What is ITR And Why is it Necessary?

ITR Filing is Mandatory in India if Any of these Conditions Apply to You:

5 Reasons Why Should You File ITR?

• Claim Tax refunds: If you earn less than Rs 5 lakh a year, you can get back all the tax that was deducted from your income only by filing tax returns by the 31st July deadline. 
• Legal consequences: If you don't file tax returns, the income tax department may send you a notice. You may face huge penalties and taxes if you do not file ITR, despite their reminder.
• Carry forward of Losses: If you have losses in your business or capital gains, you can carry them forward to reduce your future tax liability by filing tax returns on time.
• Verified income statement: Freelancers and self-employed people don't have official income statements like salaried employees do, so filing tax returns is the most reliable way to verify their income.
• Loan and Visa application: When applying for a loan or visa, your last 3 years ITR is required. Submitting tax returns from the last few years can help lenders or embassies verify your financial status and eligibility.

What Happens if ITR is Not Filed ?

• Late-filing fee: If you do not file ITR within the due date, you may have to pay a late-filing penalty of Rs 5,000. This penalty will be reduced to Rs 1,000 if your income is below Rs 5 lakh.
• Interest: You may have to pay interest under Section 234A @ 1% per month or part month on the unpaid tax amount. 

Eligibility Criteria

The scheme for Bulk Filing Of Returns By Salaried Employees applies to all eligible employers, and their eligible employees assessed in the following cities.

• Ahmedabad
• Bangalore
• Baroda
• Bhopal
• Chandigarh
• Chennai
• Delhi
• Gandhinagar
• Hyderabad
• Jaipur
• Jabalpur
• Kolkata
• Mumbai
• Nagpur
• Pune
• Thane

Furnishing Of Returns 

The scheme For Bulk Filing Of Returns By Salaried Employees is optional and provides an additional mode of furnishing returns of income by person deriving incomes from salaries. Under the Bulk Filing Scheme, an eligible employee can provide his income tax return for an assessment year which she is required to furnish under section 139 of Income Tax Act during any current financial year to his employer. The employer will transcribe the data of the returns on computer readable media using the authorised BRPS – Bulk Return Preparation Software, which will be made available by the Income-Tax Department

The employer will furnish these returns of income together with the data on specified computer-readable media, known as a Bulk return, to the designated Assessing Officer by the due date for furnishing of the returns of income.

Types of Returns to be Received

The scheme for the bulk filing of returns by Salaried Employees will apply to employees whose total income does not include any chargeable income to income tax under the head profits and gains of business or profession.

Following types of returns will not be furnished under the Scheme For Bulk Filing Of Returns By Salaried Employees, 2002

• Income tax return for any assessment year other than the assessment year for which they are needed to furnish the return of income under section 139 during the current financial year;
• Income tax return where no PAN or incorrect PAN of the employee has been quoted;
• Return of income under section 158BC and returns of any assessment year where the previous year falls within the block period
• Returns of an employee having more than one employers during the previous year for which the return is being provided;
• Return of employees who are not in receipt of her/his salary from the eligible employers as on the last day of the last financial year, for which the return is being furnished
• A revised return of income under the sub-section (5) of section 139 of the Income-tax Act 

Note: If an employee has failed his return of income for a year under the Scheme For Bulk Filing Of Returns By Salaried Employees, may furnish a revised return of income under section 139  before the assessing officer.

Procedure for Eligible Employees to File Income Tax Return

An eligible employee will have to take the below described steps for furnishing the return of income through the employer or DDO under the Scheme For Bulk Filing Of Returns By Salaried Employees.

Step 1: Provide consent to the eligible employer in the prescribed application form for furnishing the return of income of an assessment year.

Step 2: Furnish a return of income in Form 2D or Form Number 3 duly signed and verified under section 140, together with the documents required to be enclosed with such return

Step 3: Enclose a photocopy of the PAN Card or intimation letter received for allotment of PAN to ensure the PAN has been correctly quoted in the return of income.

