Income Tax Return
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What is Income Tax Return (ITR) filing?

An Income Tax Return is a formal statement filed by a taxpayer with the Income Tax Department declaring income earned, deductions claimed, taxes already paid via TDS, TCS or advance tax, and any residual tax liability or refund due. It is the annual reconciliation between a taxpayer's economic reality and the government's tax records, filed electronically on the Income Tax portal at incometax.gov.in.

Filing an ITR is far more than a legal formality. It is the single most important compliance document for any Indian citizen — banks refer to it for loan approvals, embassies scrutinise it for visa processing, VCs review it before wiring investment funds, and government tenders ask for the last three years of returns before qualifying a vendor. A well-maintained ITR history is a passport to India's formal economy.

For the assessment year 2026-27 (financial year 2025-26), returns can be filed from 1 April 2026 onwards. The Income Tax Department opens the utility for each ITR form progressively — usually ITR-1 and ITR-4 first, followed by ITR-2, ITR-3 and the audit-form ITR-5, 6 and 7 in July. Taxpex files returns end-to-end for every form, backed by CA review and a written computation summary before you approve the filing.

Who is required to file an ITR?

Under Section 139 of the Income Tax Act, 1961, filing an ITR is mandatory when any one of the following applies:

• Gross total income (before deductions) exceeds the basic exemption limit — ₹2.5L (old regime) or ₹3L (new regime) for individuals below 60; ₹3L / ₹3.5L for seniors; ₹5L / ₹3.5L for super seniors above 80.
• You are a company, LLP, firm or cooperative society — mandatory irrespective of income or loss.
• You want to claim a TDS refund — this is why 60% of salaried professionals should file even if their income is below the exemption limit.
• You want to carry forward business losses, capital losses or speculation losses to future years — only filers before the due date can carry forward.
• You are a resident holding any asset located outside India, or having signing authority in any foreign account — Schedule FA disclosure is mandatory even if there is no income.
• You deposited over ₹1 crore in one or more current accounts during the year, or over ₹50 lakh in savings accounts (from FY 2022-23).
• You spent over ₹2 lakh on foreign travel for yourself or others during the year.
• You paid over ₹1 lakh in electricity bills during the year.
• Your business turnover exceeds ₹60 lakh, or your professional receipts exceed ₹10 lakh, or TDS deducted on you exceeds ₹25,000 (₹50,000 for seniors).

Choosing the right ITR form — quick reference

Filing the wrong ITR form is the top reason for a defective-return notice under section 139(9). A common mistake is a salaried employee filing ITR-1 despite having a ₹15,000 short-term capital gain from selling shares — this requires ITR-2. Another is a consultant filing ITR-4 despite having director's remuneration from a company — this requires ITR-3. Our team screens every client at intake to lock the right form before any data entry begins.

Old regime vs New regime — the honest comparison

From FY 2023-24, the new tax regime is the default. Taxpayers must consciously opt out to file under the old regime — salaried employees do this every year via Form 10IEA (mandatory before the ITR is filed), and business owners once in a lifetime (once you opt out of new, going back requires re-opting via Form 10IEA and losing this option is permanent for business income).

New regime slabs (FY 2025-26, Budget 2025)

Old regime slabs

Under the new regime, a taxpayer with net income up to ₹12 lakh pays zero tax (via section 87A rebate raised to ₹60,000 in Budget 2025). Under the old regime, the same rebate is available only up to ₹5 lakh. This is why the new regime is a clear winner for most salaried employees earning below ₹12L. For those earning ₹15L–20L with heavy deductions (HRA ₹3L+, home loan ₹2L, 80C ₹1.5L, NPS ₹50k, 80D ₹75k), the old regime often saves ₹30k–1L per year — we run both computations for every client before filing.

Documents required — the complete checklist

The exact document list depends on your income profile. Below is a comprehensive checklist. Taxpex shares a personalised sub-set on WhatsApp based on your free consultation — most salaried clients complete uploads in under 15 minutes.

Universal documents

• PAN card (mandatory) and Aadhaar card (mandatory, must be linked with PAN).
• Bank statements for every account held during the FY — savings, current, joint, minor children's accounts.
• Form 26AS downloaded from TRACES or the income tax portal.
• AIS (Annual Information Statement) and TIS (Taxpayer Information Summary) downloaded from the income tax portal.
• Copy of last year's ITR-V acknowledgement (helps auto-fill many fields).
• Aadhaar-registered mobile number (for OTP e-verification).

