Filing of Income Tax Returns – Why, How, Where ?

December 30, 2010   ·   0 Comments



Lesson 5: Filing of Income Tax Returns – Why, ,

Individuals engaged in either business or profession may have completed adjustments and finalization of yearly accounts. To avoid hassles for you and your tax professional, it is advisable to get ready for filing return as early as possible instead of waiting for the due date to arrive.

At the same time it is equally important to know your obligations and other intricacies of filing return of income.

Documents to keep ready:

It is fruitless to go to the war front without proper arms and ammunition. Hence, it is always advisable to keep all the documents required for preparation of the income tax return ready and handy before calculating your tax liability and preparing your tax return. Some common documents required by an individual for preparing the return are:

* Form No. 16 (received from the employer): This will help to know your income from salary and tax deducted by your employer from your salary income.
* Form No. 16A (received from all the payers who have deducted tax): You will first have to get this form collected from the parties who have deducted tax while making payment to you during the year. This includes banks and companies (with whom you have kept fixed deposits), parties to whom you have given loan, tenant to whom you have rented your property.
* Summary of all bank accounts operated during the year: This summary will give an idea about all the income earned during the year and investments and expenditure incurred. This assures that no part of income is left out and you do not miss out any eligible deductions.

 # Details of property owned during the year: If you have bought some property during the year, you will need details of rent received and receipts of municipal tax paid during the year. In addition to this, if you have taken this property through a loan, do carry the loan details and a copy of certificate of interest paid during the year.
# Sale & purchase bill / documents / contract note in respect of investments / assets sold during the year: You will also need purchase documents corresponding to the sales made during the year. In case of a large number of transactions, it is advisable that you prepare a statement of sale and corresponding purchase of these investments and arrive at the amount of profit or loss, before actually calculating your taxable income.
# Details of tax payments made during the year: This is required only if you have made advance tax payment during the year.

Last date for filing tax returns

The last date for filing return of income for the year ended March 31 is July 31 and for individuals who are required to get their books of accounts audited under the Income Tax Act, it is October 31

Consequences for not filing tax return by the last date

If individuals file their returns after the last date mentioned above, they will be charged a penal interest at the rate of 1% per month of delay. However, if such a return is filed after March 31, 2010, apart from the penal interest, they will also be liable for a penalty of Rs 5,000.

Which ITR Form is applicable to you?

With the introduction of new income tax return forms based on nature of income earned during the year, one needs to know relevance of each return form and select the right form.

For an individual, four forms have been introduced, the details of which are as under:

Form No.

1) ITR � 1

Meant for Individuals, who have

a) Income from salary
b) Interest income (taxable / exempt)
c) Family pension
d) Income from agricultural activities

In other words, this form is not applicable in the following situations:

a) Individual having any income (taxable / exempt) other than mentioned above
b) Any brought forward loss of earlier years
c) Any income of other person to be included

2) ITR � 2

Individuals / HUF not having any income on account of carrying out business / profession or on account of being a partner in a partnership firm.

3) ITR � 3

Individuals / HUF who are partner in a partnership firm and does not carry out any other separate business / profession.

4) ITR – 4

Individuals / HUF who is carrying out business / profession under a proprietary concern.

How to file the tax return

Today there are two options available to the individuals to file their return of income:

* Electronic filing;
* Physical filing

Under Electronic filing, the individual will have to follow the following procedure:

* Get the tax return in a valid XML format (through the Income Tax department site or other online tax preparation sites)
* Visit the Income Tax site by clicking here.
* Log on using the user-ID and password
* Select the respective ITR form
* Upload the XML file generated
* Upon uploading, an acknowledgement will be generated.
* If the file is uploaded with a digital signature, then the process of filing return is completed.

However if the file is uploaded without a digital signature, the individual will have to print form ITR-V and submit the same to the Income Tax department physically. The process of filing return will be completed only on physical filing of ITR-V.

For Physical filing, the individual will have to take a print out of the respective ITR form along with the Acknowledgment form and file it with the Income Tax Officer.

Whether it is electronic filing or physical filing, under the new procedure, individuals do not have to attach any documents or enclosures with the return of income.

 Documents to preserve

Since the tax-payer is not required to submit any additional documents along with the return of income, the documents may be called at the later stage by the Income Tax Officer to check the correctness of the claim made. Hence, it is advised that the individual preserve all the documents required to substantiate the return of income filed. Some of the documents are enumerated below:

* Detailed calculation of taxable income and amount of tax payable / refundable.
* Form No. 16 / 16A (original).
* Counterfoil of all the tax payments made during the year.
* Copy of documents concerning sale of investments and properties.
* Copy of bank statements.
* Copy of proof for all the deductions and exemptions claimed in the return of income.

Common mistakes people make while filing tax returns

* The most common notion among salaried employees is that since tax has already been deducted from their salary, there is no need to file their income tax returns. This is not at all true or legal. Even though tax has been deducted and there is no further liability to pay tax, an employee has to compulsorily file his / her income tax return. Form No. 16 received from employer is not their income tax return.
* Employees do not include the interest that they receive on their savings bank account. The entire interest earned on your savings bank account is taxable.
* Omission of income received by a minor child. A minor child is not required to file a separate return of income. However, this income has to be included in the hands of either of the parents, although it might be a small amount of bank interest.


Permanent Account Number (PAN) – section 139A. 

