What is Tax Filing?
Tax filing = Submitting a report to the government showing your income tax details:
- How much you earned
- How much tax you paid (via TDS or advance tax)
- Whether you owe more tax or deserve a refund
Think of it like this:
Throughout the year, your employer deducted tax from your salary (TDS). Banks deducted tax on FD interest.
At year-end, you file ITR to:
- Confirm all income sources
- Check if enough tax was paid
- Claim refund if excess was deducted
- Pay more if tax was short
It's basically a reconciliation statement between you and the tax department.
Key point: Filing ITR ≠ paying tax. You're just reporting income. Tax might already be paid via TDS.
Who Needs to File an ITR?
Mandatory Filing
You MUST file if:
- Income exceeds ₹3 lakh/year (new regime) or ₹2.5 lakh (old regime)
- You run a business or freelance
- You deposited ₹1 crore+ in bank accounts
Penalty for not filing: ₹5,000 late fee (₹1,000 if income < ₹5 lakh).
Why File Even at Low Income?
Get refunds:
You earned ₹2.8 lakh, so tax owed = ₹0. But employer deducted ₹8,000 TDS.
- File ITR → Get ₹8,000 back
- Don't file → Lose ₹8,000 forever
Income proof:
Real story: Friend earned ₹4 lakh/year. Never filed ITR. Applied for education loan 2 years later. Bank wanted ITR as proof.
No ITR = no loan. Had to file belated returns with penalties. Loan delayed 4 months.
Carry forward losses:
Lost ₹30,000 in stocks? File ITR to carry loss forward. Next year's ₹50,000 profit gets offset. This is especially important for tax deductions and loss offsetting.
Don't file = loss is gone.
Types of ITR Forms (Simple Overview)
ITR-1 (Sahaj) - For Salaried People
Use this if:
- Salary income
- Bank interest
- Maybe one house property
- Income under ₹50 lakh
This covers 90% of salaried employees.
ITR-3 - For Business/Freelancers
Use this if:
- You run a business
- You freelance
- You're a professional (CA, doctor, consultant)
More complex. Usually needs CA help.
Documents Needed Before Filing
1. PAN Card
Your tax identity. Can't file without it.
2. Aadhaar Card
Needed for verification. Must be linked to PAN.
Not linked? Go to incometax.gov.in → Link Aadhaar (free, 2 minutes).
3. Bank Account Details
Where you want refunds credited. Must be linked to your PAN.
4. Form 16 (From Employer)
Shows salary breakup and TDS deducted.
Employers issue by June 15th. Ask HR if you haven't received it.
5. Interest Statements
Bank interest is taxable. Get statements from netbanking.
6. Form 26AS
This is gold. Shows ALL tax deducted in your name.
Where: Income tax portal → View Form 26AS
Auto-fills most of your ITR. Makes life 10x easier.
How Tax Filing Works (Conceptual)
Step 1: Gather Income Details
List all earnings:
- Salary (Form 16)
- Bank interest
- Freelance income (if any)
- Stock gains (if any)
Step 2: Choose Tax Regime
- Old regime: Higher rates but allows deductions (80C, HRA, home loan)
- New regime: Lower rates, no deductions
Most beginners default to new regime.
Step 3: Calculate Tax
Portal auto-calculates:
- Total income
- Tax owed
- TDS already paid
- Final refund or payment due
Step 4: File Return
Options:
- Income tax e-filing portal (free)
- Apps like ClearTax (some free, some paid)
Fill income, upload Form 16, verify math, submit.
You get acknowledgment number. Save it.
Step 5: Verify Return (CRITICAL)
Must verify within 30 days or return becomes invalid.
Easiest method: Aadhaar OTP (instant)
True story: Someone filed ITR, forgot to verify. Return considered invalid. Got notice 6 months later. Had to re-file.
Common Filing Mistakes
Mistake 1: "TDS deducted, so no filing needed"
Wrong.
TDS = advance payment. ITR = final settlement. Without filing, you can't claim refunds or prove income.
Mistake 2: Ignoring Bank Interest
Everyone forgets this.
Savings account + FD interest = taxable.
What happens: Notice 3 years later. Pay tax + 50% penalty + 12% interest.
Real example: ₹28,000 undeclared interest from 2020 became ₹52,000 bill in 2024.
Mistake 3: Filing Wrong ITR Form
Salary + freelance income? Need ITR-3, not ITR-1.
Consequence: Return rejected. Must re-file.
Mistake 4: Not Verifying
Filed on July 28th. Forgot to verify. 30 days pass. Return invalid.
Prevention: Verify immediately using Aadhaar OTP.
What Happens After Filing?
Processing (2-8 Weeks)
Tax department checks your return. Once processed, you get email confirmation.
Refunds
If owed, credited to linked bank account within 1-3 months.
Track: Income tax portal → Refund Status
Notices (Don't Panic)
Sometimes department asks for clarification on data mismatches.
Not criminal charges. Usually resolves with proper documents.
File Yourself or Get Help?
File Yourself If:
- Simple income (just salary + bank interest)
- Have 2-3 hours
- Want to learn
Tools: Income tax portal (free) or ClearTax (₹500-₹1,000)
Difficulty: Low with Form 16 + Form 26AS.
Get CA Help If:
- Complex income (freelance, capital gains, property)
- Multiple sources
- Confused or stressed
Cost: ₹500-₹3,000
Worth it for peace of mind.
Bottom Line
Tax filing protects YOU.
It ensures refunds, provides income proof, keeps you legally compliant.
The honest truth:
- First time feels overwhelming
- Second time it's familiar
- Third time it's routine
Don't wait for perfect understanding. Just start.
Gather Form 16, log into income tax portal, begin. The system guides you.
Deadline: July 31st every year.
Miss it = ₹5,000 penalty. File on time = peace of mind + potential refund.
You've got this.