Salaried employees

• Form 16 (Part A and Part B) from every employer worked with during the FY.
• Salary slips for months where Form 16 doesn't match (arrears, bonus, one-time payments).
• Rent receipts and PAN of landlord (if HRA claimed above ₹1L per year).
• Home loan interest and principal certificate from the lender (for 24(b) and 80C claims).
• LTA travel bills (if claimed).

Investors and traders

• Capital gain statement from broker (Zerodha, Groww, Upstox — auto-generated tax P&L).
• Mutual fund CAS from CAMS or KFintech (consolidated across all AMCs).
• F&O and intraday P&L reports with turnover computation.
• Dividend statements (dividends taxable in shareholder's hands from FY 2020-21).
• Property sale deed, cost of acquisition documents and indexation base year records (for LTCG on property).
• Crypto exchange statements with 1% TDS deducted under section 194S.

Business and profession

• Books of accounts — cash book, ledger, purchase and sales registers.
• Bank statements + reconciliation with books.
• GST returns filed (GSTR-1, GSTR-3B, GSTR-9) — must reconcile with turnover in ITR.
• TDS certificates from clients (Form 16A).
• Balance sheet, profit and loss statement (if not opting presumptive).
• Depreciation schedule for fixed assets.

The end-to-end filing process — how Taxpex works

Day 1 — Free CA consultation (15 min)

A senior Chartered Accountant discusses your income profile — salary, capital gains, business, foreign income, ESOPs — and locks the correct ITR form. You receive a written scope and quote on WhatsApp before any payment.

Day 1–2 — Document collection and AIS reconciliation

You upload documents via WhatsApp or our secure portal. Our team downloads your Form 26AS, AIS and TIS from the income tax portal using your login (or your PAN + OTP), and reconciles line-by-line with your documents. Every mismatch is flagged and clarified before drafting begins.

Day 2–3 — Regime comparison and computation

The CA prepares two side-by-side computations — one under the old regime with every eligible deduction, one under the new regime. The lower-tax option is recommended in writing. You get a plain-English one-page summary showing gross income, deductions, taxable income, tax payable and refund/payable amount.

Day 3 — Approval and filing

You approve the computation on WhatsApp. We file the return on the income tax portal, generate ITR-V acknowledgement, complete Aadhaar OTP e-verification and share the filed ITR + acknowledgement PDF with you within the hour. The CPC starts processing your return the same day, and refunds typically hit within 7–45 days.

Ongoing — 12 months of aftercare

If a 143(1) intimation, 143(2) scrutiny notice or 245 adjustment notice arrives within 12 months on the return we filed, we respond free of charge. This is a lifetime benefit for filings executed by Taxpex — no per-notice fees, no scope creep.

Deductions and exemptions — the complete map

The old tax regime is a jungle of deductions across Chapter VI-A (sections 80C to 80U) and other exemptions. Miss one, and you overpay tax by ₹5,000–50,000 every year. Below is the full map — we check every line-item for every client.

Under the new regime, only three deductions survive: standard deduction of ₹75,000 (salaried), employer's NPS contribution under 80CCD(2), and section 87A rebate. Everything else vanishes — which is why regime choice is the single largest tax-saving decision each year.

Capital gains taxation — full breakdown

Capital gains arise on the transfer of a capital asset — shares, mutual funds, property, gold, cryptocurrencies. Budget 2024 (effective 23 July 2024) simplified the regime dramatically but raised rates on equity. Below is the current position for FY 2025-26.

Grandfathering: For shares and equity MFs held before 1 February 2018, the cost of acquisition is the higher of actual cost or the market price on 31 January 2018 (subject to sale price) — this exempts pre-2018 gains from the LTCG regime introduced in 2018. Property indexation continues to be available for assets acquired before 23 July 2024 — a limited grandfathering window that ended for future purchases with Budget 2024.