With a view to check tax evasion, as also to facilitate tax administration, it has been made obligatory for assesses to get allotted Permanent Account Numbers from the Income Tax Department. For this purpose, those who have not been allotted Permanent Account Numbers so far and who estimate their income for the year to be more than the maximum amount not chargeable to Income Tax (the present limit is Rs. 50,000/-) or whose turnover / gross receipts in business / profession are or are to exceed Rs.5,00,000/- likely are required to apply for allotment of Permanent Account Numbers in the prescribed form (Form No. 49A) to the Assessing officer having jurisdiction over the person. A specimen application of Form no. 49A is given in Annexure 49. W.e.f. 1-6-2000, the government may notify any class of persons such as importers,exporters, etc.. whether tax is payable by them or not, requiring them to apply for PAN.

PAN is a 10 digit code allotted to each assesses by I.T. Dept.

Following Assesses should own or obtain PAN :

1. Every person whose total Income exceeds the Taxable Limit.

2. Every Business or Profession whose total Sales, Turnover, or Gross receipts exceed Rs. 5 Lakhs.

3. Every person shall quote his PAN or GIR in all documents pertaining to :

a) Who Sales / Purchases any immovable property worth Rs.5 Lakhs or more.

b) Who Sells or Purchases Motor Vehicle or Vehicle which require registration.

c) Who opens a Time Deposit Account with Banks / Post Offices exceeding Rs. 50,000

d) Who deposits amount exceeding Rs.50,000 in Post Office Savings Bank.

e) Who Sales or Purchases Securities exceeding Rs. 1 Lakh.

f) Who opens a Bank Account * .

g) Who makes payment to Hotels & Restaurants against bills exceeding Rs.25,000 at a time.

h) Who wants to purchase DD/Pay Order/ Banker’s Cheque by payment of cash aggregate Rs. 50,000 or more during any one day from a Bank.

i) Payment in cash exceeding Rs.25,000 in connection with Foreign Travel.

j) Payment of an amount of Rs.50,000 or more to buy Mutual Fund, Shares, Debentures or Bonds.

* Those not having PAN/GIR No. can submit a simple declaration in Form No. 60/61.

Any person who has not been allotted PAN/GIR No. and who makes payment in cash otherwise than by way of A/c payee Cheque or Draft or issued by any Bank in respect of any of the above listed transaction, should file a simple declaration in Form No. 60 giving the particulars of the transaction.

How to make E-payment of Taxes

Filing of Income Tax Returns (ITR) is a legal obligation of every person whose total income for the previous year has exceeded the maximum amount that is not chargeable for income tax under the provisions of the I.T. Act, 1961.

E-Payment of taxes is a facility provided to the taxpayers to make income tax payments through internet by using net banking facility.

Where mandatory:

  • In case of all corporate assesses
  • In case of all assesses (other than company) Where provisions of Section 44 AB (Tax Audit) of the Income Tax Act is applicable.


  • Taxes can be paid from any location at any location at any time through your net banking account.
  • Instant transfer of funds from your account.
  • What you write on the e-challan will be directly sent to Income Tax Department. Banks will not do any data entry.
  • You can save/print the challan copy and the receipt copy.
  • As soon as your bank authorizes payment of the amount, you will receive a clear, legible receipt/counterfoil from your bank.
  • Transaction ID of the e-payment transaction will be available to you in your bank statement.

      You can check online if your money has actually reached the I-T Department.
For this you have to go to Tax In-formation Network Website: and click the box CIN BASED VIEW.

Requirements for e-payment of tax:
Having a computer with internet connection.
Having a bank account with net banking facility in one of the banks listed below.
Bank will provide the accountholder with a username and password. Password can be changed. Ensure confidentiality of username and password.

Suggestion is to open a separate bank account that shall be used only for the purposes of e-payment of taxes for safety purposes.

Procedure for payments of tax:


  • Log on to NSDL-TIN website (
  • Click on the icon e-payment: pay taxes online.
  • Click on “Please Click Here”
  • Select the required challan.

After selecting the required challan, you will be directed to the screen for entering the following data:

  • PAN for non-TDS payments and TAN for non-TDS payments
  • Name and address of the taxpayer
  • Assessment year
  • Major Head Code
  • Minor Head Code
  • Type of payment
  • Select the bank name from the drop down provided

In case of challan no., 280, 282 Tax Deduction/Collection Account Number (TAN) needs to be entered. Please endure that you enter PAN/TAN correctly, as this is extremely important for further processing.
The system will check the validity of PAN/TAN. In case PAN/TAN is not available in the database of the Income Tax Department then you cannot proceed with the payment of tax.

After entering all the above detail click on Proceed button. TIN system will display the contents you have entered along with the “Name” appearing in the ITD database with respect to the PAN/TAN entered by you.

You can now verify the details entered by you. In case you have made a mistake in data entry, click on “Edit” to correct the same. If all the details and name as per ITD is correct, click on “Submit” button. You will be directed to the net-banking site provided by your bank.

TIN system will direct you to net banking facility of your bank, you will have to log on to the net banking site of your bank using your login ID and password/PIN provided by the bank. The particulars entered by you at TIN website will be displayed again.

You will now be required to enter the amount of tax you intend to pay and also select your bank account number from where you intend to pay the tax. After verifying the correctness, you can proceed with confirming the payment.

Your bank will process the transaction online by debiting the bank account indicated by you and generate a printable acknowledgment indicating the challan Identification Number (CIN). You can verify the status of the challan in the “Challan Status Inquiry” at NSDL-TIN website using CIN after a week, after making payment.

Apart from CIN given to you, you can check your online bank statement to verify the tax payment.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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