ITR filing for Students
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Income Tax Return (ITR) filing is a crucial financial activity that involves reporting your income and taxes paid to the government. While it may seem irrelevant for students, understanding and engaging in ITR filing can be highly beneficial. For students, particularly those earning through internships, part-time jobs, or freelance work, filing an ITR is not just about fulfilling a tax obligation—it’s an opportunity to gain financial literacy, potentially receive tax refunds, build a credible financial history and apply for VISA.
Filing an ITR early in life sets a foundation for good financial habits, making it easier to manage taxes as one’s income grows. Additionally, it helps in creating a record that can be useful for future financial endeavors, such as applying for loans or credit cards.
In this guide, we will delve into the reasons why students should consider filing an ITR, the eligibility criteria, necessary documents, and provide a comprehensive guide to help students file their ITR with ease.
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.
Importance of ITR filing for students
Filing Income Tax Returns (ITR) may seem like a task reserved for working professionals and business owners, but it’s equally important for students. Here are several reasons why students should consider filing their ITR:
1. Legal Compliance
Even if students earn a modest income from part-time jobs, internships, or freelance work, they may still be legally required to file an ITR if their gross total income before exemption and deduction exceeds the basic exemption limit of Rs, 2.50 lakhs under Old tax regime and Rs. 3 lakhs under New tax regime.
2. Financial Literacy and Responsibility
Filing an ITR is an excellent way for students to develop financial literacy. It teaches them how to manage finances, understand income tax rules, and be responsible for their earnings and savings. This foundational knowledge is invaluable as they transition into full-time careers.
3. Claiming Tax Refunds
Many students might have tax deducted at source (TDS) from their stipends or part-time job salaries. Filing an ITR allows them to claim refunds for any excess tax paid, which can be a significant financial relief for students who are managing their expenses on a tight budget.
4. Apply for Loan and Credit cards
An ITR serves as a formal record of income. Maintaining this record from a young age helps build a credible financial history, which is beneficial when applying for loans or credit cards. A consistent ITR filing history can improve a student’s creditworthiness.
5. Carry Forward of Losses
Filing ITR allows students to carry forward any losses incurred during the financial year to subsequent years. This can be beneficial if they engage in freelance work or small business ventures or to stock market trading, as it helps offset future income and reduces taxable income in the years to come.
6. Availing Education Loans
When students apply for education loans, banks often require proof of income. A filed ITR can serve as substantial evidence of the student’s financial activities and income, facilitating the loan approval process.
7. Building a Habit
Starting the habit of filing ITRs early in life instills a sense of responsibility and routine. This habit ensures that students are well-prepared for financial responsibilities as they move into their professional lives, reducing the chances of non-compliance in the future.
8. Understanding Tax Deductions and Savings
By filing ITR, students can learn about various deductions and exemptions available under the Income Tax Act. This knowledge enables them to plan their investments and savings better, optimizing their tax liabilities effectively.
In conclusion, while ITR filing may initially appear complex and unnecessary for students, its benefits far outweigh the effort involved. It not only fosters financial discipline but also provides tangible financial advantages, making it a crucial step towards responsible adulthood.
Income sources for students
When it comes to filing Income Tax Returns or ITR filing for students, it’s essential for students to understand the different types of income that must be reported. Even though students might not have traditional full-time employment, various other forms of income are still subject to taxation. Here’s a detailed look at the types of income students need to consider when filing their ITR:
1. Scholarships and Fellowships
Scholarships and fellowships are common sources of income for students, especially those in higher education. Generally, scholarships granted to meet the cost of education are exempt from tax under Section 10(16) of the Income Tax Act. This includes tuition fees, books, and other academic expenses.
2. Part-time Jobs
Many students take up part-time jobs to support their education and living expenses. Income from part-time employment must be reported in the ITR:
- Salary Income: Any salary earned from part-time jobs is taxable under the head ‘Income from Salaries’. Employers typically provide a Form 16, which details the salary paid and TDS deducted.
- TDS Refunds: Students can claim refunds on excess TDS deducted by their employers, which makes filing an ITR beneficial to claim back this amount.
3. Freelance Work
Freelancing is increasingly popular among students, offering flexibility and a source of income through various gigs. Income from freelancing is taxable and needs to be reported:
- Professional Income: Earnings from freelancing are taxed under the head ‘Income from Business and Profession’. This includes income from activities like content writing, graphic design, tutoring, software development, etc.
