ITR Filing — What Income Tax Return Is and How the Process Works
ITR is the annual income tax return filed with India's IT Department. Learn about ITR forms, due dates, AY vs FY, how to file online, and what investors need to declare.
Team Sahi
ITR, or Income Tax Return, is the annual declaration that taxpayers in India submit to the Income Tax Department. It reports total income, applicable deductions, and taxes paid during a financial year. Filing an ITR is mandatory for individuals whose income exceeds the basic exemption limit and for certain other categories of taxpayers regardless of income.
Financial Year vs Assessment Year
Two terms are central to ITR filing:
- Financial Year (FY): The year in which the income was earned, running from 1 April to 31 March. For example, FY 2025-26 covers income earned between 1 April 2025 and 31 March 2026.
- Assessment Year (AY): The year following the financial year, in which the income is assessed and the ITR is filed. For FY 2025-26, the assessment year is AY 2026-27.
When filing an ITR, taxpayers always select the assessment year corresponding to the financial year in which income was earned.
Who Must File an ITR
The following individuals are required to file an ITR in India:
- Individuals with gross income exceeding ₹2.5 lakh (₹3 lakh for those aged 60–79, ₹5 lakh for those aged 80 and above)
- Individuals with capital gains, regardless of total income
- Those with foreign assets or foreign income
- Individuals who want to claim a tax refund
- Companies and firms, regardless of income level
- Individuals who deposited more than ₹1 crore in bank accounts or incurred large electricity or travel expenses
ITR Forms — Which One to Use
The Income Tax Department provides different ITR forms based on the taxpayer's income sources:
| Form | Applicable To |
|---|---|
| ITR-1 (Sahaj) | Resident individuals with salary, one house property, and other sources; income up to ₹50 lakh |
| ITR-2 | Individuals with capital gains, foreign income, or more than one property; no business income |
| ITR-3 | Individuals and HUFs with income from business or profession |
| ITR-4 (Sugam) | Individuals and HUFs under the presumptive taxation scheme (Section 44AD/ADA/AE) |
| ITR-5 to ITR-7 | Firms, LLPs, companies, and trusts |
Investors with income from stocks (capital gains) typically file ITR-2. Those with F&O trading income, which is treated as business income, use ITR-3.
ITR Due Dates
The standard due date for filing ITR for individuals is 31 July of the assessment year. For FY 2025-26 (AY 2026-27), the standard deadline is 31 July 2026. The government occasionally extends this deadline by notification. Taxpayers who miss the deadline can file a belated return by 31 December of the assessment year with a late fee.
How to File ITR Online
ITR can be filed on the Income Tax Department's e-filing portal at incometax.gov.in. The process involves the following steps:
- Log in with PAN and password (or register if filing for the first time)
- Select "File Income Tax Return" and choose the assessment year
- Select the appropriate ITR form based on income sources
- Pre-fill data is available from Form 26AS, AIS (Annual Information Statement), and TIS
- Fill in income details, deductions, and tax paid
- Verify the return using Aadhaar OTP, net banking, or offline DSC
Capital Gains and ITR for Investors
Investors who earned capital gains from stocks must report these in Schedule CG of their ITR. Both short-term and long-term gains must be declared, along with the STT paid and details of each transaction where required.
Form 26AS and the AIS (Annual Information Statement) auto-populate much of this data. Verifying AIS before filing helps identify discrepancies between what the IT Department has on record and what the taxpayer reports.
Penalty for Not Filing ITR
A late fee of ₹5,000 applies for returns filed after 31 July but before 31 December. The fee is reduced to ₹1,000 for taxpayers with total income below ₹5 lakh. Interest under Section 234A is also levied on outstanding tax liability for the period of delay.