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This article has been written by Shivani Garg, a Diploma in Business Laws for In-House Counsels from LawSikho.

Introduction

There can be no such thing as ‘fairness in taxation’. Taxation is nothing but an organized theft, and the concept of ‘fair tax’ is absurd with that as ‘fair theft’. –  Murray Roth

In a world where nothing can be certain, we forget about two things – death and taxes. If you are lucky enough, you can still be able to get away from death, but when it comes to taxes, there seems to be no chance, you have to pay it even on your deathbed. This shouldn’t surprise you, if I tell you this, it’s not just the younger generation who thinks like that, but also the great thinkers of the world didn’t find income tax much of a  great deal to begin with. 

No wonder that the income tax is also called a slave tax. Reasons may be many, but what I can think of is probably because it is more than just being confusing and who would love to give their hard-earned money to the government for the sake of everybody else. 

Even the filthy rich ones won’t like it at all and opinions around the world from different eras are proof of that. That’s one side of the story, we are not getting into its depth, other can be this, how will the government actually be able do good for all without the taxes? The portion taken from the people is returned back to them in various other forms. 

Let’s not get into the statistics of how income is taxed in different countries with different systems of government and people holding different kinds of opinions. Let’s just talk about the system in India. Tax being an important part of economic growth, the taxation system of India is actually based on the theory of maximum social welfare, which makes it an absolute mandatory liability for every citizen of the country to pay taxes. 

But that’s not how it goes as with the huge amount of population in a developing country like India, the burden of taxation actually falls on a very little portion while many try to find the ways to evade even knowing there can be huge consequences for that. That’s the story for another day, but let me first walk you through the types of income tax forms available in your country and in which category you actually fall in, because let’s not forget, you can’t run from tax no matter what your livelihood actually is.

Types of income tax forms 

For every benefit, you receive a tax is levied but you still need to know which category you fall in to file your income tax returns. The income tax department has set out various categories of taxpayers depending upon the type of your income. In India, there are 7 different types of IT forms:

ITR-1: Also known as SAHAJ is applicable to Indian resident individuals as well as HUFs whose income is either generated through salary or pension. Apart from that: 

  1. Income from other sources excluding income from winning a lottery or income from owning and maintaining race horses, income taxable under section 115BBDA or section 115E.
  2. Income from One House Property, however, loss brought forward from previous years or carry forward of losses are not eligible in this form.
  3. Income from agriculture activities upto INR 5000.
  4. The total income of the individual should not exceed INR 50 Lakhs.

ITR-2: This form is applicable for individuals or a HUF (Hindu Undivided Family) whose income includes:

  1. Income from salary or Pension.
  2. Income from House Property (one or more).
  3. Income from other sources, including income from winning a lottery or income from owning and maintaining a race horse or income taxable at special rates.
  4. Persons who had investments in unlisted equity shares at any time during the entire financial year.
  5. An individual who is a director of a company.
  6. An individual who is a Resident (ROR/RNOR) or non-resident.
  7. Income earned from capital gains. 
  8. Income from foreign assets/ other foreign income.
  9. Agricultural income more than INR 5,000/-.
  10. Incomes where clubbing provisions are applicable.

This is to note that total income can exceed INR 50 lakhs in this form.

ITR-3: This form is applicable for individuals and HUFs who make an income from a profession or from a proprietorship business. Apart from that, this form is applicable in cases where:

  1. Any investments were present in equity shares that were unlisted at any time during the financial year. 
  2. The individual is a partner in a firm. 
  3. Individuals are generating an income from a profession or business. 
  4. The individual is a Director of a company. 
  5. If income is generated from a pension or salary, house property, or any other source of income. 
  6. Turnover of the business exceeds INR 2 crore. 

ITR-4: Also known as SUGAM, is applicable to both resident individuals as well as HUFs where:

  1. They have opted for a presumptive income scheme, according to Sec. 44 AD, Section 44AE and Section 44ADA of the Income Tax Act.
  2. If the person’s business turnover exceeds INR 2 crores, then they are required to file ITR-3 with Audit report, and not ITR 4.
  3. The total income for ITR 4 should not exceed INR 50 lakhs.
  4. Income from One House Property (loss brought forward from previous years or carry forward of losses are not eligible in this ITR Form). 
  5. The source of income is Salary or Pension.
  6. Income from other sources (excluding the income from winning a lottery or income from owning and maintaining race horses, income taxable under section 115 BBDA or 115 BE).
  7. Other than LLPs all partnership firms which are residents and have an income which is either professional or from business. 

ITR-5: This form is applicable to:

  1. LLPs
  2. Business trusts
  3. Estate of insolvent
  4. Artificial Juridical Person (AJP)
  5. Body of individuals (BOIs)
  6. Associations of Persons (AOPs) and Firms

ITR-6: This form is applicable for companies which are not claiming any exemptions under Section 11 and by a company other than a company which is required to file a return in Form ITR-7. This can be e-filed.

