What is the difference between Income Tax and Income Tax Return?
31 Dec 2020
In India, tax is one of the significant sources of revenue for the government. That means, as taxpayers, we need to be very careful when filing our income tax returns. Besides, it is essential to be aware of several income tax-related terms and rules. With the tax season ahead of us, you certainly do not want to get flustered when filing your income tax return.
We understand that at times basic income tax nuances can get overwhelming for some people, simply because they are afraid to make mistakes when filing tax. However, you no longer have to stress on this subject.
Taking one step at a time, below we have given an overview of income tax and income tax return, the difference between the two, and a brief on how you can file your tax online. So, let us begin.
About Income Tax
Income tax is a direct tax applied to the income an individual earns over the said financial year. The amount that is charged under tax is calculated based on the money the person earns annually. You can pay your income tax, TDS/TCS, and non-TDS/TCS online. All you need is relevant details and supporting documents to file your taxes successfully.
As stated earlier, the taxes paid by the people form a significant part of the government’s revenue. It is entirely managed by the Finance Ministry of India that further delegates duties to people working at the Central Board of Direct Taxes (CBDT)
About Income Tax Return (ITR)
Income tax return or ITR is the form that taxpayers have to submit when filing income tax. The application will have your (the taxpayer’s) personal and tax-related information for the said financial year. The income mentioned in your ITR can be from one or multiple sources, such as -
Profits from business or profession
Dividends, interest on deposits, royalty, lottery, etc.
The Income Tax Department of India provides seven types of ITR forms. The applicability of each form will depend on you and the nature and amount of your income. You can read in detail about the different forms by visiting the Income Tax section at Finserv MARKETS online.
Income Tax vs Income Tax Return
When it comes to income tax, it is the amount an individual has to pay for the money they earn for the said financial year. The tax liability is calculated based on the income, tax slab the person falls under and other factors such as rebate, savings, investments, etc. You can use the income tax calculator available on Finserv MARKETS to calculate the amount payable as tax for the given year.
Income tax return, on the other hand, is nothing but the annual record of your income, tax liability, tax paid, and investments for the said financial year. This record is collated and submitted to respective authorities in the needed format known as income tax return file.
Therefore, income tax is the amount that you (the taxpayers) pay and the income tax return is the yearly record of the same.
Importance of Income Tax Filing
People who are of age 60 years and below earning Rs. 2.5 Lakhs are liable to pay tax in India. Most salaried individuals think that their employer deducts tax at source and it is done. However, it is important to note that ITR and income tax are two separate things.
Whether or not you have any tax liabilities, it is mandatory to file your income tax returns. The importance of doing so is as follows -
It helps with the loan processing
It helps with the VISA process
Most banks will not issue credit cards until the applicant files his/her returns
It helps build a record with the Income Tax Department of India
Brief of Income Tax E-Filing
The Income Tax Department of India introduced the income tax e-filing facility in 2006-07. Today, all taxpayers can avail the benefits of e-filing. You can file your income tax returns online by visiting https://www.incometaxindiaefiling.gov.in/.
Also, below we have given an overview of the new and traditional income tax regime that may come in handy when filing income tax returns.
Traditional Income Tax Regime
New Income Tax Regime
Below Rs. 2.5 Lakhs
Between Rs. 2.5 Lakhs and Rs. 5 Lakhs
5 per cent
5 per cent
Between Rs. 5 Lakhs and Rs. 7.5 Lakhs
Between Rs. 7.5 Lakhs and Rs. 10 Lakhs
Between Rs. 10 Lakhs and Rs. 12.5 Lakhs
Between Rs. 12.5 Lakhs and Rs. 15 Lakhs
Above Rs. 15 Lakhs
Filing income tax does not have to be a tedious task. Just ensure that you are filing your ITR on time with accurate details to avoid any future consequences and get your tax refunds easily. Remember, it is the factualness of the information provided when filing income tax returns that will allow you to get your refunds approved without any issues.
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