1. What is ITR?

An Income Tax Return (ITR) is a document used by taxpayers to report details about their income earned and the corresponding tax liability to the income tax department. It serves as a formal declaration of an individual or entity’s financial information, ensuring transparency and compliance with tax regulations.

The ITR landscape includes seven different forms: ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. Each taxpayer is required to file their ITR on or before the specified due date. The choice of ITR form depends on factors such as the sources of income, the amount of income earned, and the taxpayer’s category, which can include individuals, HUFs (Hindu Undivided Families), companies, and more.

2. What is ITR 1 Sahaj Form?

The ITR-1 Sahaj Form, as its name implies, serves as a simplified means for individual taxpayers to file their income tax returns. This form is specifically tailored for resident individuals in India whose total income falls below the Rs. 50 Lakhs threshold and originates from the following sources:

Income from Salary or Pension
Income from a Single House Property
Income from Other Sources

The ITR-1 Form simplifies the procedure for eligible individuals to disclose their income tax information, offering a convenient and effective approach to fulfilling their tax obligations.

3. Who Can File ITR-1

Filing income tax returns (ITR) is an essential part of every taxpayer's financial responsibility. It ensures compliance with tax laws and facilitates various financial transactions. Among the various forms available for filing returns, ITR 1 holds significant importance due to its simplicity and applicability to a wide range of taxpayers.

ITR 1, also known as Sahaj form, is primarily designed for individuals having income from salaries, one house property, and other sources like interest income. It is suitable for taxpayers with relatively straightforward financial affairs and limited sources of income. Individuals falling under the following categories are eligible to file ITR 1 form:

Income Threshold

To be eligible for filing using ITR-1, an individual's total income for the financial year must not exceed Rs. 50 lakh.

a. Permissible Income Sources

ITR-1 is suitable for individuals whose income originates from the following sources:
1. Salary: Income earned from employment, including wages, bonuses, and commissions.
2. Income from a single-house property: Revenue generated from letting out or owning a single residential property.
3. Family pension income: Pension received by family members of a deceased government employee.
4. Agricultural income (up to Rs. 5,000): Income generated from agricultural activities up to the specified limit.
5. Other sources: This category encompasses various sources of income, including:
  - Interest from Savings Accounts
  - Interest from Deposits (Bank / Post Office / Cooperative Society)
  - Interest from Income Tax Refund
  - Interest received on Enhanced Compensation
  - Any other Interest Income
  - Family Pension
b. Clubbing of Income

Individuals can combine their income with that of their spouse or minor children, but only if the additional income falls within the specified limits mentioned above.

4. Who Cannot File ITR-1

Individuals falling under the following categories are ineligible to file their Income Tax Returns using the ITR-1 form:

Resident Not Ordinarily Resident (RNOR) and Non-Resident Indian (NRI) Individuals:Those who qualify as RNOR or NRI for the relevant assessment year cannot utilize ITR-1.
Total Income Exceeding ₹ 50 Lakh: If an individual's total income surpasses ₹ 50 lakh during the financial year, they are ineligible for ITR-1 filing.
Agricultural Income Over ₹ 5,000: Individuals with agricultural income exceeding ₹ 5,000 cannot use ITR-1.
Income from Specified Sources: Individuals with income derived from activities such as lottery, racehorses, legal gambling, etc., are not eligible to file ITR-1.
Taxable Capital Gains: Individuals with taxable capital gains, including both short-term and long-term gains, cannot opt for ITR-1 filing.
Investment in Unlisted Equity Shares: Those who have invested in unlisted equity shares during the financial year are ineligible for ITR-1 filing.
Income from Business or Profession: Individuals earning income from business or profession cannot file ITR-1.
Directors of a Company: Individuals serving as directors in a company during the financial year cannot use ITR-1.
Tax Deduction under Section 194N: Those availing tax deduction under section 194N of the Income Tax Act are not eligible for ITR-1 filing.
Deferred Income Tax on ESOP from Eligible Start-up Employer: Individuals with deferred income tax on Employee Stock Ownership Plan (ESOP) received from an eligible start-up employer cannot opt for ITR-1 filing.
Income from More Than One House Property: Individuals owning and generating income from more than one house property are ineligible for ITR-1 filing.
Non-Compliance with Eligibility Criteria: Individuals failing to meet the eligibility criteria outlined for ITR-1 filing cannot utilize this form for filing their Income Tax Returns.