Business and profession income — the complete picture

Business income (ITR-3 or ITR-4) is computed under sections 28 to 44DB. Every business owner — proprietor, D2C founder, restaurant, trader — has three broad choices:

Option 1 — Regular books of accounts

Maintain full books, deduct actual expenses, claim depreciation and file ITR-3. Suited for businesses with genuinely high expenses relative to revenue (retail, manufacturing, restaurants). Requires tax audit under section 44AB if turnover exceeds ₹1 crore (₹10 crore if 95% of receipts are through banking channels).

Option 2 — Presumptive scheme under 44AD

For eligible businesses with turnover up to ₹2 crore (₹3 crore if cash receipts don't exceed 5%): declare 8% of turnover as deemed profit (6% for digital receipts). No books required, no audit, no expense receipts. Perfect for online sellers, small traders, single-owner businesses with low actual expenses. Cannot claim salary and interest paid to partners (relevant for firms).

Option 3 — Presumptive scheme under 44ADA (professionals)

For specified professionals (legal, medical, engineering, architecture, accountancy, technical consultancy, interior design, film industry) with gross receipts up to ₹75 lakh (₹50L before FY 2023-24): declare 50% of receipts as deemed profit. This is the single most powerful legal tax-planning tool for freelance consultants — no books, no receipts, half your income is deemed non-taxable.

Once you opt for 44AD or 44ADA, you must continue for 5 years. Opting out (by declaring lower than deemed profit) triggers mandatory tax audit under section 44AB for the next 5 years — a costly one-way door to avoid.

F&O, intraday and stock market income

Traders in the derivatives segment and intraday equity market face the most complex ITR taxation in India. Below is the framework we apply to every trader client.

Nature of income

• F&O (equity, index, commodity, currency) — non-speculative business income → ITR-3.
• Intraday equity — speculative business income → ITR-3 (separate schedule).
• Delivery-based equity — capital gains (STCG/LTCG) → ITR-2 or ITR-3.
• Mutual fund SIPs — capital gains → ITR-2 or ITR-3.

Turnover computation for F&O

Turnover under section 44AB is the absolute sum of profits and losses on all trades — not the notional contract value. For example, if you made ₹4L profit on trade A and ₹3L loss on trade B, your turnover is ₹7L. Audit threshold is ₹10 crore turnover (with 95% digital receipts, which F&O always is). Below this, audit is not required — even if you have massive losses to carry forward.

Loss carry-forward

• F&O losses can be carried forward for 8 years and set off against any business income.
• Intraday (speculative) losses can be carried forward for 4 years and set off only against speculative income.
• STCG on equity losses can be carried forward for 8 years and set off only against capital gains.
• LTCG losses can be carried forward for 8 years and set off only against LTCG.
• All losses require ITR to be filed before the original due date (31 July) to be carried forward.

Salaried employees — the ultimate playbook

Salaried employees have the least flexibility in reducing gross income, but the most opportunities in deductions. Here's the annual playbook we run for every salaried client:

• Structure your CTC — negotiate HRA (40/50% of basic based on city), LTA (twice in 4-year block), NPS via employer (10% of basic under 80CCD(2)), food coupons (₹50/meal), car lease (tax-free perk), mobile reimbursement, uniform allowance, driver salary reimbursement.
• Max out 80C (₹1.5L) via ELSS (best tax + returns), PPF (safe, 15-year lock-in), EPF (auto), children's tuition (real fees only), LIC (avoid unless you need cover).
• Additional NPS Tier-1 up to ₹50,000 under 80CCD(1B) — this is over and above the ₹1.5L 80C ceiling.
• Health insurance under 80D — ₹25k self + family + ₹50k parents (if senior) = ₹75k or more.
• Home loan interest up to ₹2L under section 24(b), principal in 80C — for self-occupied. Second home let-out has no upper cap (limited to ₹2L set-off against other heads).
• HRA — actual HRA received, or 40% of basic (50% metro), or rent paid – 10% of basic — whichever is lowest. Landlord PAN mandatory if annual rent exceeds ₹1L.
• Section 89(1) relief for arrears — file Form 10E before ITR.
• Compare old vs new regime every single year — for salaried, this is a Form 10IEA decision made every year, not once.

Freelancers, creators and consultants

Freelancers — UI/UX designers, developers, coaches, YouTubers, Instagram creators, consultants — face a tax structure very different from salaried professionals. The upside is enormous flexibility; the downside is compliance complexity.

