How To File Income Tax Return Online For Salaried Employees – Forbes Advisor INDIA

The tax rates for individuals in India have gone up in recent times (with incremental rates of surcharge based on the income level) and the effective personal tax rates now range from 0% to 42.7%. 

While the corporate tax rates have gone down, the effective personal tax rates have increased. On the other hand, there are certain avenues available to the salaried employees to optimize their tax outgo by way of availing specified deductions and exemptions. 

Here’s an overview on the salient aspects that every salaried tax filer needs to take into consideration while filing their tax return and the process by which one can file taxes online.

Income from Salary

Taxation of income from salary is covered under Section 15 to Section 18 of the IT Act as follows:

Section 15 – Charging section for salary 

Salary is chargeable to tax as and when it becomes due or on receipt basis, whichever is earlier. Further, arrears of salary are also chargeable to tax in case the same has not been taxed earlier. 

It may be pointed out that the existence of “employment” and “employer-employee relationship” is essential for the income to be taxed under the head salaries. For instance, the remuneration received by a consultant or non-executive directors is not taxable as salary but may be taxable as “business income” or “income from other sources”. 

In recent times, there is a new class of workforce – called “gig-workers” or “task rabbits” in which the persons concerned are not subject to normal employment working hours or fixed remuneration but are engaged for performing projects or tasks generally for short duration and are paid for the projects/tasks. 

For instance, cab aggregators (Ola/Uber), on-line delivery platforms (Swiggy/Zomato) and home services (Housejoy/Mr. Right) deploy thousands of persons for rides, pick up of food/other products for delivery to customers and services of home cleaners/electricians/plumbers. 

It is estimated that India currently has over 15 million freelance personnel across various sectors. Generally, such arrangements may not qualify as “employment” but the nature of appointment, duration, working hours, extent of supervision and direction by employers, compensation structures and other relevant factors would be the key factors in this respect. 

“Salary” includes both monetary payments (example: basic salary, dearness allowance, bonus, commission, allowances etc.) as well as non-monetary facilities popularly called perquisites (example: housing accommodation, car facility, medical facility, interest-free loans etc.). Further, payments such as performance bonuses, employer’s contribution to provident funds/superannuation funds, gratuity, leave encashment are also treated as salary income.

Computation of income from salary

The computation of the Salaried taxpayers may vary depending upon the components of their Salary Structure and whether the tax filer has opted to be covered by the existing tax regime or the new tax regime. The following is an indicative template providing a brief overview on the computation of total income in case of salaried taxpayers under the old or existing tax regime: 

Note: It is pertinent to note that the above template is illustrative and not exhaustive in nature.

In case of the new tax regime, the tax slab rates are lesser for taxable income up to INR 15 lakh but certain exemptions or deductions are not available which include: 

• Section 10(13A) – House Rent Allowance
• Section 10(5) – Leave Travel Concession.
• Section 10(14) – Covers Special Allowance Detailed in Rule 2BB (such as children education allowance, hostel allowance, transport allowance, per diem allowance, uniform allowance, etc). 
• Section 16 – Standard Deduction of INR 50,000 and Entertainment Allowance
• Section 24(b) – Interest on Borrowed Loan for a Self-occupied Property (rented property not covered) 
• Any provision of chapter VI – A – section 80C, 80CCD(1B), 80D etc. 
• Section 80CCD (2) is not covered (where an employer makes a contribution to National Pension Scheme)
• No set off of loss under the head ‘Income from house property’ with any other head of income.

From the above, it is evident that one must carefully compute the tax under both the regimes before deciding the regime to be opted for.

Salient Aspects for Filing of Income Tax Return 

Tax Deduction at Source (TDS) or Withholding Requirements

Every salaried employee is required to make a declaration of his investments as well as selection of  tax regime at the beginning of any financial year so as to enable the employer to duly undertake tax deduction at source (TDS) u/s 192 of the IT Act. 

All salaried taxpayers must duly furnish Form 12BB (Statement showing particulars of claims by an employee for deduction of tax under section 192) and documentary evidence for investments made during the year to the employer. Such a form is required to be submitted by the employees before the end of the financial year or as on the date provided by the employer.

Payment of Advance Tax

The salaried employees generally do not have to pay advance tax on their salary Income as the employer is responsible for deduction of TDS u/s 192 of the IT Act after taking into consideration all the details provided by the employee in this respect. 