It's crucial for individuals falling under any of these categories to explore alternative ITR forms suitable for their specific circumstances to ensure accurate and compliant tax filing.

5. Alternatives for ITR 1 form

There are several alternative Income Tax Return (ITR) forms available for individuals who do not meet the eligibility criteria for ITR-1 filing. Some of these alternatives include:

ITR-2: This form is applicable for individuals and Hindu Undivided Families (HUFs) who have income from sources other than income from business or profession.
ITR-3: Suitable for individuals and HUFs having income from business or profession.
ITR-4: Also known as Sugam, this form is for individuals, HUFs, and firms (other than LLP) having presumptive income from business or profession.
ITR-5: Applicable for firms, LLPs (Limited Liability Partnerships), Association of Persons (AOPs), and Body of Individuals (BOIs).
ITR-6: Designed for companies other than those claiming exemption under section 11 (income from property held for charitable or religious purposes).
ITR-7: Meant for persons including companies who are required to furnish return under sections 139(4A), 139(4B), 139(4C), and 139(4D).

It's essential to carefully select the appropriate ITR form based on one's specific sources of income and financial circumstances to ensure accurate and compliant tax filing.

6. ITR-1 Due Date

The due date for filing Income Tax Return (ITR) using Form ITR-1 typically falls on July 31st of the assessment year. However, this deadline may be extended by the Income Tax Department under certain circumstances. It's important for taxpayers to stay updated with any notifications or announcements regarding deadline extensions to ensure timely filing and avoid penalties.

7. Structure of ITR Form 1

While filling out ITR Form 1, it's important to navigate its structured layout with attention to detail. The form is divided into five main parts and two schedules to ensure clarity and completeness:

Part A: General Information: This section captures personal details such as name, PAN number, age, gender, and date of birth. It also includes information about the assessing officer, communication address, contact details, filing date, and Aadhaar details if applicable.
Part B: Gross Total Income: Here, taxpayers provide details of their gross total income, including earnings from salary, property, and other sources.
Part C: Deductions and Total Taxable Income: Taxpayers furnish information about deductions claimed under sections 80C, 80D, 80U, 80G, and others, along with the calculation of total taxable income.
Part D: Computation of Tax Payable: This part entails the computation of tax payable, including details such as tax computation, status, rebates, post-rebate taxes, and claims for TDS (Tax Deducted at Source). Taxpayers also provide bank account details for refunds, if applicable.
Part E: Other Information: This section gathers various additional details as required by the tax authorities to complete the tax return accurately.

Additionally, there are two schedules included in the form:

Schedule IT: This schedule is used to report details of advance tax and self-assessment tax payments.
Schedule TDS & TCS: Taxpayers use this schedule to provide information about tax deducted at source (TDS) and tax collected at source (TCS).

Once all the required information is filled in, taxpayers must verify the accuracy of the details provided before submitting the form.