Step 4: In cases of claims of refund, either give consent in the consent form for the refund, to be delivered through an employer; or indicate the particulars of the bank account in which the refund is to be directly credited by the Assessing Officers through the Electronic Clearing Scheme of RBI

Step 5: Attach the mandate form, the bank account in which the refund is to be credited should be in the same cities where the returns being furnished.

Note: The refunds are arising on the processing of returns furnished under the Scheme For Bulk Filing Of Returns By Salaried Employees, 2002 will not be sent through any mode other than those described above.

Procedure for the Eligible Employers to File Income Tax Return

An eligible employer will get the duly signed and verified returns of income from the eligible employees assessed to tax at any of the specified city.

The employer will transcribe it correctly and completely the information contained in the returns of income using the Bulk Return Preparation Software to generate a Bulk return on a specified computer readable media.

In case employees of an employer are assessed at more than one specified cities, separate Bulk returns will have to be generated in respect of each specified city. The employer will provide a bulk return on a prescribed computer-readable medium along with the corresponding returns of income in  Form 3 or Form 2D before the designated Assessing Officer of the respective specified city

An eligible employer will take the following steps:

Get Consent from Employees

An eligible employer will get consent from the eligible employees willing to furnishing their returns under the scheme along with the mandate forms, where a refund is to be transferred to the bank of the employee.

Receive the duly signed and verified income tax returns in Form Number 2D or Form Number 3 of the eligible employees together with the enclosures required to be furnished with these returns.

Verify PAN

• The employee needs to ensure that the PAN of the employees quoted in the returns of income is correct.
• Verify the TDS claim in respect of salary income is as per the certificates in Form Number 16 issued by the DDO.
• Sort the returns according to the concerned city where the concerned employees are assessed to tax.

Furnishing of Bulk return

Transcribe the data contained in the returns of income on the computer readable media using the authorised Bulk Return Preparation Software – BRPS. The BRPS will be collected from the Income-tax Department.

The specified computer readable medium for the furnishing of Bulk return will be

• lCD ROM of 650 MB capacity
• l4mm 2GB/4GB (90m/120m) DAT Cartridge
• l3.5″ 1.44 MB floppy diskette

The employer will ensure the correctness of the transcribed data on the Bulk returns vis-a-vis the returns of income submitted by the employees

Generate separate forms of control charts  for the returns of income to be furnished at each specified city

Generate a separate Bulk return on any prescribed computer media using the BRPS in respect of the eligible employee being assessed at each of the specified city. In no case, the Bulk returns of more than one employer, DDO or relating to the employee of more than one specified city of the employers or DDO should be included on the same unit of computer-readable media. Separate units of the computer-readable media should be used for the returns about each specified city. The unit of the computer readable medium used for a Bulk return should be serially numbered

• Name and TAN of the employer
• Name of the specified city
• Assessment year
• Serial number of the unit and total number of units of the computer readable medium used
• Number of employees whose returns of incomes are included in the unit

Arrange the returns of income in the forms in the same sequence as in the Bulk returns and provide identical serial number both on the return of income and the Bulk return

Note: Only one Bulk return at one of the specified cities should be furnished for one assessment year

Get Acknowledgement

Obtain an acknowledgement of the Bulk return provided on the control chart as appended to this Scheme For Bulk Filing of Returns By Salaried Employees. Also, get the acknowledgements for the returns of income so furnished from the receiving official.

Receive the Returns

The Bulk return on the computer together with the returns of income in Form Number 2D or Form Number 3 of the concerned employees and the consent forms/mandate forms, will be received at the designated counter.

The designated Assessing Officer will also issue an individual acknowledgement for the returns of income in Form Number 2D or Form Number 3 of each employee. Such acknowledgements will be given by an appointed date not later than ten working days after the date of receipt of returns.

