Simplify ITR Filing By Segregating Your Income

Understanding ITR

Before we go any further, let's first understand the meaning of ITR or Income Tax Returns. Well, to put it most simply, it's a document that describes your finances and is filed with the Government of India. But have you ever wondered why you need to do that? Well, filing your ITR is a simple means to let the government know your payable tax, income, etc. ¹

Filing your ITR can prove beneficial in a variety of ways. For instance, it can help you with tax refunds, given your income is below five lakhs on an annual basis. ^¹ Additionally, ITR filing can also help you avoid fines and legal penalties. Further, you may use your business losses and carry forward them in your ITR fillings for tax liability reduction.¹ Not to forget, ITR is super helpful in the verification of your financial stability and, thus, comes in handy for several types of loan applications and much more. ^¹

Filing an ITR- A Simple Guide

What's satisfying is that now you may easily and conveniently complete your ITR filings online. So, if you're someone falling in the bracket of eligible taxpayers, consider following this easy step-by-step guide to complete your ITR fillings.²

1. Consider visiting the official website for e-filing and logging in using your PAN and password. Press ‘continue’.
2. Now, go to ‘e-file’, then choose ‘income tax returns, and select ‘file income tax returns’.
3. Now, select your assessment year and choose ‘online’ as your filing mode.
4. Next, pick the applicable filing status for yourself from Individual, HUF, and others.
5. Consider choosing the suitable forms from a total of 7 ITR forms.
6. Here, you're supposed to provide the reason for your ITR filing.
7. Now, verify and validate the information you have given, such as your name, DOB, mobile number, bank details, and more. Also, don't forget to cross-check the income details provided and mention any deductions, exemptions, etc.
8. Now, complete your filing by verifying your returns within a period of 30 days. You may use net banking, Aadhaar OTP, and other different measures for final verification.

When filing your tax returns, one of the most crucial things to know is income segregation under different heads. Segregating your income under different heads makes it easy to calculate and understand tax accrued on the same.

An individual’s income can be segregated into five categories as per the Income Tax Act of 1961. ³
This includes income from salary, income from business profits, income from house property, income from capital/investment assets, and income from other sources.

Let's understand these in a bit more detail.

1. Income from salary

   ³

   Income from salary can be simply understood as earnings from your fee wages , pension, advances, gratuity, retirement earnings, and so on.

2. Income from business profits

   ³
   

   Say you're an entrepreneur engaged in a business, and then, clearly, you'll be making some profits. Such gains or profits that you make from your business can be understood as income from business profits.

3. Income from house property

   ³
   

   According to the Income Tax Act 1961, your income from land or from your house property or from both is considered as income from house property.

4. Income from capital/ investment

   ³
   

   Say individual A decides to make an investment. Now, whatever income A gains from such investment or capital asset is the income from capital and investment assets.

5. Income from other sources

   ³
   

   Now, what about income from other sources? Say your given income doesn't fall in any of the above-mentioned categories; if an individual is earning from cryptocurrency etc then the same is considered as income from other sources.

Conclusion

As mentioned, ITR filings can help you in more than one way. However, it is important to stay alert and be observant while completing your ITR filings. You need to be careful in choosing the right ITR form, having all the necessary documents, and being aware of ITR-related updates to ensure you file your returns smoothly and without much hassle.

For instance, if you're a resident with a salaried income of not more than Rs.50 lakhs or agricultural income not exceeding Rs.5,000 or simply own just one house property, then you may file ITR1 Sahaj. ⁴ Similarly, have all your important documents like Aadhar, PAN, salary slips, and relevant forms to complete your ITR fillings without any chances of rejection. Further, you may also use an income tax calculator to easily review your tax liabilities as per the details of your segregated income.