Freelancers should almost always file under section 44ADA presumptive if their receipts are within ₹75 lakh — 50% of gross receipts becomes deemed profit, no books required. On a ₹40L annual receipt, this pins taxable income at ₹20L — an effective tax rate of 15–18% instead of the 25–30% marginal rate on actual profit. If you have foreign clients paying in USD/EUR/GBP, the receipt is treated as export of services — GST at 0% with LUT, and income taxable in India (with DTAA credit for tax paid abroad).

NRIs and foreign income

A non-resident (NR) or resident-but-not-ordinarily-resident (RNOR) is taxed in India only on income earned or received in India. But 'earned in India' has been expanded in the past decade — capital gains on Indian shares, dividends from Indian companies, interest on NRO deposits, rent from Indian property, employment income for services rendered in India (even for a foreign employer) all attract Indian tax.

• NRIs cannot file ITR-1 or ITR-4 — always ITR-2 (unless there's Indian business income → ITR-3).
• NRE and FCNR interest is exempt under section 10(4)(ii) and 10(15) — but the balance is still reportable.
• NRO interest is fully taxable at slab rate — banks deduct 30% TDS under section 195. Refund claimable via ITR if actual tax is lower.
• DTAA relief via TRC + Form 10F, filed before ITR — reduces double taxation for residents of US, UK, UAE, Singapore, Canada, Australia and 90+ other DTAA countries.
• Refunds credited only to a pre-validated Indian bank account — NRO account works; overseas accounts don't.

Cryptocurrency and Virtual Digital Assets

Introduced by the Finance Act 2022, section 115BBH imposes a flat 30% tax on income from transfer of Virtual Digital Assets (VDAs) — Bitcoin, Ethereum, altcoins, NFTs. No deduction other than the cost of acquisition. Losses on one VDA cannot be set off against gains on another VDA, or against any other head of income. Section 194S imposes 1% TDS on transfer above ₹10,000 (₹50,000 for specified persons like salaried employees). Reported under Schedule VDA in ITR-2 or ITR-3.

Practical impact: if you bought Bitcoin at ₹40L and sold at ₹60L, you owe ₹6L tax (30% of ₹20L gain) plus 4% cess. If you also lost ₹10L on Ethereum in the same year, that loss cannot offset your Bitcoin gain — you still owe ₹6L on the Bitcoin trade. The 1% TDS deducted by the exchange is claimable as tax paid in ITR — check Form 26AS to confirm.

ESOP taxation — the two-stage rule

Employee Stock Options are taxed twice — once at exercise, once at sale.

• At exercise: (FMV on exercise date − exercise price) × number of shares = perquisite income, taxed at slab rate. TDS deducted by employer against your salary income.
• At sale: (sale price − FMV on exercise date) × shares = capital gain. Holding period counted from exercise date. Listed shares — ≤12m → STCG 20%; >12m → LTCG 12.5% above ₹1.25L. Unlisted shares — ≤24m → STCG at slab; >24m → LTCG at 12.5% without indexation.
• Foreign parent-company ESOPs: perquisite valued in INR using SBI TT reference rate. Shares are foreign assets — mandatory Schedule FA disclosure. Sale gain reported in Schedule CG.
• Startup ESOP deferral under section 191(2)/192(1C): tax on perquisite deferred to earlier of 5 years from exercise, sale of shares, or leaving the company (available for eligible startups).

Refund process — start to finish

A refund arises when your total tax paid (TDS + TCS + advance tax + self-assessment) exceeds your total tax liability. The CPC processes returns under section 143(1) — usually within 15–30 days of e-verification — and issues a refund intimation. Refunds are credited directly to your pre-validated bank account via ECS.

• Pre-validate your bank account on the income tax portal (Profile → My Bank Account) — mandatory since FY 2019-20.
• Ensure name in bank account exactly matches PAN name.
• Refunds up to ₹50,000 usually credited within 7–15 days of processing.
• Refunds above ₹50,000 may be flagged for scrutiny — expect 30–90 days.
• Refunds above ₹5,000 attract interest at 0.5% per month under section 244A from 1 April of the AY (for TDS-based refunds) or from date of payment (for self-assessment refunds).
• If refund isn't credited within 60 days, raise a grievance via CPC Bangalore or the income tax portal — Taxpex tracks this for every client.

