Table of Contents
Introduction
Filing an Income Tax Return (ITR) is a fundamental responsibility for taxpayers in India, marking a crucial step in contributing to national development. With the digital overhaul of the e-Filing 2.0 portal, the process has shifted from manual data entry to a pre-filled, verification-based system. This article demystifies the ITR filing process for 2025, providing a step-by-step guide and essential insights to empower taxpayers in India.
Understanding Income Tax Return:
An Income Tax Return (ITR) is the official declaration of an individual’s or entity’s annual income, tax saving investments, and tax payments. Governed by the Income Tax Act, 1961, and managed by the Central Board of Direct Taxes (CBDT), the ITR is the primary document used to determine if a taxpayer has paid the correct amount of tax or is eligible for a refund.
Who Needs to File?
Filing an ITR is mandatory for:
Individuals & HUFs: If your total income exceeds the basic exemption limit.
Important: Under the New Tax Regime (Default), the basic exemption limit is now ₹3,00,000 for all individuals regardless of age.High Income Earners: If your taxable income exceeds ₹7 Lakh (after standard deduction), you must file, though you may pay zero tax due to the Section 87A rebate.
Companies & Firms: Mandatory for all registered businesses, even if they incur a loss.
Foreign Asset Holders: Any resident individual holding assets (like bank accounts or properties) outside India or having signing authority in a foreign account.
Electricity & Travel Spenders: Individuals who paid electricity bills exceeding ₹1 Lakh in a year or spent over ₹2 Lakh on foreign travel.
TDS/TCS Refund Seekers: Anyone wishing to claim a refund for tax deducted at source that exceeds their actual liability.
Types of ITR Forms
The Income Tax Department uses specific forms to categorize taxpayers. Selecting the wrong form can result in your return being marked as “Defective.”
- ITR-1 (Sahaj): For residents with income up to ₹50 Lakh from Salary, one house property, and other sources (interest, etc.).
- ITR-2: For individuals/HUFs not having business income, but having Capital Gains, foreign assets, or more than one house property.
- ITR-3: For individuals/HUFs having income from a proprietary business or profession.
- ITR-4 (Sugam): For individuals, HUFs, and firms (residents) with total income up to ₹50 Lakh opting for Presumptive Taxation.
- ITR-5: For partnership firms, LLPs, AOPs, and BOIs.
- ITR-6: For companies (except those claiming tax exemption under Section 11).
- ITR-7: For trusts, political parties, and entities filing under Sections 139(4A) to 139(4D).
How to File ITR in India (Step-by-Step)
Access the Portal: Log in to incometax.gov.in using your PAN as the User ID.
Sync AIS/TIS: View your Annual Information Statement (AIS). The portal now automatically pulls data from banks and employers to pre-fill your salary, interest, and dividend details.
Choose the Regime: The system defaults to the New Tax Regime. If you wish to claim deductions like HRA, 80C, or 80D, you must actively “Opt Out” to use the Old Tax Regime.
Validate Data: Confirm the pre-filled personal and financial information. Add any additional income from capital gains or crypto (Virtual Digital Assets).
Compute Tax: The system will calculate the final tax liability or refund. Pay any “Self-Assessment Tax” if required.
E-Verify (The 30-Day Rule): > Critical: You must e-verify your return within 30 days of filing (via Aadhaar OTP or Net Banking). If not verified within this window, your return is treated as “Invalid.”
Benefits of Filing ITR
Easy Loan Processing: Banks typically require the last 3 years of ITR for home loans and car loans to verify repayment capacity.
Visa Stamping: Embassies of the US, UK, and Schengen countries often request ITR receipts to verify financial ties to India.
Quick Refunds: Filing on time ensures your refund (with interest) is credited to your bank account within weeks.
Carry Forward of Losses: You can only carry forward capital losses (to offset future profits) if you file your ITR before the July 31st deadline.
Financial Credibility: A consistent ITR history acts as a “financial identity” for startups and entrepreneurs.
Conclusion
In 2025, ITR filing is more about verification than calculation. With the integration of the New Tax Regime as the default and the automated data flow from AIS, the process is faster than ever. Timely filing not only protects you from penalties (up to ₹5,000 under Section 234F) but also builds a robust financial profile. Whether you are a salaried employee or a digital freelancer, filing your ITR is your contribution to India’s journey toward a Viksit Bharat.
Disclaimer: The views expressed here are of the author and do not reflect those of Dhanvantree. Mutual funds are subject to market risks, please read the scheme documents carefully before investing.