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Tax Returns

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Tax is a financial levy or any type of charge imposed upon a taxpayer (an individual or other legal entity) by a governmental organization in order to fund various public expenditures. The tax imposed on companies/partnership firms is known as corporate tax and is levied at a flat rate. However, individuals are taxed at various rates according to the income slab in which they fall Charitable organisations are mostly exempt from tax. 

Tax is a financial levy or any type of charge imposed upon a taxpayer (an individual or other legal entity) by a governmental organization in order to fund various public expenditures. The tax imposed on companies/partnership firms is known as corporate tax and is levied at a flat rate. However, individuals are taxed at various rates according to the income slab in which they fall Charitable organisations are mostly exempt from tax. 

Types of taxes

1. Direct tax - It is tax which is directly paid to the Union Government on income.  To name a few of the direct taxes, which are imposed by the Government are:

  • Personal Income Tax
  • Banking Cash Transaction Tax
  • Corporate Tax
  • Capital Gains Tax
  • Double Tax Avoidance Treaty
  • Fringe Benefit Tax
  • Securities Transaction Tax
  • Tax Incentives

2. Indirect tax β€“ As opposed to the direct taxes, tax levied on some specified services or some particular goods. It is taxation on expenditure; It is not levied on any particular organisation or an individual. All the activities, which, are included in the range  from manufacturing goods and delivery of services to those  meant for consumption fall within the periphery of this taxation, other than these, the varied activities and services, which are related to import, trading etc. are even included within this range. This covers taxes like GST, excise duties (tax on cigarettes, alcohol etc.).

Municipal or Local Taxes in India

It is levied by the local municipal jurisdictions on the entry of goods, known as the Entry Tax or the Octopi Tax. 

Income Tax Returns

An income tax is a tax to be paid by individuals or entities (taxpayers) that varies as per their income or profits (taxable income).

Filing Income Tax Returns is mandatory for all Indians, including NRIs, with a total income of above Rs 2.5 lakh, before permissible deductions under Sections 80C to 80U. The limit for senior citizens (above 60 years) is Rs 3 lakh while that for those who are aged 80 and above called super senior citizens  - is Rs 5 lakh. However those out of tax bracket should also file β€œNil returns” as it works as a proof when applying for passport or availing Loan.

To bring more people under the tax net, the government in budget 2019 have made ITRs mandatory for more categories of people from the next assessment year –

  1. People who have deposited more than Rs 1 crore in a bank account.
  2. People who have bought foreign exchange of over Rs 2 lakh.
  3. People who have paid electricity bill of more than Rs 1 lakh.

Who are required to file ITR

Other than individuals, Hindu Undivided Families [HUFs], Association of Persons [AOPs], Body of individuals [BOIs], Firms, LLPs, companies, local authorities, political parties, educational or medical institutions and trade unions have to file income tax returns. The last date for filing ITRs for the FY19 is July 31.

For Individuals as Per CBDT (Central Board of Direct Taxes) in India following income tax return forms are applicable:

  • ITR-1
  • ITR-2
  • ITR-2A
  • ITR-3
  • ITR-4
  • ITR-4S

For Companies and Firms following income tax return forms are applicable:

  • ITR-5
  • ITR-6
  • ITR-7

ITR forms                                             Meant for Whom

ITR 1(SAHAJ)                                       Resident Individuals having income less than Rs.50 Lakhs
                                                              From Salary/pensioners, one house property, other sources.

ITR 2                                                     Having income ITR1>50 lakhs,
                                                              Capital gains, More than one house property, foreign Income/Asset.
                                                              Holding Directorship in a company, holding unlisted equity share.
 
ITR 3                                                     Every income from ITR 2
                                                              Business/Profession, As a Partner in a firm
                                                              Presumptive income>50 lakhs.

