Taxpayers guide to filing income returns in India

The filing of an income tax return (ITR) for the financial year 2023–24 in India begins with determining net taxable income across five distinct categories: salary, house property, capital gains, business/profession, and other sources. Each category follows its own set of rules for deductions, exemptions, and tax treatment, which vary significantly depending on the income type.

For salary income, the process starts with the annual earnings reported in Form 16 or salary slips. Employers apply tax deducted at source (TDS) on salaries, but taxpayers can reduce their taxable amount through exemptions such as house rent allowance (HRA) and leave travel allowance (LTA). These allowances directly lower the taxable portion of salary income.

Income from house property is taxed differently based on occupancy status—whether the property is self-occupied, rented, or treated as rented. If the property generates rental income or is deemed rented, a 30% standard deduction applies alongside deductions for municipal taxes and home loan interest.

Capital gains, profits from selling assets like property, shares, or gold, are divided into short-term and long-term categories. The tax treatment depends on the holding period: equity shares held for over one year qualify for long-term capital gains tax (LTCG), while property must be held for two years before the same classification applies. Short-term gains are subject to higher tax rates compared to long-term holdings.

Freelancers, independent consultants, and business owners report earnings under income from business/profession. They can deduct legitimate business expenses such as office rent, equipment costs, or travel to reduce taxable income.

Income from other sources has all those incomes that are not reported in other categories. These include, income from interest incomes from fixed deposits, RBI taxable bonds, family pension, pension received from insurance company policies, dividends etc.

Taxpayers must decide between the old and new tax regimes when filing. The old regime preserves exemptions like HRA, LTA, and Section 80C deductions, while the new regime provides lower tax rates but removes nearly 70 exemptions. The choice depends on which system results in a lower tax liability after accounting for all applicable deductions and exemptions.

After calculating total income, taxpayers select the appropriate ITR form. ITR-1 is for salaried individuals with a single house property and no capital gains. Those with capital gains must use ITR-2. The income tax portal provides pre-filled data, but errors are common, so taxpayers must cross-check documents such as Form 16, Form 26AS, and bank statements to ensure accuracy.

Errors in filing can be corrected by submitting a revised ITR under Section 139(5) of the Income Tax Act. The deadline for revisions is usually December 31, though extensions may be granted in exceptional cases. The tax department issues an intimation notice after processing to confirm whether the return aligns with their records.