Income Tax Return

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Income Tax Return (ITR)

A official document submitted to the Income Tax Department of India that details a taxpayer’s earnings, allowable deductions, and tax obligations for a particular financial year.

Assessment Year (AY)

he calendar year immediately following the tax return’s reporting period. The assessment and taxation of the taxpayer’s income occurs throughout this year.

Financial year (FY)

is the twelve-month period beginning on April 1 and ending on March 31 of the following year. Taxes for the assessment year are calculated using the revenue earned during this time.

Permanent Account Number (PAN)

A special 10-character alphanumeric identification code given to people and organizations by the Income Tax Department. It’s necessary for submitting income tax returns.

TDS (Tax Deducted at Source)

The amount of tax deducted at the time of making certain payments, such as salary, interest, or rent, by the payer (employer, bank, etc.). For the benefit of the taxpayer, it is deposited with the government.

Form 16

A certificate that employers give to their staff members outlining the wages paid, the taxes withheld at source, and other pertinent information. It is employed when filing an ITR.

ITR Forms

The Income Tax Department has a number of forms that must be used for completing income tax returns, including ITR-1, ITR-2, ITR-3, ITR-4, etc. The choice of form is determined by the eligibility and sources of income for the taxpayer.

Tax Refund

If the tax paid by the taxpayer exceeds their actual tax liability, the excess amount is refunded by the government. This typically happens when TDS is higher than the actual tax liability.

Taxable Payable

The amount of tax that a taxpayer owes the government depending on their income and deductions.

Why Filing ITR is needed.

Timely Tax Payment

Filing an ITR allows the government to calculate the taxes owed. – Non-filing may lead to late payment penalties and interest.

Tax Deductions and Exemptions

ITR enables individuals to claim various deductions and exemptions, reducing their tax liability.

Refund for Overpaid Taxes

Individuals who have overpaid their taxes can claim a refund through ITR.

Avoiding Late Filing Penalties

Timely filing of ITR helps avoid penalties and interest for late submission.

Building a Credit History

Banks and financial institutions consider ITR when assessing loan applications. – Filing ITR helps individuals establish a positive credit history, improving loan approval chances.