Income Tax and Its Time to File Your Returns

“There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.” - by Robert A. Heinlein

This is what many of us think when we pay tax for the first time. 

What is Income Tax?

Income tax is a tax that is usually levied on individuals (commonly referred as taxpayers) and varies with respect to income. The tax rate or the amount varies by type or characteristics of the taxpayer. The tax rate may gradually increase as the taxable income increases. 

The concept of taxing the income is a modern-day innovation and pre-purposes several things such as - a money economy, expenses and profits, reasonably accurate accounts, a common and clear understanding of receipts, and much more.

The Government makes use of the tax amount for various purposes - ranging from building infrastructure to paying the government employees.  To make it simple, governmental organizations make use of the tax amount to fund various public expenditures. 

Income taxes can be broadly classified into 2 types, namely,

• Direct Tax
• Indirect Tax

Direct Tax – It is a tax that is directly paid to the government by the taxpayer from their income. This tax is levied on both individuals and organizations directly by the government. Example: Income tax, wealth tax, and corporation tax. 

Indirect Tax – GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Act came into effect on 1st July 2017. GST is an indirect tax which is levied on manufacture, sale and consumption of goods & services at the national level. It will replace all indirect taxes levied on goods and services by State and Central. 

As per the income tax act, everyone who earns income from India is subject to pay tax. Income tax is to be paid under the head of 

• Income from Salary
• Income from House Property
• Income from Capital Gains 
• Income from Business
• Income from Other Sources

Tax Slab for the Financial Year 2018-2019

Income Range	Tax Rate	Tax to be Paid
Up to Rs. 2.5 lakhs	0	No tax
Between Rs. 2.5 lakhs and Rs. 5 lakhs	5%	5% of your taxable income
Between Rs. 5 lakhs and Rs. 10 lakhs	20%	Rs. 12,500 + 20% of income above Rs. 5 lakhs
Above Rs. 10 lakhs	30%	Rs. 1,12,500 + 30% of income above Rs. 10 lakhs

31 January	31 July
Deadline to submit your investment proofs	Last date to file your tax return

TDS Exemption

Tax is deducted by the employer and remitted to the government. The government also provides some exemption on the income. Tax Exemption is a monetary exemption which reduces the taxable income of the taxpayer. Tax exemptions are given under 80C, 80D, 80TTA, 80TT, etc.

Save Income Tax

The following are some of the top options that can be considered for saving on income tax:

• HRA, Life Insurance Premiums, National Savings Certificate, Leave Travel Allowance, Tax Saving Fixed Deposit (minimum of 5 years), ELSS Tax Saving Mutual Funds, and more can be considered as investment options.
• Mutual funds such as Equity Linked Savings Schemes (ELSS) can be claimed for tax deduction under Section 80C. Compare to Tax Saving fixed deposits and PPF’s, the ELSS offers shorter lock-in period.
• Unit Linked Insurance Plans (ULIP) are insurance schemes that are linked to the market. The investment made under ULIP qualifies for tax deductions.
• Insurance - Life Insurance and Health Insurance - The money paid towards life insurance and health insurance policies are considered for tax deductions under Section 80C.
• Loans - When we take a loan for buying a house or for renovation purpose, we are eligible for tax deductions for interest on Housing Loan up to Rs. 2,00,000 for a financial year 2018-2019. 
• National Saving Certificate (NSC) - The NSC offers a safe and reliable method of investing money. The investments made under NSC are eligible for tax deductions.
• Provident Fund (PF) - You are allowed to invest more amount towards your PF account that will help you reduce your taxable amount.

Income Tax Return

An Income Tax Return is a process where a taxpayer discloses details of his income, claims, applicable deductions and exemptions, and taxes that are payable on the taxable income. Any excess tax that is paid for a year can be claimed as a refund in the return of income. 

Income Tax Return Filing

Filing of income tax return has been made mandatory for all the taxpayers. The due date for filing the return of income is 31st July of every year.

If one fails to file the income tax return on time, then he/she may face some serious issues. Some of the major disadvantages include:  

• You will be denied carry forward of losses (except house property loss) to future years
• Delay processing of refund claims if any
• Difficulty on getting home loans
• Levy of late filing fee up to Rs. 10,000 under Section 234F
• Levy of interest under 234A if there are taxes due as on 31 July

Penalty on late filing of ITR:

Starting from April 1, if you file your ITR after the deadline of July 31, 2018 (unless or until the tax department extends the period), you will be legally accountable to pay a maximum penalty of Rs 10,000/-. 