Processing of the Return

The Bulk return will be processed on a priority basis, after processing of the Bulk return, employee-wise intimations would be generated only in the cases where there is a demand or a refund.

The consolidated statements showing the result of the processing  the each return included in the Bulk returns, the amount of resultant refund, the manner in which it is being issued will be sent by the designated assessing officers to the respective employer, together with the intimation, and the refunds cheques mentioned above, for distribution amongst the concerned employees.

• Address the letter correctly: The first thing you need to do when  writing an Office letter to an income tax notice is to address it correctly. The Income Tax Notice Reply Letter Format should be addressed to the officer who sent the notice, with their name and designation, along with the name of the department and their address. Make sure you spell their name correctly and get their designation right.
•  
• Reference the notice number and date: The next step is to reference the notice number and date. This information is usually mentioned at the top of the notice. It is important to include this information in your Income Tax Notice Reply Letter Format so that the officer can quickly identify which notice you are responding to.
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• State the purpose of the letter: The purpose of your Income Tax Notice Reply Letter Format should be to respond to the issues raised in the income tax notice. You should clearly state the purpose of your letter in the opening paragraph. For example, if the notice was issued for non-filing of income tax returns, you can state that you are writing in response to the notice issued under section XXX of the Income Tax Act, for non-filing of income tax returns.
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• Provide necessary details: The next step is to provide the necessary details. This could include information about your income, investments, deductions, and other relevant details. Make sure you provide accurate information and include all relevant details. This will help the officer to understand your situation better and make an informed decision.
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• Explain the reasons for non-compliance: If the notice was issued for non-compliance, it is important to explain the reasons for non-compliance. You should provide a detailed explanation of why you were not able to comply with the requirements of the Income Tax Act. This could include reasons such as illness, travel, or other unforeseen circumstances.

What is Business Income tax return filing?

Business Income Tax Return (ITR) filing in India is the annual process where businesses declare their income earned during a financial year to the Income Tax Department. This typically involves electronically filing the appropriate ITR form (like ITR-3 for companies or ITR-4 for presumptive scheme businesses) on the government portal. The required form and documents depend on your business structure and tax situation. Filing accurately and adhering to deadlines (usually September 30th) ensures compliance and avoids penalties.
 

Who needs to file a business income tax return?

In India, most businesses must engage in business tax filing annually. Here’s a breakdown of who needs to file based on business structure, criteria, and appropriate business ITR forms.

• Sole Proprietorship: All sole proprietors must file an ITR if their total income exceeds Rs. 2.5 lakhs. The income threshold varies depending on the age:
  • Below 60 years old: Rs. 2.5 lakhs
  • Between 60 and 80 years old: Rs. 3 lakhs
  • Above 80 years old: Rs. 5 lakhs (ITR filing will be exempted if below Rs. 5 lakhs)
• Partnership Firm: All partnership firms must file an ITR, regardless of profit or loss.
• Limited Liability Partnership (LLP): All LLPs must file an ITR, even if they report a loss.
• Companies: All Private Limited and one-person companies (OPCs) must file an ITR.

Proprietorships and businesses requiring audited accounts should use ITR-3, while those opting for the presumptive taxation scheme under a certain turnover limit can file ITR-4 (Sugam).
 

Applicable ITR form for different types of Business

You need to use the ITR form based on your business structure. Here’s the table captures the applicable ITR form for different types of businesses,

Applicable Business Income tax return (ITR) Form	Business Type	Description
ITR-3	Individuals/HUFs (Business/Profession Income)	For individuals and Hindu Undivided Families (HUFs) with income from business or profession (requires maintaining books of accounts or audit).
ITR-4 (Sugam)	Individuals/HUFs/Firms (Business under Sec 44AD/44ADA/44AE)	For residents with income up to ₹50 lakhs from business or profession computed under sections 44AD, 44ADA, or 44AE (presumptive taxation scheme).**
ITR-5	LLPs/Partnerships	For Limited Liability Partnerships (LLPs) and Partnerships (except those filing ITR-7).
ITR-6	Companies (Except Sec 11 Exemption)	For companies other than those claiming exemption under section 11 (e.g., public charitable trusts).
ITR-7	Companies under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) only	For person and companies required to file returns under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) only