ITR-7: This form is applicable for companies that are required to file returns under Section 139 (4A), Section 139 (4B), Section 139 (4C), Section 139 (4D). They should choose the ITR-7 form. I have noted down bit of details for each section for you: 

  1. Section 139 (4A): The return is to be filed in respect of Income from a property, of which the true owner is a trustee or such property is held under any other legal obligation. In this case, the income generated should be used only for charitable or religious purposes.
  2. Section 139 (4B): The return to be filed in respect of total Income derived by a Political party.
  3. Section 139 (4C): The below-mentioned entities should file returns under this section:
    i.) Scientific Research Association.
    ii.) Educational institutions, hospitals and other medical institutions.
    iii.) Associations and institutions covered under section 10 (23A) and Section 10 (23B).
    iv.) News agencies.
    v.) Others as may be prescribed.
  4. Section 139 (4D): The returns by colleges, universities or any other institutions which are not required to furnish return of income or loss under any other section need to be filed under this section.

However, one common thing between all these forms is that all these people must have generated their income from other sources as well like the lottery, horse racing etc. 

To make things, ITR can be filed online at https://www.incometaxindiaefiling.gov.in/home, which is an official GOI site, giving you all the insights about the taxation and also providing you a window for e-filing along with various other things to know about tax. Since filing ITR is a way of letting your government know about the total income you earned in that you have managed to earn in a particular financial year and taxes paid for that, let’s check out who needs to file ITR forms.

Who needs to file these and by when?

As per the current income tax laws of India, it is only mandatory for an individual to file ITR if their income/expenditure/investments meet certain defined criteria which are being laid down by the income tax department. So, who all needs to file ITR? Given below are the individuals who shouldn’t skip the same:

  • Who wish to receive a refund from the Income Tax Department;
  • Who wish to apply for a loan or a visa;
  • Who have more than one source of income (capital gains, house property, etc.);
  • Who have earned an income from foreign assets during the financial year

Time period 

The simple thing to know about when you need to file these income tax forms is the due date. The due date for filing your income tax returns is the date by which you can avoid all sorts of penalty or any late fee.

Exemptions 

Once the basic income of the resident individual’s exceeds the basic exemption limit, filing of ITR becomes mandatory. However, the basic exemption limit for an individual depends upon their age. As per FY 2019-20, the basic exemption limit is:

  • Below 60 years of age – INR 2,50,000/-
  • Senior citizen (between 60 and 80 years of age) – INR 3,00,000/-
  • 80 years and above – INR 5,00,000/- 

However, there are certain cases where even though one hasn’t reached the exemption limit, they are still liable to pay the ITR. As per new tax laws, ITR for FY 2019-20, must be filed before Jan 10, 2021, if:

  • The individual has spent an amount or aggregate of amounts exceeding Rs 2 lakh for himself/herself or any other person for travel to a foreign country; 
  • The individual has deposited an amount or aggregate of amounts exceeding Rs 1 crore in one or more current accounts maintained with a bank or co-operative bank; 
  • The individual has paid electricity bill exceeding Rs 1 lakh in a single bill or on an aggregate basis during the financial year; 
  • Ordinarily resident individual having income from foreign countries and/or assets in foreign countries and/or having signing authority in any account outside India; and 
  • If an individual’s gross total income exceeds the exemption limit before claiming tax exemption on capital gains under section 54, 54B, 54D, 54EC, 54F, 54G, 54GA or 54GB. 

One needs to know that there are no major changes for FY 2021-22, it remains the same.

COVID-19 impact

It is a well-known and harsh truth as to how COVID-19 has impacted the entire nation on a larger scale. The chaos is up to such an extent that nobody can actually tell when we will come out of it and how we are going to survive this. To make things easy for citizens of the country, there are few measures that were suggested to the government related to direct tax provisions for relief during Covid-19. In addition to this, the deadline for filing the ITR was revised more than once, following that no fee/penalty was charged for any delay. The entire pandemic hit the work environment as every moved to digitalization as the result of which there were many challenges faced at the beginning of COVID 19. With the shift in workplaces, the whole system of tax got impacted as well.

Conclusion

With many pros and cons about the tax, I can relate the tax with the fuel. Just like fuel is required for the functioning of vehicles, tax is required for the growth of the economy of the country. Now we all know that, no matter how expensive fuel gets, you have to buy it as long as you want your vehicle working. Just like that, no matter how much tax is levied or how confusing it is to understand the whole taxation system is, you have to pay the tax for growth of the economy as well as the betterment of your present and future since they are co-related. It’s better to brush up with the basics of how to pay taxes and what all is available in your country to get going than to whine about it, especially when taxes come with deductions, exemptions and other benefits too. 


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