E-Filing Income Tax

E-Filing Income Tax: Overview

What is E-Filing Income Tax?

The government funds its various projects and subsidies through the revenues it generates. Though a portion of these revenues are earned by the government through exports the majority of the revenue is generated by means of taxes. Taxes are commonly classified into 2 categories – direct and indirect. Among direct taxes, income tax is perhaps the most talked about and the one that almost everyone tries to get a deduction on. Income tax refers to the tax where the person earning a particular sum of money pays a part of their income to the Government at a predetermined rate. Income tax is directly proportional to the earning capacity of an individual. As income increases, the amount of tax payable also increases.

Income Tax Return or ITR is a document that provides data regarding all the different heads under which tax is applicable in case of the assessee. Income tax returns need to be filed by individuals, organisations and firms which show the income generated by them in a particular financial year and the tax paid till date and/or payable for the same income. This income tax return is submitted with the Department of Income Tax. Presently, income tax can be filed by a resident in nine different forms. They are as follows:

  • ITR-1
  • ITR-2
  • ITR-3
  • ITR-4S
  • ITR-4
  • ITR-5
  • ITR-6
  • ITR-7
  • ITR-V

It has been made mandatory by the Government of India to file the income tax returns within a specified date. The need to file income tax returns arises because of the following reasons:

  • If the total annual income of a person below 60 years of age is Rs. 250,000 or for a person above 60 years but below 80 years is Rs. 300,000 and  for a person above 80 years is 5, 00,000 and above
  • If any Indian resident has financial interests abroad.
  • If it is a firm or company where financial year’s profit or loss is not taken into consideration.
  • If the tax payer applies for a visa.
  • If an Indian resident has signing authority overseas.

Filing of income tax can be easily done online and the process is called e-filing income tax. For e-filing of income tax, the tax payer must keep some important documents ready with him/her. These documents are as follows:

  • Form 16.
  • Statement of bank in which the tax payer holds a valid savings/current account.
  • Photocopy of the last year’s income tax returns filed by him.

If the tax payer has the above mentioned documents ready with him, he has to then follow a series of steps in order to file income tax online. The different steps for e-Filing are as follows:

  • The first and foremost step to file income tax online is registration. Subsequent to registration, the Permanent Account Number or PAN of the tax payer becomes the user id.
  • The second step is Tax Credit Statement available in Form 26AS. Last year’s TCS is checked as it contains all the lists of the taxes that were deducted and submitted with the Income Tax Department.
  • The TDS or Tax Deducted at Source that is available in Form 16 should the Tax Credit Statement in Form 26AS downloaded from the company website.
  • In order to file income tax return for the current year, these steps are to be followed:
  • Select ‘Download’ from the drop down menu.
  • Click on Income Tax Returns Forms and choose the present financial year.
  • After doing so, the user must download the proper ITR form available.
  • Then the user gets the facility to complete the process of filing of income tax returns on the portal itself with the help of ‘Quick e-file ITR’ link that is present on the portal.
  • Then the user should fill in the details from form 16 in the Return Preparation Software. It is special type of software that contains different spreadsheet applications like Microsoft Office, Open Office etc. that can be used to calculate the applicable tax liability or dues.
  • After that the user should compute the amount of tax that he is supposed to pay. For that purpose, he should click on ‘Calculate tax’ tab that is available. If it is applicable, then the user is supposed to pay the required tax and then give out the details of the challan in the tax return option.
  • The user should always cross check all the details provided by clicking on the ‘validate’ tab.
  • After this, a ‘XML file’ has to be generated and saved on the local disk on the tax payer’s computer.
  • To upload the tax return document, the user select the current year, choose the XML file that was previously saved. This offers the tax payer an option to digitally sign the file. If the user has digital signature he should choose ‘Yes’ option otherwise ‘No’ tab.
  • After all these processes take place and there are no mistakes, the filing process becomes complete when a proper message is flashed on the screen. Then the user can download the ITR acknowledgement form commonly known as ITR-V.
  • Lastly, the tax payer is supposed to physically sign the ITR-V form and then submit the same to the appropriate Income Tax Department office through either speed post or normal post. This should ideally be done within 120 days from the date of filing the income tax returns online.

Advantages of E Filing of Income Tax

E-Filing of income tax returns has been made compulsory by the Government of India. Though it is not an easy task, if done properly and before time, the tax payer can actually benefit in a lot of ways. But more importantly, it is much easier to do as compared to the earlier paper filing process. The advantages of e-filing of income tax are as follows:

  • The last date for filing income tax returns is July 31st every year. If the user files them one or two month prior to this date, they can complete the task more swiftly with less congestion as during the final dates, servers tend to get overloaded.
  • Online filing of tax returns helps the tax payer to keep a record of all the financial transactions with the Income Tax Department in a more effective manner. This record can act handy if the tax payer wishes to carry out a business relation with any other organisation supporting such records in the future.
  • The ITR-V Form acts as a proof of all the tax related transactions carried out by the tax payer for a particular year. This form can be used if the tax payer who wishes to open a line of credit or holds any other financial liability such as a loan later on.
  • If the tax payer becomes unable to file income tax returns for the previous year, he becomes liable to pay penal interest for every extra day till the date when payment is paid. So, advance filing of income tax return is extremely necessary for every tax payer.
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