ITR filing for Non Salaried person
Learn everything about ITR filing for Non Salaried person such as taxability, tax rate, choosing ITR form, tax rates, due date, penalty, how to file ITR. Contact us for filing!
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Filing an Income Tax Return (ITR) is a critical responsibility for all non salaried individuals. This annual process involves declaring income earned during the financial year and paying the applicable taxes to the government. In this guide you will learn about taxability, tax rates, how to choose ITR form, how to file ITR, Due date and penalties for not filing ITR for non-salaried individuals, including freelancers, entrepreneurs, and self-employed individuals.
What is an ITR?
An Income Tax Return (ITR) is a form that individuals and entities use to report their income, expenses, deductions, and taxes paid to the government. It is a crucial document for ensuring that taxpayers fulfill their legal duty to report their financial activities for a financial year from April 1st to March 31st.
Taxability of Non Salaried Individual
Non-salaried individuals can opt for the presumptive taxation scheme under section 44AD or 44ADA, which allows them to pay tax at a fixed rate based on their income. Under 44AD the fixed rate is 8% and under 44ADA (for professionals) it is 50%. This scheme is optional and can be chosen for a specific financial year. If chosen, the scheme cannot be opted out of for the next 5 financial years.
Below you can find the main difference between Section 44AD and 44ADA-
| Criteria | Section 44AD | Section 44ADA |
| Applicability | Applicable to eligible individuals and businesses | Applicable to specified professionals |
| Presumptive Taxation Rate | 6% or 8% of turnover or gross receipts | 50% of gross receipts |
| Turnover limit | Rs. 2 crore | Rs. 75 lakhs (wef 1-4-2024) |
| Eligibility Criteria | Eligible individuals and businesses | Specified professionals, including doctors, consultants, engineers, architects, accountants, and others |
| Maintenance of Books of Account | Not required | Not required |
| Audit | Not required | Not required |
| Advance Tax | Required | Required |
If your tax liability exceeds Rs. 10,000 for a financial year, you may need to pay advance tax. The installment period for advance tax is divided into four parts: 15% by June 15th, 45% by September 15th, 75% by December 15th, and 100% by March 15th. If you’ve opted for presumptive taxation, advance tax must be paid by March 15th. When paying advance tax, consider any TDS deducted, which can be verified using Form 26AS.
Income tax deduction under Old regime for Non Salaried person
Income tax deductions are crucial for non salaried individuals to reduce their taxable income, thereby lowering their overall tax liability. These deductions can apply to various expenses and investments of personal nature.Here’s a comprehensive guide to the key income tax deductions available to them:
- Maximum Limit: ₹1,50,000 per financial year.
- Eligible Investments and Expenses:
- Public Provident Fund (PPF)
- Employee Provident Fund (EPF)
- National Savings Certificates (NSC)
- Life Insurance Premiums
- Tuition Fees for Children
- Principal Repayment on Home Loan
- Equity-Linked Savings Scheme (ELSS), etc
- Health Insurance Premiums:
- Self, Spouse, and Children: Up to ₹25,000.
- Parents: Additional ₹25,000 (₹50,000 if parents are senior citizens).
- Preventive Health Check-up: Up to ₹5,000 within the overall limit.
- Education Loan Interest: Deduction for interest paid on education loans for higher education, with no maximum limit. Applicable for loans taken for self, spouse, or children.
- Donations to Charitable Institutions: Deduction for donations to specified funds and charitable institutions. The percentage of deduction (50% or 100%) depends on the organization.
5. Section 80TTA and 80TTB Deductions
- 80TTA: Deduction on interest income from savings accounts up to ₹10,000.
- 80TTB: For senior citizens, a deduction up to ₹50,000 on interest from savings accounts, fixed deposits, etc.
- Rent Paid: Deduction for individuals who do not receive HRA (House Rent Allowance). The deduction is the least of:
- ₹5,000 per month.
- 25% of total income.
- Rent paid minus 10% of total income.
7. Section 80GGB and 80GGC Deductions
- Political Contributions: Deduction for contributions to political parties or electoral trusts. (80GGB for companies and 80GGC for individuals).
Which ITR form is applicable for Non Salaried person?
ITR-1: This form is for individuals with income from salary/pension, one house property, other sources (like interest income and total income up to ₹50 lakh. Individuals with business or professional income and capital gains cannot use this form.
ITR-2:Â This form is for individuals who do not have income from business or profession. It covers income from salary/pension, house property, capital gains, and other sources.
- Who Can Use It: Individuals and HUFs having income from a proprietary business or profession.
- Suitability for Non Salaried person:
- Comprehensive Coverage: This form is suitable for Non Salaried person who earn i business income, along with income from salary, house property,capital gains and other sources.
- Required Information: Details about business income, deductions, expenses, and profits.
- Who Should File: Non Salaried persons with higher earnings, complex financials, or those who need to declare specific business-related deductions.
- Who Can Use It: Individuals, HUFs, and firms (other than LLP) having a total income up to ₹50 lakh and having income from business and profession which is computed under presumptive taxation scheme under Sections 44AD or 44ADA.
