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Who Should File Income Tax Return?

If your annual income is more than ₹2.5 lakhs per annum, you must file Income tax* returns in our country. This limit is stretched to ₹3 lakhs for senior citizens above the age of 60. Additionally, people above the age of 75 can get exemptions from paying income tax in India.

The Government of India has imposed Income tax* laws for individuals, firms, LLP (Limited Liability Partnership), HUF (Hindu Undivided Family), companies, local authorities, etc. These laws are mandated to tax the taxable income of the concerned party. Resident Indians and NRIs, who have a taxable income source in India, need to pay taxes if their overall income is above the basic exemption limit.
 

Taxpayers should know their responsibilities and file their income taxes on time without delay. Delay in income tax e-filing can lead to a penalty. If you are wondering if you should file income tax returns, then keep reading this blog to gain insight about income tax returns.

Why File Income Tax Returns?

The income tax returns help in proving that the income earned by an individual or entity in the financial year is legit and fully disclosed to authorities. Filing of income tax returns is a statement or report which gives authorities a detailed idea about certain things such as:
 

  • Income earned from different sources.

  • Tax liabilities on the income earned.

  • TDS deducted on income that is under tax exemption.

Individuals can claim the deducted amount from authorities by filing an income tax return. It also helps individuals get loans, startup funding, etc.

Who Should Register for an Income Tax Return?

We need to clearly understand who should file IT returns to ensure compliance with the income tax laws in the country. Individuals residing in India and NRIs having a source of earning must register to pay income tax if the income is more than the basic exemption limit. If you fall under any of the following categories, you must file IT returns in India:
 

  • Gross income - Individuals with a gross income of ₹2.5 lakh or more in a financial year must file income tax returns. However, the limit for citizens aged between 60-79 is ₹3 lakhs in a financial year, and for citizens above 80, it is ₹5 lakhs. However, the total or gross income should be calculated after factoring deductions applied to sections 80C to 80U and Section 10.

  • Businesses - All the business entities and companies that are registered and are earning from business need to file income tax returns. Here, it does not matter if the business has made a profit or loss in the financial year.

  • LTCG income above ₹2.5 lakh  - If an individual invests in mutual funds, equities, etc. for a duration above the prescribed tenure, the income generated from them is classified as long-term capital gains. Income from various assets under long-term capital gains is taxed differently under the Income Tax Act. 

  • Signing authority - If you are an Indian national with signing authority for a foreign account, then filing an income tax return is essential.

  • Foreign Companies - Other than this, a foreign company taking advantage of a treaty with India should file for income tax returns.

  • NRI - There are provisions for NRIs under the Income Tax Act. NRI must adhere to the taxation rules for them and can also avail of tax deductions under certain heads. 

  • Claim refund - Individuals whose tax has been deducted and who would like to claim a refund can file an income tax return.

  • The income held by trust - Further, individuals or entities who are earning from religious institutions, NGOs, research organisations, etc., need to comply with Indian tax laws and file returns.

  • Business Interest in a foreign country - An individual living in India with an interest or asset in a foreign country must file an income tax return. It does not apply to NRIs.

  • Applicable for Loan - Lastly, in some cases, you must file income tax returns to be eligible to apply for a loan from bank authorities.

Types of Income Tax Returns

Income tax returns are classified into various categories, such as:
 

  • ITR-1 - Indian residents or pensioners with a total income of ₹50 lakh can file ITR-1. An income source can be from salary, house property, etc.

  • ITR-2 - Those individuals or HUFs with income or profit other than their profession or business, such as capital gains, foreign income, agricultural income, etc., must file ITR-2.

  • ITR-3 - ITR-3 applies to individuals, business owners and professionals earning from professional or business sources.

  • ITR-4 - ITR-4 applies to HUF, partnership firms and individuals who have listed their income under a presumptive income scheme. This ITR applies to freelancers, retailers, insurance agents, doctors, etc. However, if the professional turnover exceeds ₹2 crore, they must file the ITR-3.

  • ITR-5 - ITR-5 is applicable for AOP (Association of Persons), partnership firms, LLP(Limited Liability Partnerships) and BOI (Body of Individual) to report their income earned from any other source and business.

  • ITR-6 - It is applicable for companies to disclose their earnings from business or any other source of income.

  • ITR-7 - ITR-7 is for companies, trusts and associations who are claiming tax exemption.

Types of Forms for ITR e-filing

Certain types of forms are associated with filing an ITR.
 

