E-filing Income Tax Return Guide
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Step-by-Step E-Filing: Comprehensive Tax Guide

Wed Jun 21 2023

A Comprehensive Guide to E-Filing Income Tax Return

Introduction

Filing income tax returns is an essential responsibility for taxpayers. It allows individuals to declare their income, expenses, deductions, investments, and taxes. In accordance with the Income Tax Act of 1961, taxpayers are required to file an income tax return under various scenarios. In this blog, we will explain all types of ITR forms that need to be filled for Income Tax Return; we will guide you through the process of e-filing your income tax return, providing step-by-step instructions to ensure a smooth and hassle-free experience.

Types of ITR forms

The Income Tax Return (ITR) forms in India are categorised into different types: ITR 1 to 6. These forms are designed to cater to the varying needs of different types of taxpayers based on their income sources and nature of income. Let's take a brief look at each of these forms:

  1. ITR 1 (Sahaj): This form is meant for individuals with a salary, pension, or income from one house property and with an income of up to Rs. 50 lakhs. It is a simplified form for salaried individuals and does not require the disclosure of detailed financial statements.
  2. ITR 2: Individuals and Hindu Undivided Families (HUFs) who do not have income from business or profession are required to use ITR 2. This form applies to individuals with income from more than one house property, capital gains, and foreign income.
  3. ITR 3: This form is applicable for individuals and HUFs who have income from business or profession. It is specifically designed for taxpayers who are partners in a partnership firm or have proprietary businesses.
  4. ITR 4 (Sugam): Individuals, HUFs, and firms (other than LLPs) having income from business or profession can use ITR 4. It is a simplified form for small taxpayers and professionals, allowing them to report their income presumptively.
  5. ITR 5: This form is for partnerships, LLPs (Limited Liability Partnerships), Association of Persons (AOPs), and Body of Individuals (BOIs) who are not required to file their returns under any other ITR form.
  6. ITR 6: Companies other than those claiming exemptions under section 11 (income from property held for charitable or religious purposes) should file their returns using ITR 6. It is applicable for companies that are not eligible for filing returns in ITR 7.
  7. ITR 7 - It is an income tax return form for individuals and companies with specific income sources, such as charitable or religious trusts, political parties, and research associations. It requires detailed financial information and is filed annually.

    Each ITR form has specific sections and schedules that taxpayers need to fill out based on their income sources and nature of income. It is essential to carefully select the appropriate ITR form that matches the individual's income profile to ensure accurate reporting and compliance with tax regulations.

Crypto Earning and ITR Filling.

The new schedule for reporting income from virtual digital assets (VDAs) such as cryptocurrency has been introduced in the income tax return (ITR) forms for individuals for Assessment Year 2023-24 (Financial Year 2022-23). The Central Board of Direct Taxes (CBDT) notified ITR forms 1-6, including ITR 1 to 6 mentioned earlier, along with ITR-V (verification form) and ITR acknowledgement form for AY 2023-24 through a notification on February 10, 2023.

Individuals filing their ITRs using any of the six forms will now have a separate schedule to report their income from virtual digital assets. The new schedule requires taxpayers to provide details such as the date of acquisition and the date of transfer of the virtual digital assets. They also need to mention the head under which the income will be taxed, specifically for capital gains. Additionally, the acquisition cost must be mentioned in case the assets were acquired as a gift or from a previous owner. The amount should be entered if any tax has been paid on the assets under section 56(2). In case of a loss, taxpayers should enter nil for income from the transfer of virtual digital assets.

It is essential for individuals who earn income or gains from VDAs, including cryptocurrency, to be prepared with these specific details while filing their ITR for Assessment Year 2023-24 or Financial Year 2022-23. They must carefully select the appropriate ITR form that matches their income profile and utilise the new schedule to report their income from virtual digital assets accurately.

By introducing this new schedule, the Income Tax Department aims to enhance tax compliance and ensure transparency in reporting income from virtual digital assets. Taxpayers are advised to consult tax professionals or refer to the official guidance provided by the department to ensure compliance with the new requirements while filing their ITRs.

Procedure for E-filling of ITR

Step 1: Calculation of Income and Tax

The first step in filing your income tax return is accurately calculating your income. Consider all sources of income, such as salary, freelance earnings, and interest income. Additionally, be sure to include any deductions you are eligible for, such as investments under section 80C. Furthermore, consider any tax credits for TDS, TCS, or advance tax payments made.

Step 2: Tax Deducted at Source (TDS) Certificates and Form 26AS

Summarise the total TDS amount from the TDS certificates you received throughout the financial year. To assist you in this process, refer to Form 26AS, which comprehensively summarises the TDS and taxes paid during the year.

Step 3: Choose the Right Income Tax Form

Before filing your returns, determine the appropriate Income Tax Return (ITR) form you need to fill out. You can file your returns either online or offline.

Step 4: Download ITR Utility from Income Tax Portal

Visit the official website of the Income Tax Department at www.incometax.gov.in and select the 'Downloads' option from the top menu bar. Choose the relevant assessment year and download the offline utility software, such as Microsoft Excel, Java, or JSON, based on your preference. Note that the income tax department discontinued Excel and Java utilities from AY 2020-21.

Step 5: Fill in Your Details in the Downloaded File

After downloading the offline utility, fill in all the necessary details of your income, expenses, and deductions. Use the utility to calculate the tax or refund receivable based on the provided information. Additionally, fill in the details of the income tax challan in the downloaded form.

Step 6: Validate the Information Entered

You will find several buttons on the right-hand side within the downloaded form. Click the 'Validate' button to ensure all the required information has been correctly filled in and validated.

Step 7: Convert the File to XML Format

Once the information has been successfully validated, click the 'Generate XML' button on the file's right-hand side. This action will convert the file into XML format, which is necessary for uploading it onto the income tax portal.

Step 8: Upload the XML File on the Income Tax Portal

Login to the income tax e-filing portal and select the 'e-File' tab. From the options provided, choose 'Income Tax Return.' Enter the required details, including your PAN, assessment year, ITR form number, and submission mode. Make sure to select 'Upload XML' from the drop-down menu for the 'Submission Mode' field.

Next, attach the XML file from your computer and click the 'Submit' button. Finally, choose one of the available verification modes, which include Aadhaar OTP, electronic verification code (EVC), or sending a manually signed copy of ITR-V to CPC, Bengaluru.

Conclusion

E-filing income tax returns is a crucial responsibility for taxpayers, and it can be simplified by following a systematic process. Understanding the different types of ITR forms and selecting the appropriate one based on individual income sources is essential to ensure accurate reporting and compliance with tax regulations. Introducing a new schedule for reporting income from virtual digital assets, including cryptocurrency, further emphasises the need for taxpayers to be well-prepared with specific details while filing their ITRs when they also earn from cryptocurrency. By adhering to the step-by-step procedure for e-filing, taxpayers can effectively calculate their income, choose the right form, and submit their returns electronically, contributing to enhanced tax compliance and transparency. We at TaxNodes can help ensure a smooth and hassle-free experience while filing income tax returns.

Astik Dubey

byAstik Dubey

Astik is a law student diving deep into indirect Tax and business law. With a flair for business writing and a special interest in crypto taxation, he turns complexity into captivating articles. Join his enlightening blog, where law and business intersect.

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