Whenever you’re out on the roads of India and take a moment to notice the infrastructure all around you, does it make you question the source of funding? From a wooden park bench to the massive 6-lane highways that connect major metropolitan cities, everything is paid for by the taxes we pay. So, people who file their taxes help the nation move forward. Sure, there was a time when filing taxes was a cumbersome process. But with advances in technology, it can be done online within minutes.
Filing your income tax is now easier than ever before. You can even look up information easily or use an income tax calculator to get an accurate estimate. The Indian government has also made it easier to file your income tax with their e-Filing portal. Plus, there are several benefits of regularly paying taxes.
In light of all this, here’s everything you need to know about income tax returns. Who knows, you may be tempted to even pay advance tax after this!
How can you claim an income tax return?
Put simply, when you enter all the relevant information regarding your identity and income, the e-Filing portal will ask you for an ITR prompt. It is right there on the screen when you’re filing your income tax and next-to-impossible to miss. You can be eligible for it if you’ve been smart with your finances and have invested in assets that lend you a tax break. To make a claim on your ITR, you simply need to fill in the right details and the benefits reflect instantaneously. Either your taxable income gets lowered, or you receive some reimbursement in the bank account linked to your PAN card.
If you file an advance tax, you can even make a claim when the cycle of the next financial year rolls around. It also gives you plenty of time to build up your financial assets and invest in tax-saving instruments, such as life insurance, before your annual income is calculated.
Are there different types of income tax?
In the current process of filing income tax, there are four different types of ITR:
- ITR-1 (Sahaj): This can be filed by residents who have an annual income of up to ₹50 lakhs. This can be from salaries, properties, investments, and other sources, including agricultural income of up to ₹5,000.
- ITR-2: This can be filed by individuals or Hindu Unified Families (HUFs) who don’t have a business or profession for income.
- ITR-3: This is for individuals or HUFs who have an income from a profession or a business.
- ITR-4 (Sugam): This is a special category for individuals, HUFs, or business entities (other than LLPs) that possess a presumptive income of up to ₹50 lakhs in a year. This is the cumulative income that is calculated under Sections 44AD, 44ADA, or 44AE of the Income Tax Act.
How can ITR benefit you?
Filing your taxes is more than just something that benefits the nation. Your ITR is proof of you being responsible for your finances. It can help you get a visa approved quickly or a quick loan approval. Plus, whenever you decide to start your own business, you will need ITR proof to register your business.
Additionally, you get reimbursement in case of donations to a cause you support, letting you ease the financial burden for doing the right thing. It also massively improves the contribution you make to society, giving you a more direct approach instead of depending on the government for projects of goodwill.
Also, doing your duty towards the nation helps you avoid penalties. So, make sure you learn how to file taxes and plan for it well in advance. This way, you have enough time to invest in tax savings instruments, such as life insurance. With such investments, you can get deductions of up to ₹1.5 lakhs on your taxable income in a financial year. So, you end up with dual benefits of savings and future financial security.