.
• Part B-TI: Computation of Total Income.
• Part B-TTI: Computation of tax liability on total income.
• Details to be filled if the return has been prepared by a Tax Return Preparing Agent.
• Schedule S: Details of income from salary/salaries.
• Schedule HP: Details of income from House Property(s).
• Schedule CG: Computation of income under Capital gains.
• Schedule OS: Computation of Income from other sources.
• Schedule CYLA: Statement of income after setting off of the current year’s losses.
• Schedule BFLA: Statement of income after setting off of unabsorbed loss brought forward from earlier years.
• Schedule CFL: Statement of losses to be carried forward to the future year.
• Schedule VIA: Statement of deductions (from total income) under Chapter VIA.
• Schedule 80G: Statement of donations entitled for deduction under section 80G.
• Schedule 80GGA: Statement of donations for scientific research or rural development.
• Schedule AMT: Computation of Alternate Minimum Tax payable under section 115JC.
• Schedule AMTC: Computation of Tax Credit u/s 115JD.
• Schedule SPI: Statement of income of spouse/minor child/son’s wife or any other person or association of persons to be included in the income of the assessee in Schedules-HP, CG, and OS.
• Schedule SI: Statement of income which is chargeable to tax at special rates.
• Schedule EI: Exempt Income Details.
• Schedule PTI: Pass-through income details from business trust or investment fund in Section 115UA, 115UB
• Schedule FSI: Statement of income accruing or arising from outside India.
• Schedule TR: Details of Taxes paid outside India.
• Schedule FA: Details of Foreign Assets and income from any source outside India.
• Schedule 5A: Statement of apportionment of income between spouses governed by Portuguese Civil Code.
• Schedule AL: Asset and liability at the year-end (applicable in case income exceeds Rs. 50 lakhs).

How to file ITR-2?

Form ITR-2 requires detailed disclosures for various transactions. In the case of donations, segregation into cash and other modes have to be provided. For the immovable property sold, the address of the immovable property sold with buyer’s details with PAN. In the case of agricultural income exceeding Rs. 5 Lakhs, the location and ownership details of agricultural land must be provided.

• The Directors have to disclose information on their Directorships in various companies and details of their investment in unlisted equity shares.
• The specifications of the amounts falling under salary, perks, and profits other than salary have to be mentioned therein. Taxpayers would be able to draw this information from the annexure to Form-16 provided by the employer.
• The employee earning income from more than one employer during a financial year has to provide the complete salary details (salary, perks, and profits) for each employer.
• While disclosing “Residential Status”, the taxpayer has to furnish the details of days of stay in India in the previous year, during the previous 4 years, etc. For NRIs, additional details need to be furnished concerning details of the jurisdiction of residence outside India and taxpayer identification numbers of such a country.

Who is to use ITR-3 form?

The ITR-3 Form applies especially to those Individuals and HUF who have income from carrying on a profession or Proprietary business. If an Individual or HUF is having income as a partner of a partnership firm that is carrying out business/profession, he is not to file ITR-3. He is required to file ITR 2.

Who should not file the ITR-3 Form?

If an Individual/HUF is having income as a partner of a partnership firm that is carrying out business/profession, he cannot file ITR-3. In such a case, he is required to file ITR 2.

What is the structure of ITR-3?

ITR-3 is divided into:

• Part A-Gen: General Information of taxpayer & business.
• Part A-BS: Balance Sheet of the business or profession for the FY.
• Part A-P& L: Profit and Loss statement of the business for the FY.
• Part A-OI: Other Information.
• Part A-QD: Quantitative Details.
• Part B: Outline of the total income and tax computation on the net income chargeable.
• Verification.
• Tax Payments: Details of advance tax, TDS, etc.

Who is to file ITR-4?

ITR-4 is the Income-tax return form for those assessees, who have opted for the presumptive income scheme u/s section 44AD and 44ADA of the Income-tax Act. However, if the total income of the taxpayer is over Rs. 50 lakhs, then he can’t file ITR-4 and will have to file some other return form.

ITR-4 can be filed by a resident Indian or HUF or a resident firm (other than LLP) if the total income comprises of any of the following components:

• Presumptive Income computed as per Sections 44AD, 44ADA and 44AE
• Salary or pension
• Income from single house property (provided there is no brought forward loss or loss to be carried forward)
• Income from other sources (including winnings or loss from lottery and racehorses, other than income chargeable at special rates, and including family pension)
• In the case of clubbed income, i.e., the income of another person (spouse, minor child, etc.) is to be clubbed with the income of the taxpayer. Returns in ITR-4 can be filed only when such income falls in any of the above categories.

Who cannot opt for ITR-4?

The below-mentioned individuals and HUFs are not allowed to opt for ITR-4:

• The total income that has been generated is more Rs.50 lakh.
• If any losses have been brought forward from previous years.
• In case the individual has a signing authority at any place outside India.
• If any investments are present in equity shares that are unlisted at any time during the FY.
• Limited Liability Partnerships (LLPs) cannot opt for this.
• For individuals having foreign assets or have generated a foreign income.
• If the income has been generated from more than one house property.
• For the Director of a company.
• In case the individual is an NRI or an RNOR.
• He has any income to be apportioned following Section 5A.
• Income from business or profession other than the income from the presumptive taxation scheme.
• Capital gains/losses on the sale of investment/ property,
• He is assessable for the complete or part of the income on which TDS has been deducted in the hands of the person other than the assessee.
• Dividend income exceeding Rs. 10 lakhs taxable under Section 115BBDA.
• Assessee has any unexplained income (i.e. cash credit, unexplained investment, etc.) taxable at 60% u/s 115BBE.
• Income under the head “income from other sources” of which the assessee has claimed exemption u/s 57.
• Deduction has been claimed u/s 80QQB or 80RRB in respect of royalty from patent or books.
• Deduction has been claimed u/s 10AA or Part-C of Chapter VI-A.
• If an individual is taxable in respect of an income but TDS for such income has been deducted by any other person (i.e., clubbing of income, Portuguese Civil Code, etc.).
• Assessee is Claiming relief of tax u/s 90, 90A or 91.