Documents required for filing ITR for business

These are the documents generally the business is required to have when filing an ITR,

• PAN Card: This is essential for identification purposes.
• Aadhaar Card: Aadhaar is mandatory for filing ITRs for most businesses.
• Profit and Loss (P&L) Statement: This document summarises your business’s income and expenses over the financial year.
• Balance Sheet: This shows your business’s financial position at the end of the financial year, including assets, liabilities, and capital.
• Bank Statements: You will need these to reconcile your income and expenses and ensure all transactions are accounted for.
• GST Registration Number (if applicable): If your business is registered under GST, you’ll need your GST number.
• Tax Deducted at Source (TDS) Certificates: If you have deducted TDS from payments made to others, you’ll need the TDS certificates.
• Loan Documents (for claiming interest rebates): If you’ve taken out business loans, you may need documents to claim interest rebates.
• Challans of Income Tax Payments: Keep copies of any challans showing advance tax or self-assessment tax payments made.
• Records of Fixed Assets: If you’ve added or sold fixed assets during the year, you’ll need records of these transactions.

How to File ITR for Businesses?

Here’s the general procedure common to all types of business tax filing,

1. Gather Documents: Collect the documents mentioned previously, including financial statements, bank statements, tax challans, and any relevant business registration details.
2. Choose the ITR Form: The specific Income Tax Return (ITR) form you need depends on your business structure (proprietorship, partnership, company, etc.). Choosing the right ITR form depends on your business type and income. ITR-4 is for businesses (except LLPs) with income under Rs. 50 lakhs calculated under specific sections. ITR-5 is for LLPs and partnerships, while ITR-6 is for companies except those exempt under Section 11. Finally, ITR-7 is specific to companies mandated to file under sections 139(4A) to 139(4D).
3. Prepare the ITR Form: Carefully fill out the chosen ITR form, accurately reflecting your business income, expenses, deductions, and tax liabilities. Utilize your financial statements and supporting documents for accurate reporting.
4. E-filing is Preferred: The Income Tax Department encourages electronic filing (e-filing) of ITRs. You can e-file your ITR through the official department website or authorized e-filing portals.
5. Verification and Submission: Once you’ve completed the ITR form, digitally verify it using your Aadhaar or other authorized methods. Finally, submit the verified ITR electronically through the chosen platform.
6. Payment of Tax Dues: Before submitting your ITR, ensure you’ve paid any outstanding advance tax or self-assessment tax. Keep copies of challans as proof of payment.

Also read: 10 Benefits of Filing Income tax return (ITR)

Due Dates for Business Income tax return (ITR) filing

Business filing taxes due dates in India vary depending on the ITR form used. For most businesses, ITR-1 (SAHAJ) and ITR-4 (SUGAM) offer a July 31, 2024 deadline (AY 2024-25). However, businesses audited or with income requiring ITR-3 have an extended deadline of October 31, 2024. Currently, ITR-1, ITR-2, ITR-4, and ITR-6 are activated, which can be accessed on the income tax e-filing website.

