Direct Tax - Know How to file your income tax return (India)

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Direct Tax

WHAT IS DIRECT TAX?

In India, tax is levied by state government and central government in two ways Direct and Indirect. Direct tax is levied on Individuals and Corporate income. While Indirect tax is levied on the sale of Goods and Services. In direct tax the burden of paying taxes is on Individuals and Corporate entity. For that matter Individual and Corporate entity need to assess their tax and pay the due at end of financial year.

On other hand, Indirect tax burden is on seller who sell the goods or service to the consumer or client. He has to charge tax on the goods or services and pay to government.

SOME OF DIRECT TAX IMPOSED BY GOVERNMENT

  1. Income tax– it is the tax applicable on the income earned by an individual or taxpayer.
  2. Corporate tax– this is the tax applicable on the profits earned by companies from their businesses

We will focus on Income Tax  for salaried, professional and business entity.

WHY TO FILE INCOME TAX RETURN

An Income Tax Return is the form where individual declare his income and deduction for the given financial year. Often I here people saying that my employer had deducted my income tax, why do I have to file it. 

Your Employer deposit tax with Income Tax Department and issue form 16 to you.

When employer deduct you TAX called TDS quaterly, you can see the equivalent tax in your 26AS. 26AS form is available online when you login to Income Tax website by credentials. If you are not registered on the site, please register on priority if you have PAN number.

So why to file Income Tax Return?

  1. If you have paid access tax or missed some deductions such as LIC, NPS or Mutual Fund investment then you can claim refund for same.
  2. Avail home loan facility as bank may need your ITR form.
  3. Lastly, if you declare all your income and deduction and transaction that would avoid scrutiny and notices from IT department.

All individual whose income exceeds Rs.2,50,000 for the financial year have to file their income tax return. 

INCOME TAX SLAB FOR INDIVIDUALS (SALARIED, PROFESSIONAL AND BUSINESS ENTITY)

New tax slab introduced in Budget 2020 is an optional scheme where the taxpayer has to choose from the old scheme and the new scheme.

However, for the new scheme, taxpayer need to sacrifice the deductions such as Leave Travel Concession (LTC), House Rent Allowance (HRA), Standard deduction, Interest on housing loan for respect of self-occupied property, deductions of up to Rs 1.5 lakh available for specified investments/expenses availed under the popular section 80C, donations to charitable organisations, deduction for medical insurance premium, etc.

Comparison of the new scheme and old scheme for filing the income tax return for AY 2021-22

Tax Slab

COMPONENTS OF FORM 16 PART B -1

Let us understand  some components of Form 16.  Form 16 Part A is where you can see total TDS deducted for each quarter. And Form 16 Part B is computation of tax of salary and other income. We rather say Part B is comprehensive tax summary.

  1. Gross Salary– Salary received from employer is show in 1(a) and any perquisites received are shown in 1(b).
  2. Allowance- Allowance exempted are shown in 2. Allowance like Uniform Allowance, House Rent Allowance or Medical Allowance and many others are shown in under this.
  3. Balance – After deducting allowance from gross salary balance is shown in 3.
  4. Deductions – These deduction are generally tax on employment that is professional tax. 
  5. Aggregate of deduction is sum up in 5
  6. Balance (3) – (5) 
  7. Any other income reported by Employee- That is other income. If you have short term gain or long term gain then you have to inform your employer the possible gain for that financial year. If you fail to provide the other income details to employer, you can later show it in you ITR filing. But there is the possibility of interest charged on the excess tax if your tax due cross Rs 10,000. If your total tax due is below Rs 10,000 than no interest is charged. Now this is total Gross income (salary plus income from other sources.
Form 16
Direct Tax

COMPONENTS OF FORM 16 PART B -2

Serial no 9 is deduction under chapter VI-A which helps Individuals and HUF to reduce their taxes. Among various tax deduction individual prefer to claim deductions and 80C. 

80C deductions includes Life Insurance, Public Provident Fund, Equity linked Saving Scheme, Stamp duty and Registration, National Savings Certificates, Home Loan Principal Repayment.

80CCC deduction for premium paid for annuity plan.

80CCD deduction for contribution to Pension fund.

80TTA deduction Interest on saving account.

80GG deduction House Rent Paid.

80E deduction Interest on education loan.

80EE deduction  Interest on Home loan

80DD deductions and others. I will explain all the deductions in detail here.

After deducting aggregate deduction you will get taxable income on which tax is payable. You can pay tax on NSDL website by challan 280 we will also discuss how to pay tax online.

HOW TO FILE ITR-1 FOR SALARIED INDIVIDUAL

Before we start filing ITR 1 make sure you are registered with income tax website. Filing ITR 1 is as simple as copy and paste. Income tax website will calculate everything automatically. So you just need to input data from form 16.

Direct Tax

ITR-1

ITR – 1 is for resident individuals having income less than Rs.50 lakhs, one house property and other sources.

So, for filing ITR-1 select e-file after login. Select assessment year and ITR form as ITR 1 and filing type as Original/revised return. And lastly submission mode as prepare and submit online.

Check bank details are correct, if not available you can enter same while filing ITR 1.  Select continue.

Fill the ITR from as per Form 16 data. This is only for ITR-1. We will discuss about filing ITR-2, 3 and 4 in next article. Please comment in comment box if you feel difficulty in filing the ITR. I will surely assist you. 

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