An Income Tax Return (ITR) declares the total annual income of an individual or an entity to the Income Tax Department of India. Read on to know more about Income Tax Return.
An income tax return is a form that mentions your income from all the sources and tax liability. It provides information about the taxes paid by you. If the ITR declares that you have paid excess tax during a year, you will be eligible for an income tax refund.
According to the income tax laws, every individual or entity that earns any income during a financial year must file an income tax return. Furthermore, the income is categorised into five heads.
|Income Head||Types of Income|
|Income from Salary||Gratuity, EPF, and EPS contributions, wages, salary, etc. are the types of income that fall under this category|
|Income from Capital Gains||Capital gains are profits earned by selling capital assets such as house property, shares, mutual funds, stocks, etc.|
|Income from House Property||Income earned by giving property on rent is categorised under this head|
|Income from Profession||Income earned by providing professional services or from businesses is categorised in this head|
|Income from Other Sources||Interest and dividend earned from bank deposits, mutual funds, securities, etc. are considered income from other sources|
The IT department has segregated ITR forms based on the classes of taxpayers. To understand the different forms, read the following table.
|ITR Forms||Taxpayer Class|
|ITR 1||This form is for individuals who have a regular source of income (salary, pension, or other sources)|
|ITR 2||This form is for individuals and HUFs with income from sources other than business or profession|
|ITR 3||This form is for HUFs and individuals with income from business or profession|
|ITR 4||This form is for taxpayers who have selected the presumptive income scheme|
|ITR 5||This form is for Firms, AOPs and BOIs, etc.|
|ITR 6||This form is for companies that don’t claim tax exemption under Section 11 of the Income Tax Act|
|ITR 7||This form is for entities that fall under Section 139(4A), 139(4B), 139(4C), 139(4D)|
Income Tax Slabs
In Budget 2020, the finance minister of India introduced a new tax regime. The finance minister reduced the tax rates for almost every income tax slab. However, the new regime can only be opted by individuals who are willing to forgo most of the deductions and exemptions. But the finance minister also announced that individuals who don’t want to forgo exemptions and deductions can pay tax as per the old regime.
Old Tax Regime vs New Tax Regime
|Annual Income||Old Tax Rate||New Tax Rate|
|Up to Rs. 2.5 Lakhs||0%||0%|
|Between Rs. 2.5 Lakhs and Rs. 5 Lakhs||5%||5%|
|Between Rs. 5 Lakhs and Rs. 7.5 Lakhs||20%||10%|
|Between Rs. 7.5 Lakhs and Rs. 10 Lakhs||20%||15%|
|Between Rs. 10 Lakhs and Rs. 12.5 Lakhs||30%||20%|
|Between Rs. 12.5 Lakhs and Rs. 15 Lakhs||30%||25%|
|Above Rs. 15 Lakhs||30%||30%|