In case the salaried employee has liability towards advance tax due to other income or other reasons exceeding INR 10,000, the same is required to be paid by way of 4 advance tax instalments (June 15/Sept. 15 /Dec. 15/ March 15).

In case where the employee is making any job-shift during the year, there is a possibility that the new employer may deduct less TDS than what was actually required to be deducted if the employee is not duly furnishing the details of the previous employment. This may entail interest consequences for the employee as there is no proper withholding of taxes u/s 192 of the IT Act. 

Thus, an employee (having more than one employer in any year) is required to furnish to the present/chosen employer details of the income under the head “Salaries” due or received from the former/other employer and tax deducted at source therefrom, in writing and duly verified by him and by the former/other employer. 

The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer). In the past 12 months, due to unprecedented job changes and high attrition, this aspect assumes greater significance.

Relief under Section 89 

As aforementioned, the taxability of salary is based on the rule that salary is taxable on due or receipt basis, whichever is earlier u/s 15 of the IT Act. However, it may be possible that an employee may receive salary in arrears or in advance in the current year. Such arrears / advance will be taxed in the year in which these arrears / advances are paid or allowed to the employee. 

Due to this, the taxable income of the employee may increase and the employee may be required to pay tax at a higher rate than he would have, if there were no such arrears or advance salary. In such cases the employee can claim relief under Section 89. In case any government employee is entitled to such relief, he would be required to furnish online the details of such relief in Form 10EE. 

Selection of ITR Forms

Taxpayers can file their income-tax returns (ITR) either online on the e-filing portal or through the offline J-son utility. For the said purpose, taxpayers must be aware of the ITR applicable to them as selection of any incorrect ITR may invalidate the entire tax return. Thus, the salaried taxpayers would be required to select from any of the below-mentioned ITRs based on their income sources as follows:  

ITR-1 (SAHAJ)

ITR-1 is a simplified form for resident individuals with a total income up to INR 50 lakh from the following sources: 

• Salary or pension 
• Rent income from one house property
• Other sources (interest, dividend etc)
• Agricultural income up to INR 5,000 

ITR-2

This form is applicable for Individuals and Hindu Undivided Families (HUFs):

• Not carrying any profession or business and is not eligible to file their return in ITR -1. 
• Holding foreign assets.
• Invested in unlisted equity shares of a company.
• Director/s of any company. 

ITR-3 

Individuals having business income apart from other heads of income but not eligible for ITR-1, 2 or 4 (Sugam). Since this is specifically for business income, it is not relevant for salaried persons to use such ITR unless they have any income derived from any business and profession.

ITR-4 

Individuals having income up to INR 50 lakh and includes business income under presumptive taxation u/s 44AD, 44ADA or 44AE. However, the said ITR is not applicable for an Individual who is either a director of a company or has invested in unlisted shares of a company.

It can be observed that ITR 1 and ITR 2 are generally applicable in case of salaried taxpayers. However, depending upon any other nature of income, the applicability of other ITRs needs to be analysed.

Online Procedure for Filing of Income Tax Return 

Prerequisites for Return Filing

Before going through the filing procedure there are certain prerequisites that a taxpayer must comply with as follows:-

• Register on the Income Tax portal (https://eportal.incometax.gov.in/iec/foservices/#/pre-login/register) with the help of PAN and avail the registered user ID and password. 
• Active PAN of the taxpayer needs to be linked with Aadhar, if not previously linked. 
• At least one pre-validated bank account which is nominated for refund should be. 
• Valid mobile number linked with Aadhaar/e-filing portal/your bank/NSDL/CDSL (for e-verification).

Below mentioned are the detailed steps of filing ITR-1 and ITR-2 in online mode.

STEP 1:- 

Login to income tax portal using registered login ID and password https://eportal.incometax.gov.in/iec/foservices/#/login

STEP 2:- On the home screen, direct the cursor to e-file and click “Income Tax Return” then file the income tax return. 

STEP 3:- From the drop-down menu, choose the relevant assessment year and choose online mode of filing. 

STEP 4:- You must select the “Status” as “Applicable” i.e. “Individual” in the given case and then continue.

STEP 5:- On the screen, the portal provides for two options: either selecting the correct ITR form applicable or the portal will select the ITR Form based on the income information provided by the taxpayer. Every taxpayer needs to analyse their ITR applicability and select the relevant ITR. 

