“People tend to forget their duties but remember their rights.”- Indira Gandhi. – Tax Filing for Income
Voting is your right, and every individual exercises it to choose the most suitable leader who promises to fulfil our dreams. Similarly, filing income tax returns is the responsibility of every Indian citizen. It is important to file income tax as your contribution towards the growth of the country. The percentage of Income will be deducted if you fall under the tax-deductible income group. If this is clear to you, understand that there is a procedure to file your income tax.
Herman Wouk once said, “Income tax returns are the most imaginative fiction being written today.”
It is compared with fiction in life, but the fact is that it is reality. You have to file income tax as per the guidelines laid by the Income Tax Department.
“Being responsible is an enormous privilege.. It’s what marks anyone a fully grown human.”-Barack Obama.
Paying income tax is a prime responsibility if you think and wish to be a part of a developed nation. Reading about income tax and still not aware of what it is about?
Let us read further to understand what income tax is?
What is income tax?
The direct tax that the government levies on the citizens for the Income they make is called income tax. The Income does not always refer to the monthly salary from the job. It can also refer to rental Income, profits from business, capital gains, and Income from other sources.
But does it strike your mind that it is your hard work or source with which you make money? Then why does the government charge income tax on it?
If your mind gets flooded with thoughts like these, let us read why we pay taxes.
Why do we pay income tax?
Your contribution to the development via taxes is used by the government for various welfare schemes. India is a vast and developing country that attracts numerous jobs to serve its citizens. For example, healthcare facilities through government hospitals, cooking gas at concessional rates, water at low prices, education through government schools, roads for transport, etc. If you become a user of these services, you need to pay income tax also.
Professionals that need to file ITR.
Any or every individual who resides in India with an age below 60 years is liable to pay income tax if the Income exceeds the defined limit. For people above 60 years, the tax deduction limit is different.
Some of the professionals that include in the list are:
- Doctors
- Teachers
- Lawyers
- Consultants
- Architects
- Government Employees
- Corporate Employees
Different types of Tax filing for Income
These are the different types of tax filing that the individuals need to consider in India:
- ITR-1
- ITR-2
- ITR-2A
- ITR-3
- ITR-4
- ITR-4S
ITR-1
ITR-1 is to be filed by an individual taxpayer that includes:
- Individuals who make money like a wage or pension.
- People who earn rent from the property and make their living.
- Any individual who does not get capital gains or earn money from the sale of any assets.
- Individuals who do not own any assets or property in any country outside India.
ITR-2
This ITR can be filed by the individuals who are to receive the Income through the sales of the property. Other people who can use ITR-2 are ones who make money from countries outside India. The form can be used by these:
- Individuals who make their living through pension or other sources like wages
- Any person whose income is generated from the sale of assets (capital gains) or real estate in India .
- A person whose permanent income comes from the rental property. They make their living with this source only.
- Individuals who are not able to make a profit from any business.
- A person who owns assets in countries other than India.
ITR-2A
ITR-2A is the form that can be used by an individual taxpayer. The form ITR-2A is applicable for use by these:
- A person who makes his/her living from more than one rental property.
- Any individual who does not have any other source of Income. Or a person who does not make any capital gains via sale of any assets.
- Any person who earns money through various investments that includes financial instruments like Fixed Deposits, Investments, Shares, and so on.
- A person who has no property or assets in countries outside India.
ITR 3
Individual taxpayers who own a partnership in a firm but do not conduct any business under the firm can file the income tax return. The form is applicable for individuals who make Income in the form of:
- Salary
- Bonus
- Interest
- Commission
ITR 4
Filing income tax through ITR 4 is for the individuals who conduct business through a profession. The taxpayers can combine the Income made from salaries, windfall, lotteries, or speculations. Shopkeepers, designers, freelancers, doctors, and other professionals can use the form to file an income tax return.
ITR-4S
Form ITR-4S is to be used by these individuals to file the income tax return:
- People who make their living through any business.
- Individuals who earn money from a single rental property.
- People who do not earn money via sale of assets (capital gain).
- Any person with an annual agricultural income of not more than Rs 5,000.
- People who do not have assets or property in countries outside India.
How to reduce tax amounts through an insurance policy?
Speaking of income tax returns, life insurance policies are the traditional way to get the tax benefit. There are different policies that you can consider buying, which include:
- Term plan
- Child plan
- Pension plan
- Savings Plan or Endowment plan
- Critical Illness Insurance
- ULIPs
The life insurance policies allow for tax deduction under different sections of the Income Tax Act 1961. These include:
Section 80C: According to Section 80C of the Income Tax Act, all the premiums paid for life insurance policies are eligible for a tax deduction. The limit of the tax deduction allowed is of Rs.1.5 lakhs only.
Section 10(10D): The amount of the sum assured plus any bonus (i.e. the policy proceeds) received on maturity, surrender, or death of the insured is totally tax-free for the receiver under Section 10(10D) of the Income Tax Act of 1961, subject to certain restrictions.
Section 80D: Income tax deductions for medical insurance premiums paid for you and your family are available under Section 80D of the Internal Revenue Code. You can deduct the cost of health insurance for yourself, your parents, your children, and your spouse from your taxes.
Conclusion:
Filing income tax returns is the responsibility of every individual. Choosing an old or new tax regime is an individual’s decision. The important matter is to file the tax after choosing tax saving investment options like buying life insurance policies. All professionals like doctors, advocates, freelancers, etc., have to file ITR, especially if they fall in the income range that needs deduction. For more details on how you can save money for tax savings, read here.