ITR 4 OR SUGAM                                 Every income from ITR 1. Presumptive income >50 lakhs
                                                              Salary/pension, Partnership firms (other than LLPs)
                                                              Other sources, one house property

ITR 5                                                     Applicable to FIRM’s, LLP’s, AOP’s, BOI’s

ITR 6                                                     Companies not claiming exemption u/s 11

ITR 7                                                      Persons/Companies under Section 139 (4A, 4B, 4C, 4D)

 

ITR Form

Applicable

to

Salary

House Property

Business Income

Capital Gains

Other Sources

Exempt Income

Lottery Income

Foreign  Assets/ Income

Carry Forward Loss

ITR 1 / Sahaj

Individual, HUF (Residents)

√

√ (One House Property)

X

X

√

√ (Agricultural Income < Rs 5,000)

X

X

X

ITR 2

Individual, HUF

√

√

X

√

√

√

√

√

√

ITR 3

Individual or HUF, partner in a Firm

√

√

√

√

√

√

√

√

√

ITR 4

Individual, HUF, Firm

√

Yes(One House Property)

Presumptive Business Income

X

√

√ (Agricultural Income < Rs 5,000)

X

X

X

ITR 5

Partnership Firm/ LLP

X

√

√

√

√

√

√

√

√

ITR 6

Company

X

√

√

√

√

√

√

√

√

ITR 7

Trust

X

√

√

√

√

√

√

   

                                              Documents required for filing ITR

1. Taxpayers have to choose the ITR form applicable to them for the AY 2019-20.

2. Link Aadhar with PAN on or before the filing of income tax returns.

3. For Salaried Employees

  • PAN
  • Form-16 issued by your employer
  • Month wise salary slips

From the AY 2019-20, it is essential to disclose in the IT return information on all taxable allowances received and the amount claimed exempt. e.g., house rent allowance, leave travel allowance etc.

4. Documents related to interest income

  • Bank statement/passbook for interest on savings account.
  • Interest income statement for fixed deposits.
  • TDS certificate issued by banks and others.

5. Form 26AS

It is a summary of taxes deducted on your behalf and taxes paid by you.

It shows details of tax deducted by deductors on your behalf, details on tax deposited by taxpayers and tax refund.

6. Section 80 Investments

Investment made u/s 80 which qualify for deductions under PPF, NSC, ULIPS, ELSS, and LIC.

7. Documents Required to Claim Deductions

  • Contribution to Provident Fund
  • Children’s school tuition fees
  • Payment of Life insurance premium
  • Stamp-duty and registration charges
  • Principal repayment on home loan
  • Equity Linked Savings Scheme/Mutual funds investment
  • Rs. 1.5 lakhs is the maximum amount that can be claimed under Section 80C.

 8. Other Investment Documents

Total loss from house property available for set off against other income is capped at Rs 2 lakhs and therefore, for let out property interest on housing loan is eligible for tax saving up to Rs 2,00,000.

Education loan interest payments.

The stock trades that were made during the year may be taxed under Capital Gain.

New Income Tax Slabs and Rates for Financial Year  2019-20

      1.  For Individual Tax Payers & HUF (Less Than 60 Years Old)

Income Tax slab                (INR)                     Tax rate

up to 2,50,000                                                   Nil

2,50,000 to 5,00,000                                         5% of total income above  2,50,000

5,00,000 to 10,00,000                                      12,500 + 20% of total income above  5,00,000

Above 10,00,000                                              1,12,500 + 30% of total income above 10,00,000

Note : An additional 4% Health & education cess will be applicable on the tax amount calculated above.

Surcharge: 10% of income tax, when total income exceeds Rs.50 lakh up to Rs.1 crore.

                    15% of income tax, when total income exceeds Rs.1 crore.

2.  For Senior citizens (60 yrs to 80 yrs)

Income Tax slab                (INR)                     Tax rate

up to 3,00,000                                                    Nil

3,00,000 to 5,00,000                                          5%

5,00,000 to 10,00,000                                        20%

Above 10,00,000                                                30%

Note : An additional 4% Health & education cess will be applicable on the tax amount calculated above.

Surcharge: 10% of income tax, when total income exceeds Rs.50 lakh up to Rs.1 crore.

                    15% of income tax, when total income exceeds Rs.1 crore.

3. For super Senior citizen (80 yrs and above)

Income Tax slab                (INR)                     Tax rate

up to 5,00,000                                                    Nil

5,00,000 to 10,00,000                                        20%

Above 10,00,000                                                30%

Note : An additional 4% Health & education cess will be applicable on the tax amount calculated above.

Surcharge: 10% of income tax, when total income exceeds Rs.50 lakh up to Rs.1 crore.

                    15% of income tax, when total income exceeds Rs.1 crore.

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Author
Vinay Singh
Vinay Thakur is Managing Partner in Corpseed. He focused on payments, digital transformation, and financial technology for over 15 years and holds strong expertise on fintech startups, banking innovation, and investors with a keen understanding of the trends and activities of startups, banks, and investors in the space.