8. Documents Required for Filing ITR 1

PAN (Permanent Account Number): Every taxpayer should have a PAN, which is essential for filing taxes.
Form 16: This form is provided by the employer and contains details of salary income, taxes deducted (TDS), and other allowances.
Form 26AS: It is a consolidated tax statement that shows details of tax deducted at source (TDS), tax collected at source (TCS), advance tax paid, and self-assessment tax payments.
Bank Statements: Bank statements are required to verify interest income, dividend income, and any other financial transactions.
Details of Other Income: Any income earned from sources other than salary, such as rental income, interest income, or capital gains, should be documented.
Investment Proofs: Documents related to investments made under various sections like 80C (such as LIC premium, PPF contribution, etc.), 80D (health insurance premium), and other applicable sections for claiming deductions.
Home Loan Statement: If applicable, a statement of interest paid on home loan can be used for claiming deductions under section 24.
Aadhaar Card: Aadhaar number should be provided for Aadhaar-based e-verification of the tax return.
Details of Bank Accounts: Information regarding bank accounts held during the financial year, including account numbers, IFSC codes, and type of accounts.
Property Details: If the taxpayer owns property, details such as address, share of ownership, and income from property should be provided.
Tax Saving Investment Receipts: Receipts of investments made in tax-saving instruments like mutual funds, National Savings Certificates (NSC), etc.
Medical Bills and Health Insurance Premium Receipts: Receipts of medical expenses and health insurance premiums paid during the financial year.
Receipts of Donations: Receipts of donations made to eligible charitable organizations for claiming deductions under section 80G.

Having these documents and information readily available can streamline the process of filling out ITR-1 and ensure accurate reporting of income and deductions.

9. Required Details in ITR1 Form

The completion of the ITR1 form necessitates providing detailed information across its various sections:

1. Part A: This segment gathers personal details such as PAN number, age, gender, address, and communication information.

2. Part B: Here, one must furnish details concerning gross total income, encompassing earnings from salary, property, and other sources.

3. Part C: This section requires information pertaining to deductions claimed under sections 80C, 80D, 80U, and 80G of the Income Tax Act.

4. Part D: Tax computation details, including the taxpayer's status, rebates, post-rebate taxes, claims for Tax Deducted at Source (TDS), and bank account particulars, are outlined in this part.

10. Types of Income Excluded from ITR-1 Form

Income Tax Return (ITR) Form 1, also known as Sahaj, is designed for individuals with relatively straightforward financial affairs. However, certain types of income are excluded from being reported on this form. These include:

Income from Business or Profession: Individuals who are self-employed, freelancers, or have income from business activities cannot use ITR-1 to report such earnings. They must use a different ITR form suitable for their business or professional income, such as ITR-3 or ITR-4.
Capital Gains: Any income generated from the sale of capital assets, such as stocks, mutual funds, real estate, or other investments, cannot be reported on ITR-1. Taxpayers with capital gains must use the appropriate ITR form, like ITR-2 or ITR-3.
Income from Multiple House Properties: If an individual earns rental income from more than one house property, they are not eligible to use ITR-1. Instead, they should use a different ITR form capable of accommodating multiple house properties, such as ITR-2.
Income from Other Sources: Certain types of income, such as winnings from lotteries, horse races, or legal gambling, are not allowed to be reported on ITR-1. Taxpayers earning such income need to use a different ITR form, like ITR-2 or ITR-3.
Foreign Income: Individuals with income earned outside India or with assets held abroad are not permitted to use ITR-1. They must use the appropriate ITR form for reporting foreign income and assets, such as ITR-2 or ITR-3.
Agricultural Income exceeding ₹ 5,000: If agricultural income exceeds ₹ 5,000, individuals are ineligible to use ITR-1. They must opt for a different ITR form capable of accommodating agricultural income, such as ITR-2.
Resident Not Ordinarily Resident (RNOR) and Non-Resident Indian (NRI) individuals: These individuals cannot use ITR-1 regardless of their income sources. They must use the appropriate ITR form for their residential status and income sources, such as ITR-2 or ITR-3.

11. What are the major deductions available to Salaried Employees in ITR 1 form.

i. Understanding deductions for salaried employees

Salaried employees are entitled to various deductions under the Income Tax Act, 1961, which can help them reduce their taxable income and ultimately their tax liability. Let's explore some of the major deductions available to salaried employees in the ITR 1 form.

a. Standard deduction

Standard deduction is a fixed amount that is deducted from the salary income of an individual. It was introduced in the Budget 2018 and is available to all salaried individuals and pensioners. For the assessment year 2023-24, the standard deduction is set at ₹50,000.

b. Section 80C deductions

Section 80C of the Income Tax Act provides various investment avenues through which salaried individuals can claim deductions up to ₹1.5 lakh in a financial year. Some popular options under Section 80C include Employee Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), etc.

c. House rent allowance (HRA)

House Rent Allowance (HRA) is provided by employers to employees to meet the cost of renting a home. Salaried individuals can claim HRA exemption based on certain conditions specified by the Income Tax Department. The exemption amount is calculated as the minimum of actual HRA received, 50% of salary for employees living in metro cities, or 40% of salary for employees living in non-metro cities.