  • Form 16 - Form 16 is a type of salary TDS certificate that an employee gets or receives from the organisation. This form from the employer provides the details about gross salary and other exemptions such as LTA and HRA. Further, the form also mentions the salary TDS and all other revenue or loss reported under tax-saving deductions. 

  • Form 26AS - Another income tax form is Form 26AS, which provides the details of TDS deduction on various incomes such as salary and selling of immovable property. Further, it also provides details of financial transactions, advance tax paid and self-assessment tax.

  • Form 15G and Form 15H - An individual submits Form 15G and Form 15H to earn income or interest without a TDS deduction. Form 15G is submitted by individuals below 60 years of age whose income is below the basic exemption limit. Further, for Form 15H, individuals must be above 60 years of age, and their tax liability should be zero at total income.

Significant Benefits of Filing Income Tax Returns

Some of the prominent benefits taxpayers get when they file their income tax returns are:
 

  • Get Claim or Refund - Suppose the tax has been deducted from your income or fixed deposits, etc., even if it comes under the basic tax exemption limit. Then, by filing an income tax return, an individual can claim the TDS deducted.

  • Avoid Penalties and Interests - Another benefit of filing an income tax return on time is to avoid any penalties and interest imposed by the income tax department. The tax officer can impose a fine if the individual or entity fails to file tax within the due date.

  • Proof of Address - An income tax return can be used as proof of address. Various documents like passports, aadhar cards, etc., require proof of address; in that case, income tax returns can be submitted as address proof.

  • Evidence of Earnings - An income tax return works as proof of income or earnings for an individual contractor or self-employed. It provides a detailed report of individual earnings for the entire financial year.

  • Buying Term Insurance -Lastly, filing an income tax return on time helps individuals buy term insurance. An insurance provider asks for proof of income to determine the coverage based on earnings. Submitting ITR helps insurance providers assess the income details of individuals.

Consequence of Failing to File An ITR

There are serious repercussions if an individual fails to file an income tax return on time.
 

  • A legal notice will be sent to the person if he failed to file an income tax return. However, if the individual has a legitimate reason for not filing an ITR on time, they can seek relief from condonation.

  • The individual or entity unable to file income tax returns within the due date is liable for a fine. If the individual income exceeds ₹5 lakhs, then a fine of ₹10,000 will be imposed by the tax authority. And if the income is under ₹5 lakhs, the fine is ₹1,000.

  • If it is found that an individual is doing tax evasion, then they can face serious detainment.

How to File an Income Tax Return?

The following steps need to be taken for filing an ITR.
 

  • Step 1: Head to the official income tax e-filing website and click the "Login" option.

  • Step 2: Add your username and password and click "Continue."

  • Step 3: Further, a dashboard will open. Here, you will see the "e-file" tab option, click on the  "Income Tax Returns" option. Further,  go for the "File Income Tax Return" option within "Income Tax Returns".

  • Step 4: After that, choose the assessment and mode of filing and then click on the "Continue" button.

  • Step 5: Select your applicable status from various filing options and click "Continue."

  • Step 6: Select the "ITR type" from the dropdown and then "Proceed."

  • Step 7: You need to answer the reason for filing an ITR and click on the "Continue" option.

  • Step 8: Next, as the portal asks, you need to add your bank details and other relevant information.

  • Step 9: Lastly, after filing an ITR, you must verify it using Aadhar OTP, EVC, net banking, etc.

Conclusion

Here, we have provided a detailed answer on who should file ITR. Filing an income tax return is the responsibility of Indian citizens. Individuals or entities must do income tax e-filing within the due date to avoid repercussions. If the individual has failed to file the ITR of the financial year on time, then the authorities can impose a penalty.
 

Since tax laws may change from time to time, it is advisable to consult a tax professional to get a clear understanding of the tax filing norms applicable to your case.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Frequently Asked Questions

What is the minimum income for ITR?

If the individual gross income is over ₹2,50,000, then he needs to file an ITR. However, this may be subject to change under few circumstances.

Are senior citizens exempted from filing an ITR?

As per the Income Tax Act, Section 194P, individuals above the age of 75 are exempted from filing an ITR.

Are NRIs liable to file income tax returns?

Filing an ITR is not mandatory for an NRI, but if an NRI has earned more than ₹2,50,000, they must file an ITR. Further, if a NRI wants to claim a refund on TDS deducted from earned income in India, they can file an ITR.

Disclaimers

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • Tax: *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.