Know about the Pay later option for income tax return filing

Benefits of Income Tax Return Filing on or Before Due Dates

Filing your Income Tax Return (ITR) on or before the due date, which is 31st October for companies, is crucial for maintaining compliance and ensuring financial stability. Here are some significant benefits of timely ITR filing:

• Compliance with Legal Obligations: As per Section 139 of the Income Tax Act, every company is mandated to file its ITR by the specified due date. Timely filing ensures compliance with the law, helping companies avoid penalties and legal problems.
• Carrying Forward Losses: Companies that file their ITR on time can carry forward their business losses for adjustment against future profits, as stipulated in Section 72 of the Income Tax Act. This provision allows businesses to offset losses over eight subsequent assessment years. Conversely, failing to file on time results in the loss of this right, potentially impacting the company’s financial health.
• Avoidance of Penalties and Interest: Late filing attracts penalties under Section 234F, alongside additional interest charges under Sections 234A, 234B, and 234C if there are outstanding tax liabilities. Timely submission mitigates these financial burdens, safeguarding the company’s resources.
• Reduced Risk of Scrutiny: Filing ITR on time minimizes the risk of scrutiny from tax authorities. Delayed filings can trigger red flags, leading to increased scrutiny, notices, and audits, which may further complicate a company’s operations.
• Faster Refund Processing: Companies that file their tax returns promptly can expect quicker processing of any tax refunds due.
• Facilitating Loan Applications: Timely filed income tax returns are often required by banks and financial institutions as part of the loan application process. Such documentation demonstrates financial stability and compliance, improving the chances of securing loans or credit facilities.
• Smoother Winding-Up Process: If a company plans to wind up its operations, having all Income Tax returns filed on time simplifies the process. This compliance can lead to a more efficient winding-up procedure, minimizing complications and delays.

Penalty for late filing business tax return

Corporate tax filing before the business tax return filing deadline is crucial to avoid penalties and ensure you can take advantage of all tax benefits. Here’s what you need to be aware of if you miss the deadline:

• Interest: As per Section 234A, a penalty interest of 1% per month (or part month) will be charged on any outstanding tax amount from the due date until the payment is made. This can quickly add up, so timely filing is important.
• Late Filing Fee: Section 234F imposes a late filing fee of Rs. 5,000 if you miss the deadline. However, there’s some relief for smaller businesses. If your total income is below Rs. 5 lakh, the late fee is reduced to Rs. 1,000.
• Loss Carry Forward: Missed deadlines can impact your ability to offset future tax liabilities. Businesses often incur losses, especially in initial years. These losses can be “carried forward” and used to reduce taxable income in subsequent years. However, this benefit is forfeited if you fail to file your return on time.
• Belated Returns: If you miss the deadline, you can still file a “belated return” by December 31st of the assessment year (subject to any government extensions). However, you will still be subject to late filing fees and interest charges. Additionally, you cannot carry forward any business losses for future tax adjustments.

Tips for Filing Taxes for Businesses

Filing business taxes can feel overwhelming, but it can be a smooth process with the right strategies. Here are five key tips to ensure efficient and accurate corporate tax filing:

• Maintain meticulous records: Organize your business income and expenses meticulously throughout the year. Keep receipts, invoices, and bank statements readily available. This ensures you have all the necessary documentation to support your tax deductions and calculations and file quickly before the business tax return filing deadline.
• Understand your business structure: How your business is structured (sole proprietorship, LLC, S corporation, etc.) determines how you file your taxes. Knowing your structure helps you identify the appropriate tax forms and business tax return filing deadlines.
• Separate business from personal finances: Mixing personal and business expenses can lead to complications during tax filing. Dedicate separate bank accounts and credit cards for business transactions. This simplifies record-keeping and avoids confusion.
• Embrace tax-deductible expenses: Many business-related costs can be deducted from your taxable income. Familiarize yourself with allowable deductions, such as office supplies, travel expenses, and marketing costs. Maximize these deductions to reduce your overall tax burden.
• Consider professional help: If navigating tax complexities seems complex, consider consulting an IndiaFilings tax professional. We offer the best tax service for small businesses to larger incorporations.

Conclusion

In conclusion, understanding Business Income Tax Return (ITR) filing in India is essential for businesses to ensure compliance and avoid penalties. This article has covered everything you need to know, from who must file and the different ITR forms to the documents required and the filing process. Remember to file the business income tax return form before the filing taxes due date.