- Suitability for Non Salaried persons:
- Presumptive Taxation Scheme: Ideal for small Non Salaried persons with sales up to ₹75 lakh or ₹2 crores, opting for presumptive taxation, which simplifies the process by assuming a certain percentage of total receipts as profit.
- Simplified Compliance: Reduces the burden of maintaining detailed records and books of accounts.
- Required Information: Gross receipts, presumptive income, and basic details of business.
Here is a summary of the above ITR forms-
| Criteria | ITR-1Â | ITR-2 | ITR-3 | ITR-4Â |
|---|---|---|---|---|
| Applicability | Individuals with income from salary, single house property, and other sources (interest, dividend, etc.) | Individuals and HUFs with income from sources other than profits and gains from business or profession | Individuals and HUFs with income from proprietary business or profession | Individuals, HUFs, and Partnership Firms with presumptive income from business or profession |
| Income Limit | Total income up to ₹50 lakhs | No income limit | No income limit | Total income up to ₹50 lakhs |
| Heads of Income | – Salaries – One House Property – Other Sources (Interest, dividend, etc.) – Agricultural Income up to ₹5,000 | – Salaries – House Property – Capital Gains – Other Sources – Foreign Assets and Income | – Salaries – House Property – Profits and Gains from Business or Profession – Capital Gains – Other Sources | – Salaries – House Property – Profits and Gains from Business or Profession under Sections 44AD, 44ADA, or 44AE – Other Sources |
Income tax rates for Non Salaried Person
Old tax RegimeÂ
| Income | Tax rates |
| Upto ₹ 2.50 lakh | 0% |
| ₹ 2.50 lakh – ₹ 5 lakh | 5% |
| ₹ 5 lakh – ₹ 10 lakh | 20% |
| Above ₹ 10 lakh | 30% |
You Can claim deduction under Section 80C, 80D, 80G, etc
For senior citizen (age between 60 & 80 years), tax rate is 0% upto ₹ 3 lakhs. Rest of the rates are same.
For super senior citizen (age above 80 years), tax rate is 0% upto ₹ 5 lakhs. Rest of the rates are same.
In Old tax regime, a maximum tax rebate under section 87A of Rs. 12,500 is available for income upto Rs. 5 lakhs meaning your income is totally tax free till Rs. 5 lakhs. The rebate under section 87A is not allowed to a Non-resident.
New tax Regime (FY 23-24)
| Income | Tax rates |
| Upto ₹ 3 lakh | 0% |
| ₹ 3 lakh – ₹ 6 lakh | 5% |
| ₹ 6 lakh – ₹ 9 lakh | 10% |
| ₹ 9 lakh – ₹ 12 lakh | 15% |
| ₹ 12 lakh – ₹ 15 lakh | 20% |
| More than ₹ 15 lakh | 30% |
New tax Regime (FY 24-25)
Income | Tax Rate |
Upto ₹ 3 lakh | 0% |
₹ 3 lakh – ₹ 7 lakh | 5% |
₹ 7 lakh – ₹ 10 lakh | 10% |
₹ 10 lakh – ₹ 12 lakh | 15% |
₹ 12 lakh – ₹ 15 lakh | 20% |
Above ₹ 15 lakh | 30% |
New tax Regime (FY 25-26)
| Income Range (₹) | Tax Rate |
|---|---|
| Upto ₹ 4 lakh | Nil |
| ₹ 4 lakh – ₹ 8 lakh | 5% |
| ₹ 8 lakh – ₹ 12 lakh | 10% |
| ₹ 12 lakh – ₹ 16 lakh | 15% |
| ₹ 20 lakh – ₹ 20 lakh | 20% |
| ₹ 20 lakh – ₹ 24 lakh | 25% |
| Above ₹ 24 lakh | 30% |
Documents Required for ITR filing for Non Salaried person
- PAN Card
- Aadhaar Card
- Savings and Current A/c bank statement
- Balance sheet and Profit & loss A/c
- Investment proof under section 80C or proof of any other deduction
- Form 26AS and AIS
- Other relevant documents depending on other income sources
Difference between Form 26AS and AIS
Form 26AS and the Annual Information Statement (AIS) are essential documents for taxpayers in India, each serving distinct purposes. Form 26AS acts as a tax passbook, summarizing taxes deducted, collected, and paid by the taxpayer during a financial year. It includes details on Tax Deducted at Source (TDS), Tax Collected at Source (TCS), advance tax payments, self-assessment tax payments, and any tax refunds received. The data in Form 26AS is sourced from employers, banks, and other entities that deduct or collect tax and from the taxpayer’s own payments.
In contrast, the AIS provides a comprehensive view of a taxpayer’s financial transactions, encompassing a broader range of information. It includes detailed records of interest and dividend income, shares and mutual funds transactions, property transactions, and significant gifts, among other financial activities. This information is sourced from banks, financial institutions, and other entities that report transactions to the Income Tax Department. Both Form 26AS and AIS is accessible on the Income Tax Department’s e-filing portal.