What is meant by Presumptive Scheme?

As per Section 44AA of the Income-tax Act, 1961, an individual engaged in business is required to maintain regular books of account under certain circumstances. Presumptive taxation scheme under sections 44AD, sections 44ADA and sections 44AE, has been framed to give relief to small taxpayers from this tedious work.

• Section 44AD: For small taxpayers engaged in business other than the business of plying, hiring, or leasing goods carriages.
• Section 44ADA: For small taxpayers having income from profession.
• Section 44AE: For small taxpayers engaged in the business of plying, hiring, or leasing goods carriages.

A person adopting this scheme can declare income at a prescribed rate and is relieved from the complicated job of maintenance of books of account. The individual availing this scheme will be able to declare the total taxable income at a predefined rate.

Who is eligible to take the benefit of presumptive scheme u/s 44AD?

Who is eligible to take the benefit of presumptive scheme u/s 44AD?

• Resident Individual
• Resident HUF
• Resident Partnership Firm (excluding LLP)

Who cannot opt to file ITR-4 as per Section 44AD?

The scheme cannot be adopted by a non-resident and by any person other than an individual, a HUF or a partnership firm, LLP. And the person who has claimed for any deductions u/s 10A/10AA/10B/10BA or u/s 80HH to 80RRB in the FY.

Who is eligible to file ITR-4 under 44ADA?

The presumptive taxation scheme of sections 44ADAcan be adopted by a person resident in India, in a specified profession whose gross receipts do not exceed Rs. 50 lakhs in an FY. Following are the specified profession:

• Legal
• Medical
• Engineering or architectural
• Accountancy
• Technical consultancy
• Interior decoration
• Any other profession as notified by CBDT

Who is eligible for presumptive taxation u/s 44AE for ITR-4?

Every person (i.e., an individual, HUF, firm, company, etc.), who owns not more than 10 goods carriages at any time during the previous year and who is engaged in the business of plying, hiring or leasing these goods carriages.

Are professionals opting for presumptive income scheme required to maintain books of accounts?

No, professionals who opt for the presumptive scheme are not required to maintain books of accounts. They are exempt from the requirements of section 44A to maintain books.

How to calculate the taxable income of person u/s 44ADA of presumptive income scheme?

Persons who are engaged in a profession that is eligible and whose turnover does not exceed Rs. 50 lakhs can opt for the presumptive taxation scheme u/s 44ADA. They will have to declare 50% or a higher percentage of gross turnover or gross receipts as taxable income. No expenses will be allowed further. This amount will be chargeable to tax under the head “Profits and gains of business or profession”. The taxpayer can declare higher profits but it cannot be less than 50% of gross turnover.

Can expenses be claimed under presumptive income scheme?

No, a person cannot claim any expenses under presumptive taxation scheme as income computed as per this section at 8% (in case of businesses) or 50% (in case of professionals) is final taxable income. It is deemed that all expenses have been adjusted while computing this final taxable income.

In which form should income tax return be filed for the presumptive scheme?

If any assessee who is eligible for presumptive taxation scheme opts for it then he should file his return in ITR-4.

What is the limitation of opting out of the presumptive taxation scheme?

An assessee opting for presumptive taxation scheme should continue the same scheme for the next 5 assessment years. If he fails to file ITR, he cannot opt for a presumptive scheme.

Who can file ITR-5?

• Firms
• Limited Liability Partnerships (LLPs)
• Body of Individuals (BOIs)
• Association of Persons (AOPs)
• Co-operative Societies,
• Artificial Judicial Person
• Local Authorities

Who is not eligible for ITR-5 Form?

ITR-5 cannot be filed by Taxpayers under the below category:

• Assessees who are required to file the return of income u/s 139(4A) or 139(4B) or 139(4C) or 139(4D) (i.e., Trusts, Political party, Institutions, Colleges, etc.)
• Individuals, HUFs (Hindu Undivided Families), Companies.

Who is eligible to file ITR-6?

ITR-6 is to be filed by companies that are not claiming any exemption under Section11.

How can I view my 26AS?

26AS can be viewed only if you are registered on the Income-tax Portal. The user is redirected to the Traces Portal when he requests to view 26AS. The statement can be viewed & downloaded for the selected Assessment year.

I have already paid my taxes. Do I still need to file my return?

Yes, return filing is compulsory if your taxable income is above the slab, whether taxes have been paid or not. You can claim the benefit of tax credit or get a refund only if your return is filed.

What if I have missed the due date of filing ITR?

You can file a belated return. It can be filed either at the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. With a penalty. For the assessment year 2019-20, for example, if you had failed to file your returns by 31st August 2019. Then belated return can be filed any time before 31st March 2020.

What to do if a mistake has been made in filing the return?

If any error is discovered after the return is filed then it can be revised u/s 139(5). Revised Return of Income Tax can be filed by an assessee any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.