Pertaining to the new law, if the return is filed after the due date but before December 31 of that year, a penalty of Rs 5,000/- will be levied; Post December 31, Rs 10,000/ will be levied. As a concession to the small taxpayers, if your income is not more than Rs 5 lakh, the maximum penalty levied will be Rs 1,000/-.

E-Filing Procedure

Before doing E-filing, have the following documents in hand:

1. PAN
2. Aadhaar
3. Bank account details
4. Form 16
5. Investments details

How do I file e-Returns?

1. Fill income tax returns offline and upload XML on the official website: IncomeTaxIndiaeFiling.gov.in 
2. Prepare and submit ITR 1 online.

Steps to Follow to File Income Tax Returns

You can easily file your income tax returns online by simply following the below steps:

1. First, log on to IncomeTaxIndiaeFiling.gov.in and complete the registration process.
2. Your Permanent Account Number (PAN) is your user ID.
3. View your tax credit statement or Form 26AS. The TDS as per your Form 16 must tally with the figures in Form 26AS.
4. Click on the income tax return forms and choose the financial year. 
5. Download the ITR form applicable to you.
6. Open the excel utility and fill the form by entering all necessary details using your Form 16.
7. Check the payable tax amount by clicking the 'calculate tax' tab.
8. Pay the tax (if applicable) and fill in the details in the challan. 
9. Check and confirm all the data that are provided in the worksheet by clicking the 'validate' tab.
10. Generate an XML file and save it on your desktop.
11. Upload the saved XML file.
12. A pop-up will be displayed asking you to digitally sign the file. In case you have obtained a digital signature, select ‘˜Yes'. If you have not got the digital signature, choose 'No'.
13. The acknowledgment form, ITR Verification (ITR-V) will be generated, which you can download for future purposes.
14. Take a printout of the form ITR-V and sign it in blue ink. 
15. Send the form by ordinary or speed post to the Income-Tax Department-CPC, Post Box No. 1, Electronic City Post Office, Bangalore, 560 100, Karnataka within 120 days of filing your returns online.

Instead of Sending the ITR-V to CPC Bangalore government encourages to do e- Verification.

How to e-Verify your income tax return using Aadhaar Card? 

To complete the e-filing process, taxpayers need not send the 1-page verification document ITR-V to the Income Tax Department located in Bangalore. They are rather allowed to evaluate their return online, once the e-filing using EVC is done.

The Electronic Verification Code (EVC) will be sent to the mobile number that is registered, while filing the returns online. This is a 10-digit alpha-numeric code. It checks the identity of the verifier to evaluate his Income Tax Return. It can be generated through the IT department’s e-filing portal.

e-Verify Your Return Using Aadhaar Card

Your Aadhar card must be linked to your PAN in order to e-verify your return.

Follow the below listed steps to link your Aadhar card to your income tax return.

Step 1: Log on to the Department e-filing website.

Step 2: As soon as logging in, a popup appears asking you to link your Aadhar number with you e-filing account. If you do not see the pop-up, go to the blue tab that appears on the top bar named ‘Profile Settings’ and click on ‘Link Aadhaar’.

Step 3: Make sure your PAN card details are appropriate and enter the Aadhar number. Click on Save.

Your Aadhar number will now be successfully linked to your PAN after validation.

Once your Aadhar and PAN has been linked, follow the below steps to e-verify your return:

Step 1: Upload your ITR through the Income Tax e-Filing website.

Step 2: After this, you will be asked how you would like to verify your return. 

The following options will appear:

a) I already have an EVC to e-verify my return.

b) I do not have an EVC and would like to generate EVC to e-Verify my return.

c) I would like to generate Aadhaar OTP to e-Verify my return.

d) I would like to send ITR-V/I would like to e-verify Later.

Select the third option to generate your Aadhaar OTP. An OTP will be sent to the registered mobile number which appears on your Aadhaar. The validity of this OTP is 10 minutes.

Step 3: Enter the OTP you received on your registered mobile number on the page.

Click submit, you will get the message ‘Return successfully e-Verified. Download the Acknowledgement’. This acknowledgment will be sent to your email ID that is registered.

You have successfully e-filed and e-verified your income tax return.

Paying tax is the fundamental duty of every citizen!