STEP 6:- Once we have selected applicable ITR form, the taxpayer must have a ready reference to the below mentioned documents for smooth facilitation of tax return filing process:

• TDS certificates in Form 16 (for salary details) and Form 16A (for other than salary details).
• Rent receipts/ Bank statement entries/ municipal tax/ bank interest certificate for housing loans interest.
• LIC premium, eligible investments, mediclaim, donation receipts for claiming deduction under Chapter VI-A.
• Form 26AS, Annual Information Statement/ Taxpayer Information Summary.
• Documents for reporting foreign sourced income and claim of corresponding foreign tax credit. 
• Details of foreign assets and liabilities at any time during the relevant FY.
• Details of all movable and immovable assets along with liabilities incurred in relation to such assets in case of residents having total income exceeds INR 50 lakh (In case of non-residents having total income exceeding INR 50 lakh, only the details of assets located in India to be reported).
• Bank account details where the refund amount should be credited.

STEP 7:- We need to choose the reason for filing ITR from the given options. In this case, the taxpayer usually has to select “Taxable Income is more than Basic Exemption Limit” wherein their taxable income exceeds the threshold limit of INR 2,50,000 (applicable threshold limit in case of Senior Citizens and Super Senior Citizens is INR 3,00,000 and INR 5,00,000 respectively). 

However, if the taxpayer is filing the return for any other reason, they need to specify the reason 

STEP 8:- IT Department pre-fills certain information in the return based on information available with the IT Department from TDS certificate such as Form 16, Form 16B, Form 26AS, AIS/TIS, etc. Though such details are pre-filled, the taxpayer needs to confirm whether such details are in accordance with the actual transactions. 

In Personal Details, details such as profile, contact details, and bank account details are to be verified to proceed further.

In Salary Schedule, the taxpayer would be required to fill in details such as salary or pension, exempt allowances and deductions etc. In case such details are already pre-filled, the taxpayer needs to verify the same from his payslips.

In Schedule House Property, details relating to co-owner details, tenant details, rent income, municipal taxes, interest paid etc. are to be provided. 

In Schedule Capital Gains Short-term and Long-term capital gains or losses for all types of capital assets transferred during the year would need to be provided. This can be verified from the Form 26AS and annual information statement (AIS) or taxpayer information summary (TIS), etc.

Apart from the same, the taxpayer also needs to fill in details regarding deductions claimed under Chapter VI-A such as LIC premium, mediclaim, principal loan repayment, donation receipts claimed u/s 80G.  

STEP 9:- Once the taxpayer fills the complete income details in the applicable Schedules, the taxpayer may verify the computation of Income and Tax liability from Schedule TI (“Total Income”) and Schedule TTI  (“Computation of tax liability on total income”) and then click Proceed.

1. If any self-assessment tax liability arises, the taxpayer would be required to make such payment by using option “Pay Now”. The details of the payment Challan “ITNS 280” such as Challan No. Amount paid, etc. need to be mentioned in the Tax Paid schedule.
2. If any refund of tax arises wherein the taxpayer has paid more tax than assessed by way of Advance Tax, TDS or TCS, confirm the amount of refund and “Preview Return”. 

STEP 10:- In the preview tab, the taxpayer is required to select the place and check the declaration box and proceed to validate the tax return. It is pertinent to note that in case any mandatory field data has been missed out or there is a mismatch in the information provided in the Schedules, the return will not be validated unless the taxpayer fills in the required information.  

STEP 11:- Once Return is validated successfully, proceed to verify, the taxpayer has got two options to verify either now or later, based on the taxpayer’s opinion to choose the option. 

Methods of e-Verification –. The taxpayer may e-verify the return using any of the following methods: 

1. For e-verification using DSC, one has to ensure that the DSC is already registered in the profile section after logging in the e-filing portal
2. emSigner utility is available under “Downloads” tab of the e-filing portal

In case you have selected “Verify Later”, still you can submit your return, however, you will be required to verify your return within 30 days of filing ITR.

Bottom Line

Tax filing has become feasible for employees having salary income particularly in case they do not have added complexity such as rental income, capital gains income, business income, tax deductions other than tax deductions under section 80C/80CCD/80D. 

The tax authorities have made remarkable progress in processing of the tax returns and issue of tax refunds making the process easier and faster for most tax filers.