Refer HRA Calculator

d. Deductions under section 80D

Section 80D provides deductions for payment of health insurance premiums for self, spouse, children, and parents. Salaried employees can claim deductions up to ₹25,000 for premiums paid for themselves, their spouse, and dependent children. An additional deduction of up to ₹25,000 is available for premiums paid for parents (aged below 60 years), and if parents are senior citizens, the limit is increased to ₹50,000.

e. Education loan interest

Interest paid on education loans for higher studies is eligible for deduction under Section 80E of the Income Tax Act. There is no upper limit on the amount of deduction, and it can be claimed for a maximum of 8 years starting from the year in which the interest payment begins.

f. Home loan interest

Interest paid on home loans is eligible for deduction under Section 24 of the Income Tax Act. For self-occupied properties, the maximum deduction allowed is ₹2 lakh per annum, while for let-out or deemed let-out properties, the entire interest amount can be claimed as deduction without any limit.

g. Leave travel allowance (LTA)

Leave travel allowance (LTA) is provided by employers to employees to cover their travel expenses when they go on leave with their families. Salaried individuals can claim LTA exemption for travel expenses incurred within India subject to certain conditions.

h. Other allowances

Apart from the above deductions, salaried employees may also avail deductions on other allowances such as medical allowance, transport allowance, children education allowance, etc., as per the rules specified by the employer and the Income Tax Department.

ii. How to claim deductions in ITR 1 form

To claim deductions in the ITR 1 form, salaried employees need to fill in the relevant details in the appropriate sections of the form. They should ensure that they have proper documentation and proofs for the deductions claimed to avoid any discrepancies during the tax assessment process.

Penalties for Late Filing of ITR 1 Form

1. Financial Penalty

One of the primary penalties for late filing of ITR 1 form is the imposition of a financial penalty. If a taxpayer fails to file the ITR within the specified due date, a penalty under section 234F of the Income Tax Act may be levied. The amount of penalty depends on the delay in filing the return:

For returns filed after the due date but on or before December 31 of the assessment year: A penalty of ₹5,000 may be imposed.
For returns filed after December 31 of the assessment year: A penalty of ₹10,000 may be levied.

However, if the total income of the taxpayer does not exceed ₹5 lakh, the maximum penalty amount shall be restricted to ₹1,000.

2. Interest on Tax Payable

Apart from the financial penalty, the taxpayer may also be liable to pay interest on the tax payable for the period of delay in filing the return. The interest is calculated at the rate of 1% per month or part thereof, starting from the due date of filing the return until the actual date of filing.

3. Disqualification from Certain Benefits

Late filing of ITR may also lead to disqualification from certain benefits and exemptions under the Income Tax Act. Taxpayers who fail to file their returns within the due date may lose the opportunity to carry forward losses, claim deductions, or avail benefits like revision of returns, adjustment of taxes, etc.

Consequences of Persistent Non-Compliance

Continued non-compliance with the filing of ITR can have more severe consequences, including:

Prosecution: The Income Tax Department may initiate legal proceedings against habitual non-filers or those deliberately evading taxes.
Scrutiny and Assessment: Late filing increases the chances of scrutiny and assessment by the Income Tax Department, leading to potential tax audits and inquiries.
Attachment of Assets: In extreme cases, the department may resort to attaching the taxpayer's assets to recover the outstanding tax liabilities.

The Indian Income Tax Act has undergone significant changes over the years, particularly concerning the tax regime. One of the notable transitions is from the Old Regime to the New Regime. This article delves into the differences between the two regimes, their implications for taxpayers, and the overall impact on the income tax landscape.