- Expense Deductions: Freelancers can claim deductions for expenses incurred in earning their income, such as internet charges, software subscriptions, and other professional expenses.
4. Investments and Savings
Students might also have income from investments and savings:
- Interest Income: Interest earned on savings accounts, fixed deposits, and other investments is taxable under ‘Income from Other Sources’. While savings account interest up to INR 10,000 is exempt under Section 80TTA, any amount above this is taxable.
- Capital Gains: If students invest in stocks, mutual funds, or other assets, any gains from the sale of these assets need to be reported as capital gains. Short-term and long-term capital gains are taxed differently, with distinct rates and exemptions.
5. Rental Income
Some students might receive rental income from property:
- Rental Income: Income from renting out property is taxable under ‘Income from House Property’. Students can claim standard deductions and expenses like property tax and interest on home loans against this income.
6. Stipends
Stipends received from internships or training programs are also considered income:
- Stipend Income: If a stipend is received as part of a formal agreement where work is being done, it may be treated as salary income.
Income tax rates for students
Old tax Regime
| 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 Students
1. Personal Identification
- PAN Card
- Aadhaar Card
2. Income Proof
- Form 16: Provided by employers, it details the salary paid and Tax Deducted at Source (TDS).
- Form 16A: For TDS on income other than salary, such as interest or freelance earnings.
- Bank Statements: To track income deposits, interest received, and any other financial transactions.
3. Investment and Savings Documents
- Interest Certificates: From banks for savings accounts, fixed deposits, and recurring deposits.
- Investment Proofs: For any investments made in tax-saving instruments like Public Provident Fund (PPF), National Savings Certificate (NSC), or Equity Linked Savings Scheme (ELSS).
- Capital Gains Statements: From brokers or mutual fund houses, if you’ve earned through stock or mutual fund investments.
4. Expense Proofs for Deductions
- Rent Receipts: For claiming House Rent Allowance (HRA).
- Tuition Fee Receipts: If claiming deductions for education expenses.
- Insurance Premium Receipts: For life insurance, health insurance, and other eligible policies under Section 80C and 80D.
- Donation Receipts: For donations made to charitable organizations, eligible for deduction under Section 80G.
- Loan Certificates: For interest paid on education loans or home loans, eligible for deductions under Section 80E and Section 24(b) respectively.
5. Other Relevant Documents
- Form 26AS and AIS: This is a consolidated annual tax statement that can be downloaded from the income tax department’s website, showing financial transactions, TDS, TCS, and tax payments.
Choosing the Correct ITR Form
ITR-1 (Sahaj):
- Applicable for students who have:
- Income from salary
- Income from one house property
- Income from other sources (interest dividend, etc.)
- Total income up to ₹50 lakh
- This form is suitable for students with income from a part-time job, internship stipend, or interest income that meets the above criteria.
- Applicable for students who have:
- Applicable for students not having income from business or profession, who have:
- Income from salary
- Income from house property
- Income from other sources (interest dividend, etc.)
- Capital gains on shares, mutual funds,etc
- This form is suitable for students who have income from multiple sources, including capital gains.
- Applicable for students not having income from business or profession, who have:
- Applicable for students having income from a business or profession.
- This form is relevant if the student has income from freelancing or any small business activities.
- Also Salary, stipend, interest, capital gains can also be reported here.
ITR-4 (Sugam):
- Applicable for students having total income up to ₹50 lakh and having income from business and profession computed under sections 44AD or 44ADA (Presumptive Taxation Scheme).
- Suitable for students engaged in freelancing with a total income not exceeding ₹50 lakh.
Example Situations
Student with Part-time Job and Interest Income:
- Use ITR-1 if total income is below ₹50 lakh and the only sources are salary and interest.
Student with Freelance Income:
- Use ITR-3 for detailed reporting of business income or ITR-4 if opting for the presumptive taxation scheme with total income below ₹50 lakh.
Step-by-Step Guide for ITR filing for Students
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:
- Salary Income: Use Form 16 to fill in salary details.
- Income from Other Sources: Include interest income, freelance earnings, etc.
- Exempt Income: Report exempt incomes like scholarships under Section 10(16).
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 Students?
The Due date to file Income tax return is 31st July.
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?
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.
Conclusion
ITR filing for students helps in understanding income sources, managing finances better, and claiming refunds for any excess taxes paid. Moreover, it builds a credible financial history which can be beneficial for future financial needs like applying for loans or credit cards.
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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