Step-by-Step Guide for ITR filing for Non Salaried person
1. Registering on the Income Tax E-Filing Portal
- Visit the Portal: Go to the official Income Tax Department e-filing website
- New User Registration: If you are a first-time user, click on ‘Register Yourself’. Choose the ‘Individual’ category and enter your PAN, which will serve as your User ID.
- Fill in Details: Provide your basic details, contact information, and create a password.
2. Choosing the Correct ITR Form (ITR-1 or ITR-2 or ITR-3 or ITR-4)
3. Filling Out Personal Details and Income Information
- Select the Assessment Year: Choose the appropriate assessment year for which you are filing the return.
- Income Details: Enter your income details under the appropriate heads:
4. Claiming Deductions and Exemptions
- Deductions under Section 80C: Enter eligible deductions such as life insurance premiums, PPF, NSC, and tuition fees.
- Deductions under Section 80D: Include premiums paid for health insurance.
- Other Deductions: Claim deductions under other sections like 80E for education loan interest, 80G for donations, etc.
5. Verifying and Submitting the Return
- Calculate Tax: Click on ‘Compute Tax’ to see the tax liability or refund.
- Tax Payment: If there is any tax payable, pay it through the e-filing portal using net banking or other available options.
- Preview and Submit: Preview the completed ITR form, ensure all details are correct, and click ‘Submit’.
- Verification: After submission, verify your ITR within 30 days of filing. You can e-verify using methods such as Aadhaar OTP, net banking, or through a digital signature. Alternatively, you can send a physical signed copy of ITR-V to the Centralized Processing Center (CPC).
What is the Due date of ITR filing for Non Salaried person?
The Due date to file Income tax return for Non Salaried person is 31st July. If Tax audit is applicable then due date is 31st October.
In case you have missed this deadline then you can file belated ITR till 31st December with late fees.
Also for any mistake made while filing ITR before 31st July, you can make corrections by filing Revised ITR any number of times till 31st December.
If you miss deadline of Belated income tax return filing then you can file Updated ITR till 2 years from the end of relevant assessment year with late fees and additional taxes.
What are the Consequences of non-payment of Tax and non-filing of ITR by Non Salaried person?
Failing to pay taxes and file your Income Tax Return (ITR) has severe consequences. Firstly, unreported income is deemed illegal, equating to tax evasion, and can result in a penalty of 100% to 300% of the evaded tax under Section 271(C). Secondly, a penalty ranging from 10% to 90% of the undisclosed amount may be imposed under Section 271AAB, depending on the circumstances. Lastly, if you miss the filing deadline, a 1% interest per month or part thereof will be charged on the unpaid tax amount as per Section 234A.
Benefits of ITR filing for Non Salaried person
1. Legal Compliance
Filing ITR ensures that you are compliant with the law. It is a legal obligation for individuals with income above a certain threshold to file their returns. Non-compliance can lead to penalties and legal consequences.
2. Proof of Income
ITR serves as a documented proof of income, which is essential for various financial transactions and applications. This is particularly useful for:
Loan Applications: Banks and financial institutions often require ITRs as proof of income when processing loans for housing, personal needs, or businesses.
Credit Card Applications: Similar to loans, credit card issuers may require ITRs to assess the applicant’s financial stability and repayment capacity.
Visa Applications: Many countries require ITRs as part of the visa application process to ensure that the applicant can support themselves financially during their stay.
3. Claiming Tax Refunds
If excess tax has been deducted at source or if advance tax paid exceeds the actual tax liability, filing ITR allows you to claim refunds from the tax department. Without filing returns, you cannot get these refunds.
4. Carry Forward of Losses
Filing ITR allows you to carry forward losses incurred in a financial year to subsequent years. This is particularly beneficial for business owners and investors as it helps in offsetting future profits, thereby reducing the taxable income in those years.
5. Avoid Penalties
Filing ITR on time helps avoid penalties and interest that may be levied for late filing or non-filing. The penalty for late filing can be substantial, and interest may accrue on unpaid taxes.
6. Establishing Financial Credibility
Regular filing of ITRs builds a financial history, which can be advantageous when dealing with financial institutions. It helps in establishing your financial credibility and can be beneficial in business negotiations or when seeking partnerships.
7. Avoiding Scrutiny
Filing your taxes regularly and accurately helps avoid unwanted scrutiny by the tax authorities. It shows that you are a responsible taxpayer, reducing the risk of being flagged for detailed examinations.
9. Documentation for Insurance
Insurance companies often require ITRs for processing high-value insurance policies. It helps in assessing the applicant’s ability to pay premiums and maintain the policy.
10. Participating in Government Tenders
For business owners, participating in government tenders often requires the submission of ITRs for the previous few years to demonstrate financial health and stability.
Conclusion
Understanding the taxability for non salaried individual involves understanding presumptive taxation scheme, applicable deductions and tax rates. By staying informed about these aspects, non salaried persons can file their Income tax return correctly by choosing the right ITR form. Regularly updating knowledge about income tax and seeking professional advice when needed can further aid in effective tax planning.
In case you still have any query or want to file ITR with CA assisstance then you can contact us at +91 9769647582
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