ITR filing for Unemployed
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Filing Income Tax Returns (ITR) is often associated with salaried individuals or those with a steady income. However, unemployed individuals may also need to file ITR in certain circumstances. 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 unemployed 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.
Why Should Unemployed Individuals File ITR?
1. Compliance with the Law
Filing ITR is a legal obligation for individuals with income above a certain threshold. Ensuring legal compliance helps avoid penalties and potential legal consequences.
2. Proof of Income
An ITR serves as documented proof of income, essential for various financial transactions and applications. It establishes a clear financial record.
3. Loan Applications
Banks and financial institutions require ITRs as proof of income for various types of loans, such as home loans, business loans, and personal loans. An ITR demonstrates financial capability and increases the chances of loan approval.
4. Credit Card Applications
Credit card issuers assess financial stability and repayment capacity using ITRs. A higher reported income can result in a higher credit limit.
5. Visa Applications
Many countries require ITRs for visa applications, whether for travel or study. It ensures that the applicant has sufficient financial support.
6. Claiming Tax Refunds
Filing ITR allows an individual to claim refunds if excess TDS (Tax Deducted at Source) has been deducted or if advance tax paid exceeds the actual tax liability. Without filing returns, these refunds are not possible.
7. Carry Forward of Losses
Filing ITR help to carry forward losses to subsequent years. This is beneficial for offsetting future profits and reducing taxable income, especially for those involved in agribusiness or investments.
8. Avoiding Penalties
Timely filing of ITR helps avoid penalties and interest for late filing or non-filing. The penalties for late filing can be substantial, and interest may accrue on unpaid taxes.
9. Avoiding Scrutiny
Regular and accurate filing of ITR helps avoid unwanted scrutiny by tax authorities. It demonstrates financial responsibility and reduces the risk of detailed examinations.
10. Buying Insurance
Insurance companies require ITRs for high-value insurance policies to assess the applicant’s ability to pay premiums and maintain the policy. It serves as proof of financial stability.
11. Participating in Government Tenders
Business owners, including those in agribusiness, must submit ITRs for government tenders. It demonstrates financial health and stability, increasing the chances of securing government contracts.
Taxability of Unemployed individuals
Unemployed individuals might think filing an Income Tax Return (ITR) is unnecessary, but certain situations make it essential. These include income from other sources such as interest from savings accounts, fixed deposits, recurring deposits, dividends from stock investments and mutual funds, and rental income from property leasing or subletting. Additionally, capital gains from the sale of shares, mutual funds, real estate, gold, jewelry, bonds, and debentures require filing an ITR. Business income from freelance work, consulting services, creative pursuits, online platforms, small businesses, home-based operations must also be reported. Proper financial record-keeping and timely ITR filing are crucial, and consulting a tax professional is advisable for personalized guidance.
Income tax deduction under Old regime for Unemployed individuals
Income tax deductions helps 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).
Income tax rates for unemployed individuals
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% |
Which ITR form is applicable for Unemployed person?
The Income Tax Return (ITR) forms vary based on the sources and limits of income. ITR-1 is for individuals with income from salary/pension, one house property, and other sources (like interest) with a total income up to ₹50 lakh, excluding business or professional income and capital gains. ITR-2 is for individuals and Hindu Undivided Families (HUFs) with income from salary/pension, house property, capital gains, and other sources, but not from business or profession. ITR-3 is designed for individuals and HUFs with income from a proprietary business or profession, also covering income from salary, house property, capital gains, and other sources, suitable for those with complex financial situations and higher earnings. ITR-4 applies to individuals, HUFs, and firms (excluding LLPs) with total income up to ₹50 lakh, under presumptive taxation for small businesses and professions, simplifying compliance by reducing record-keeping requirements. Each form is tailored to specific income sources and limits, ensuring appropriate filing based on individual financial circumstances.
What documents are required for ITR filing for Unemployed 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
- Details of Capital Gains related to the sale of property, shares, mutual funds, gold, and other assets. This includes sale deeds, broker statements, and transaction receipts
- Form 26AS and AIS
- Other relevant documents depending on income sources
Difference between Form 26AS and AIS
Form 26AS and the Annual Information Statement (AIS) are crucial 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, including details on Tax Deducted at Source (TDS), Tax Collected at Source (TCS), advance tax payments, self-assessment tax payments, and tax refunds received. The data in Form 26AS is sourced from employers, banks, and other entities. On the other hand, the AIS provides a comprehensive view of a taxpayer’s financial transactions, covering interest and dividend income, shares and mutual funds transactions, property transactions, and significant gifts, sourced from banks, financial institutions, and other entities. Both Form 26AS and AIS are accessible on the Income Tax Department’s e-filing portal.
Step-by-Step Guide for ITR filing for Unemployed
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 from 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 Umemployed person?
The Due date to file Income tax return for Unemployed person 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 by Unemployed person?
Not paying taxes and neglecting to file your Income Tax Return (ITR) can lead to severe consequences. Firstly, unreported income is considered illegal, tantamount to tax evasion, which may result in a penalty ranging from 100% to 300% of the evaded tax under Section 271(C). Secondly, a penalty of 10% to 90% of the undisclosed amount may be imposed under Section 271AAB, depending on the circumstances. Lastly, missing the filing deadline incurs a 1% interest per month or part thereof on the unpaid tax amount as per Section 234A.
Conclusion
Filing ITR as an unemployed individual might seem unnecessary, but it has several benefits including claiming refunds, maintaining financial records, and carrying forward losses. By following the steps outlined above, you can file your ITR smoothly. 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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