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Understanding Income Tax Returns

Understanding Income Tax Returns

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Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.

Oh no, is this going to be another drab income tax article? Should I even bother reading?

Honestly, if I glanced at an article like this I would have my doubts too. There are many terrible days I mark on my calendar but one stands out.

Nope, it isn’t my annual “oh I was broken up with today”, it’s the 1st of April. It’s no coincidence that the financial new year and Fool’s day lie on the same day – a fool is what I feel like on that day. I don’t know who to blame - the lack of financial education in schooling, or the over-complication of any information on taxing. 

So being panicked and clueless are not new for me when everyone starts discussing the big T-word. I know income tax season is truly taxing (See what I did there?) but I’ve found a tiny ray of hope in all the sadness that this season brings -

IT Returns! 

IT Returns, unlike your Income Tax, are actually for you.

What are IT Returns? 

Here’s my post-breakup analogy - Imagine you and your partner call it quits. You realise that you gave loads of attention, emotion, and energy into the relationship But you also gave your favourite things, like your cute little plant. Now that’s an overpayment. You realise where you overpaid and decide on taking the plant back. That’s exactly how Income Tax Returns work. To put it simply, tax returns are basically the government’s way of paying you the money you might have overpaid throughout the year in your taxes. 

Nice, right? 

Form 16 Explained

Now, this is where people like me back out, but once you have a look into it, it isn’t all that difficult. Income Tax Returns are generally supposed to be filed by the end of July each year, but in years like this one, there are extensions due to the pandemic. There’s also a late filing fine of ₹ 10,000.  First, you’re going to register yourself on the official e-filing website. You’ve got to keep your documents, like payslips, Form 16 and other interest certificates with you. Let’s stop there for a bit, I know you’re wondering what Form 16 is. Form 16 is essentially a certificate your employer needs to provide you with, to show that TDS was deducted from your pay. 

Next, try your luck with form 26AS. This form is your bible when it comes to all tax deductions. Check your TDS certificates with form 26AS to see if your tax deductions have been deposited with the government with your PAN details. 

Have a closer look and avoid any errors. Calculate your income, pay your taxes, and then go ahead with filing in your returns. IT Returns have to mandatorily have filed online, so make sure you have digital versions of everything you need and are ready to put in some digital signatures.

Who is eligible for IT returns?

Anyone whose taxable income exceeds the maximum amount which isn’t charged tax can get their returns. 

Basically, if you’ve paid more in taxes than what you should have, you’re going to get returns from the government. Meanwhile, all individuals with an income of more than ₹2.5 lakh have to file for their income tax and returns. 

What are the benefits of ITR?

There’s a bunch of benefits we could get into but the most obvious ones are -

  1. Getting refunds on the money that has gone is taxes on your end
  2. Easily being eligible for larger loans like home loans. 
  3. Acts as a great legal document and helps you in processes like getting a Visa

What next?

Now I know you might think that hey, ‘I’m done dealing with this, let’s get that money!’ But like ex-partners, the government can also make you wait quite a bit before actually sending you refunds. Errors in your 16/16A forms usually result in delayed payments, errors in refund, and more. Make sure you have a close look at the refund you’re given. After all, your IT Returns require as much patience as an unresponsive ex-partner, but that doesn’t mean you don’t take what is yours. I’m a strong supporter of the entire “teach us finances in school” movement. The huge gap in financial literacy is a clear indication that things need to revamp. How do you think financial literacy could be improved?

Frequently Asked Questions

1. What Percent of Income Is Taxed?

Currently, income over Rs 2.5lakhs is taxed in India. This starts at 5% tax on income of Rs 2.5-5Lakhs and increases across slabs.

2. Which States Have No Income Tax?

Sikkim is exempted from paying an Income Tax, this is because Sikkim was a former kingdom that merged with India on the condition of maintain its old laws ans culture,

3. What is the concept of income in income tax?

Income in 'Income Tax' stands for any amount of money earned by selling goods, providing services, or working jobs. Different incomes are taxed differently, and some incomes, like the ones through agriculture or farming are tax free.

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