Notices and how to respond

Never ignore a notice — the department escalates in tiers, and non-response leads to best-judgement assessment under section 144, freeze of bank accounts under section 226(3), and prosecution under section 276CC. Every notice on a Taxpex-filed ITR is handled free of cost — we draft the reply, coordinate with the assessing officer and appear at hearings where required.

Deadlines, late fees and interest

Revised, belated and updated returns

The Income Tax Act provides three separate remedies for post-filing changes, each with a different window and consequence:

• Revised return under section 139(5) — any number of revisions until 31 December of the AY, or before processing (whichever earlier). Replaces the original. No penalty. Best used for missed deductions, forgotten income, wrong ITR form.
• Belated return under section 139(4) — if the original due date is missed, file by 31 December of AY with late fee under 234F. Cannot carry forward losses (except house property loss).
• Updated return under section 139(8A) — for genuine cases discovered later, filed up to 4 years from the end of the relevant AY, subject to additional tax of 25%–70% on tax due. Cannot claim refunds; cannot reduce tax liability; cannot report search / survey income.

Latest Budget 2025 updates founders should know

• New regime slabs revised — zero tax up to ₹4L, higher slabs restructured; net effect: ₹75k tax saving for taxpayers earning ₹12-24L under new regime.
• Section 87A rebate increased to ₹60,000 — effectively zero tax up to ₹12L income under new regime.
• Standard deduction under new regime raised to ₹75,000 (from ₹50,000).
• TDS threshold rationalised across sections — 194A interest limit raised to ₹1L for seniors, 194J professional services threshold at ₹50k.
• Presumptive scheme under 44AD extended to ₹3 crore (with 5% cash restriction) and 44ADA extended to ₹75 lakh.
• New regime STCG on equity increased to 20%, LTCG to 12.5% (effective 23 July 2024).
• Debt MF taxation continues at slab rate for post-April-2023 investments.
• Simplified property capital gains — choice of 12.5% without indexation OR 20% with indexation for property acquired before 23 July 2024.
• AIS now covers cryptocurrency transactions from Indian exchanges — full visibility to the department.
• TCS on foreign remittance under LRS above ₹10L raised to 20% for non-education / non-medical remittances.

10 common ITR filing mistakes to avoid

• Filing the wrong ITR form — the single biggest cause of 139(9) defective return notices.
• Ignoring AIS and TIS — the department already knows your interest, dividends, MF sales, and property purchases; hide nothing.
• Claiming HRA without genuine rent flow — AIS captures rent payments above ₹50k/month; fake claims are the #1 audit trigger.
• Missing bank interest — savings interest above ₹10k, FD interest of any amount, RD interest are all fully taxable.
• Missing dividend income — dividends from Indian companies are fully taxable from FY 2020-21.
• Wrong regime selection — filing under new regime while having ₹2L+ deductions costs ₹30-80k in extra tax.
• Not linking PAN with Aadhaar — inoperative PAN blocks filing, refunds and TDS credit.
• Not e-verifying within 30 days — treated as not filed, attracts late filing penalty.
• Forgetting foreign assets (Schedule FA) — ₹10L penalty per year under Black Money Act plus prosecution.
• Assuming Form 16 is enough — TDS beyond salary (bank, MF, contract work) is often missed.

Expert tips from our CAs

• File early — the first two weeks of April and May are the calmest at CPC. Refunds process in 7 days instead of 30–45 days later in the season.
• Download AIS in June once it stabilises — many entries are updated by banks and brokers between April and mid-June.
• Pre-validate your bank account today — this cannot be done after filing and delays refunds by weeks.
• Never file under the new regime blindly — always compute both and file whichever is lower. This is a Form 10IEA choice made each year for salaried.
• Keep your investment proofs for 6 years — the department can reopen assessments up to 4 years back for high-value cases.
• Report capital losses even if you have no gains — they carry forward for 8 years and offset future gains, if the ITR is filed before the due date.
• For freelancers earning in USD/EUR — file the LUT for GST separately, and remember to include the INR-converted receipt (RBI reference rate) in your ITR.
• For salaried who quit mid-year — get Form 16 from both employers, and reconcile PF withdrawals under section 192A if withdrawn before 5 years of service.