ITR Filing- Meaning, Key Steps & Importance

Last Updated On -19 Sep 2025

In India, every individual and business has an income tax filing and payment to the Government of India. Considering the complexity of tax filing, taxation becomes simple as long as it is prepared with the right instructions and clarity. Paying taxes is the law and also a right that facilitates many benefits, like minor finance tax loans, tax visa loans, and tax visa loans for paying more tax than is due.

This is a step-by-step guide calculating tax and documents for the tax return form of the ITR, as well as practical hints for more efficient tax filing.

What is ITR Filing?

Every taxpayer is supposed to complete and hand in a certificate form containing records of the taxpayer's income during the tax year and the subsequent deductions from the said amount.

ITR allows the calculating agency to determine if the person has an outstanding amount that is due or is entitled to a refund for the tax that is claimed paid in surplus.

In more than 90 percent of cases in the international systems for bounded income, the income figure can be drawn from the taxation records as systems utilize Form 16.

Who Needs to File An Income Tax Return?

You fall under the TR filing rules when:

Your total annual income exceeds the basic exemption limit, over ₹2.5 lakh.
You are a company or firm. It makes no difference whether or not you make a profit.
To claim a refund, you must have excess TDS deducted.
You have foreign business assets.
You have Rentals or Foreign Income.

It is common sense to file ITR above any income reporting cap. It serves as a more useful business record.

Key Types of ITR Forms

Based on the income, the Income Tax Department has different ITR forms:

ITR-1: If salary income is up to ₹50 lakh, pension, and one house property.
ITR-2: Individuals or Hindu Undertaking of a Firm having more than one house property, capital gains, and foreign income.
ITR-3: For business or profession income earning Individuals or Hindi Undertaking of Firms.
ITR-4 (Sugam): For the Presumptive Income Scheme with business turnover up to ₹2 crore.
ITR-5: For Partnership Firms, Limited Liability Partnerships, and certain Associations.
ITR-6: For companies not claiming exemption under Section 11 and other companies.
ITR-7: For trusts, political parties, and charitable entities.

For example, if you are employed and earn ₹4.5 LPA, you would typically file an ITR-1.

Key Steps for Filing an ITR Online

As an income earner, here is how you can file your Income Tax Return using an e-filing method.

Step 1: Gather Important Papers

The following papers need to be prepared before filing;

Employer-issued Form 16
Tax credit statement (Form 26AS)
Salary slips
Proofs for bank a/c
Documents confirming investment (80C, 80D, etc.)
Statements of taxable capital gains
Aadhaar and PAN

Step 2: Create an Account or Log In on the Tax Portal

On a web browser, type incometax.gov.in. Log in and insert the PAN, which is the Use ID, and type in the OTP or the Password that is connected to your Aadhaar.

Step 3: Select the Relevant Assessment Year

Pick one from the list of Assessment years. For example, income earned in FY 2024-25 will fall under AY 2025-26.

Step 4: Select the ITR Form

The system will usually recommend the right form (for instance, ITR-1 for a salaried person). If necessary, select it manually.

Step 5: Provide Individual Particulars

Provide personal details like:
Full name, PAN, Aadhaar
Residential address
Mobile Number
Employer Nature (Govt, PSU, Private, etc.)

Step 6: Provide Income Particulars

This will include:

Salaries (Auto-populated from Form 16)
House Property Income (Rent Received, Home loan, Interest deductions)
Capital Gains (Shares, Property)
Other Income (FD Interest, Savings)

Step 7: Claim Deductions

Deductions that can reduce taxable income are:

80C: Contributions to PPF, ELSS, Life Insurance (maximum ₹1.5 lakh)
80D: Tax-deductible insurance
80TTA/80TTB: Income on Savings for personal/senior accounts
Payable Rent Tax Claim (if you are renting)

Suppose salary is ₹7.5 lakh, you can invest ₹1.5 lakh in PPF, taxable income becomes ₹6 lakh.

Step 8: Check Tax Estimates

The system will automatically calculate:

Total Income
Deductions
Income Tax
Taxable Income
TDS
Refund or Amount payable

Step 9: Pay Remaining Tax (if applicable)

If your tax payable is more than the tax TDS, you can pay it via Challan 280 on the portal.

Step 10: Submitting And E-Verifying Your ITR

You need to finish your return by verifying it using one.

Aadhaar OTP
Net banking
By sending a signed ITR-V form by mail to CPC, Bangalore

ITRs are not verifiable, so they will not be processed.

Key Reasons for Filing ITR

ITR filing can be overwhelming; however, with good order and stepwise methodology, it can become manageable. Along with compliance, it establishes financial goodwill and goodwill opportunities. From a tax-compliant salaried individual to a proficient self-employed professional and a business owner, timely filing speaks volumes about financial discipline and enhances the financial journey.

Legal Relevance: Non-compliance attracts penalties as per Section 234F, which is a fine ranging from ₹ 1000 to ₹ 5000.
Quick Loan Processing: For your car or home loan, banks typically request ITRs.
Visa Application: Various embassies request ITRs to be submitted for visa approval.
Taxes: Refunds on taxes claimed are not remitted for TDS deducted.
Proof of Income: It is accepted as a valid proof for financial transactions.

Best Practices While Filing Returns

Make sure that you have entered the correct Aadhaar, PAN, and Bank details.
Attach all forms that relate to remote income, including small interest income.
Summary documentation for all deductions made.
ITRs must be in the correct form as of 30 days after filing, after which the ITR is treated as void.

For example, Ravi, a salaried employee earning ₹6.5 LPA, invests ₹1.5 lakh in ELSS funds and pays ₹20,000 in health insurance. His taxable income reduces to:

Gross Income = ₹6,50,000
Less 80C = ₹1,50,000
Less 80D = ₹20,000
Taxable Income = ₹4,80,000

Since his taxable income falls below ₹5 lakh, he is eligible for a rebate under Section 87A, making his net tax liability = ₹0.

Did you know?

The number of ITRs submitted in India hit a record 7.78 crores in the financial year 2023-2024, which is excellent proof of the increasing tax awareness by both individuals and businesses.