ITR Series: Day 1: What is Income Tax Return? Start here with this Beginner’s Guide

Introduction to the 30-Day ITR Series

Welcome to Day 1 of our 30-day ITR (Income Tax Return) series! Whether you’re a salaried employee, a freelancer, or a business owner, understanding Income Tax Returns is essential. Over the next 30 days, we’ll be breaking down everything you need to know about filing ITR – from the basics to common misconceptions.

 

Why Income Tax Matters?

 

Taxation plays a crucial role in nation-building — it’s the primary source of income for the Indian government, funding everything from infrastructure and national security to welfare schemes and development projects.

India follows a three-tier federal tax system, where taxes are collected at the central, state, and local levels. Despite being one of the most intricate tax systems in the world, it is becoming increasingly digitized and accessible.

Presently, India has currently 11.98 Crores registered users on the income tax portal while 7.28 Crores income tax returns have been filed for the last assessment year i.e. AY 2024-25 till 31 July 2024 which is 7.5% higher as compared to the 6.77 Crore ITRs filed for AY 2023-24 till 31 July 2023, the due date for filing such ITRs in the preceding year. (Source).

 

Despite this progress, a significant number of registered users still don’t file their Income Tax Returns.

Why? Mostly due to common misconceptions — like assuming that earning a low income means you’re exempt, or procrastinating until it becomes necessary for things like getting a loan, applying for a credit card, or processing a visa.

But filing ITR isn’t just a formality — it’s a powerful financial tool.

 

So, what exactly is an Income Tax Return (ITR)?

An Income Tax Return (ITR) is an official document that individuals, businesses, and entities submit to the government to report their income, taxes paid, and other relevant financial details for a specific financial year.

Simply put, an ITR is a way to let the government know how much you’ve earned and whether you owe taxes or are eligible for a refund. Everyone who earns income is supposed to file an ITR, though the filing process can vary based on income level and other factors.

💡 Think of it as your annual financial selfie — but for the government! 📸

 

What’s the need for filing ITR?

Filing an ITR is not just a legal obligation; it’s also beneficial for various reasons. Let’s look at why it’s important:

 

1.Legal Requirement

If your income exceeds the minimum taxable limit set by the government, you are required to file an ITR. This applies to everyone : salaried employees, self-employed professionals, business owners, and even individuals with income from investments.

 

Income exceeding the exemption limit	Old Regime	New Regime
Resident individuals having age below 60 years	2,50,000	3,00,000
Non- Resident Individuals (irrespective of age)	2,50,000
Resident Individuals having age above 60 years      (Senior Citizen)	3,00,000
Resident Individuals having age above 80 years      (Super Senior Citizen)	5,00,000

📌 If you’re earning more than these thresholds — you’re on the government’s radar.

 

2. Tax Refunds

If you have paid excess taxes throughout the year (through Tax Deducted at Source, or TDS), filing your ITR is the only way to get that money back. Without filing an ITR, you won’t be able to claim a refund, even if you’ve overpaid. In addition to getting a tax refund, filing your ITR can also serve as a formal record of your income, which is crucial for various financial processes.

 

3. Proof of Income

Your ITR serves as an official proof of your income. Think of your ITR as your financial passport – whether you’re applying for a loan, mortgage, or visa, your ITR is often required by financial institutions and government agencies as proof of your financial status.

 

4. Avoid Penalties

Filing your ITR on time helps you avoid penalties and interest charges for late submission. By following deadlines and submitting the correct form, you ensure that you comply with tax regulations and avoid unnecessary fines.

 

5. Carry Forward Losses

If you have incurred any financial losses (e.g., business or property-related losses), filing an ITR allows you to carry forward those losses and set them off against future income, potentially reducing your tax liability in the coming years. For instance, if you own a business and incur a loss of INR 50,000 in FY 2024-25, filing an ITR lets you carry forward that loss to the next year, reducing your taxable income in the following year.

 

6. Quick Visa Processing

ITR receipts are vital for visa application processing. Embassies of countries like the United States of America ask for receipts to know more about individual tax compliances. ITR being the income proof of the applicant’s income, the embassy will check income details and the capability of the applicant whether he/she can take care of their travel expenses.

 

7. Eligibility Criteria for Government tenders

ITR filing is important for the people intending to file government tenders and undertake government projects. ITR is one of the eligibility criteria to apply for such tenders.

 

NIL income tax returns – No Income? File Your Return Anyway! 

Even if you have no income to report, filing a nil ITR can be beneficial for processing things like credit card applications, or in case you’re applying for a loan later.

 

Why Filing ITR for Deceased Loved Ones Matters More Than You Think?

Filing ITR of deceased individuals who have passed away in the middle of a FY is also beneficial. Tax is calculated on income generated till their date of death. In such a case, their legal heir should file the ITR. This is important because insurance companies need income proof to sanction an amount for an accident during court trials. Therefore, by presenting the ITR receipts, one can easily obtain the claim amount. ITR also serves as a record of assets and liabilities of the deceased throughout their lifetime which can help in the cordial distribution of these assets among their legal heirs.

Filing the income tax return for a deceased person who passed away during a financial year is often overlooked but can be extremely important. The tax liability is calculated only on the income earned up to the date of their death, and it is the responsibility of the legal heir to file this return.

What many don’t realize is that filing the ITR for the deceased can play a crucial role beyond just compliance. For instance, insurance companies often require proof of income during court proceedings before approving accident claims or other benefits. Having the ITR filed and receipts in hand can significantly speed up the claim settlement process, avoiding unnecessary delays and legal hassles.

Moreover, the ITR acts as a comprehensive financial record, detailing the deceased’s assets and liabilities over their lifetime. This can be a key tool in ensuring a smooth and transparent distribution of the estate among legal heirs, reducing potential disputes or misunderstandings. In essence, timely filing of the deceased’s ITR can save families from future financial and legal complications that many are unaware of. 

 

Why Filing ITR Makes Sense (Even If Not Mandatory)

• ✅ Creates a Clean Financial Record – Helps build a credible financial history for future references.
• 🏦 Useful for Loan & Credit Card Applications – Acts as proof of income during financial verifications.
• 💼 Essential for Self-Employed & Freelancers – Helps validate earnings without formal salary slips.
• 🌐 Important for NRIs with Indian Income – Ensures compliance and aids in smooth repatriation.
• 👴🏻 Helpful for Senior Citizens – Pension and investment income can still attract tax scrutiny.
• 🧾 Proactive Financial Planning – Filing regularly can simplify financial tracking and compliance.
• ⚖️ Avoid Legal Hassles – Ensures peace of mind by staying on the right side of tax laws.

We’ll decode the legal thresholds and mandatory rules for filing ITR in India—so you’ll know exactly when it’s not just beneficial but compulsory.

Stay tuned… Happy Learning.