Old Tax Regime vs New Tax Regime - Which one is benefiical for Salaried Employees

Introduction

The Old Regime refers to the traditional income tax system wherein taxpayers can claim various exemptions, deductions, and rebates to reduce their taxable income. On the contrary, the New Regime introduced a simpler tax structure with lower tax rates but limited deductions and exemptions.

Key Differences between Old Regime and New Regime

Tax Calculation Methodology

Under the Old Regime, taxpayers compute their taxable income after availing deductions and exemptions provided under various sections of the Income Tax Act. Conversely, the New Regime offers fixed tax rates without considering any deductions or exemptions.

Tax Rates

The tax rates differ between the Old and New Regimes. While the Old Regime follows a progressive tax rate structure with higher rates for higher income slabs, the New Regime offers lower tax rates across all income levels.

Applicability

Taxpayers have the option to choose between the Old and New Regimes based on their preference and financial circumstances. However, certain taxpayers, such as salaried individuals with limited deductions, may find the New Regime more beneficial.

Advantages of the New Regime

Simplified Tax Structure

The New Regime simplifies the tax filing process by eliminating the need to track and claim various deductions and exemptions. This streamlines the tax compliance process, especially for individuals with straightforward financial affairs.

Increased Flexibility

With the removal of deductions and exemptions, taxpayers have more flexibility in managing their finances and investments. They can focus on optimizing their financial portfolio without being influenced by tax-saving considerations.

Removal of Tax Exemptions and Deductions

The New Regime eliminates the complex web of tax exemptions and deductions, ensuring a level playing field for all taxpayers. This promotes transparency and fairness in the tax system, reducing the scope for tax evasion and avoidance.

Disadvantages of the New Regime

Loss of Tax Benefits

Taxpayers transitioning from the Old Regime to the New Regime may lose out on certain tax benefits, such as deductions for home loan interest, medical insurance premiums, and investments in specified savings schemes.

Higher Tax Liability for Some Taxpayers

While the New Regime offers lower tax rates, some taxpayers, especially those with significant deductions under the Old Regime, may face a higher tax liability under the New Regime.

Impact on Taxpayers

The choice between the Old and New Regimes significantly impacts taxpayers' financial planning and decision-making process. Individuals need to carefully evaluate their tax-saving options and choose the regime that best aligns with their long-term financial goals.

New vs Old Regime

Conclusion

The transition from the Old Regime to the New Regime marks a paradigm shift in India's income tax landscape. While the New Regime offers simplicity and transparency, taxpayers must weigh the advantages and disadvantages before making an informed decision.

Frequently Asked Questions

Can ITR-1 be filed by Non-resident Indians (NRIs)?

No, ITR-1 can only be filed by resident individuals. NRIs are not eligible to file ITR-1.
Is it mandatory to e-file ITR-1?

Yes, if your income exceeds ₹5 lakh or if you are claiming a refund, it is mandatory to e-file your ITR-1.
What documents are needed to file ITR-1?

Documents required for filing ITR-1 include Form 16 (for salary income), details of other incomes such as bank interest, rental income, etc., details of deductions claimed under Section 80C to 80U, details of taxes paid, and Aadhaar card number.
What is the due date for filing ITR-1?

The due date for filing ITR-1 for individuals is generally July 31st of the assessment year. However, this date can be extended by the Income Tax Department.
Can I revise my ITR-1?

Yes, you can revise your ITR-1 within a specified time limit if you have made any errors or omitted any details in the original filing.
Do I need to attach any documents while filing ITR-1?

No, you do not need to attach any documents while filing ITR-1. However, you should keep all the supporting documents safely as they may be required during the assessment by the Income Tax Department.
Can I file ITR-1 offline?

No, ITR-1 can only be filed online. Offline filing options are not available for ITR-1.

STARTUP STATION

ITR-1 Return Filing

Income tax return filing for an individual with salary income of less than Rs.5 lakhs.

Documents Required

ITR-1 (Sahaj) Filing