As taxpayers get ready to file their returns, it is crucial to understand the key sections of the Income Tax Act, 1961, that can help in accurate tax calculation, availing deductions, and choosing the appropriate tax regime.
The Income Tax Department has notified ITR-1 and ITR-4 forms for Assessment Year 2025-26. These forms are meant for individuals and entities with an annual income of up to Rs 50 lakh, marking the beginning of the ITR filing process for Financial Year 2024-25.
As taxpayers get ready to file their returns, it is crucial to understand the key sections of the Income Tax Act, 1961, that can help in accurate tax calculation, availing deductions, and choosing the appropriate tax regime.
Mandatory Filing Under Section 139(1)
Section 139(1) of the Income Tax Act makes it compulsory for individuals and entities exceeding the income threshold to file their ITR within the prescribed deadline. It also details provisions for both mandatory and voluntary return filing.
Investments in Tax-Saving Instruments (Section 80C)
For those opting for the old tax regime, Section 80C allows deductions for investments in various tax-saving instruments like Public Provident Fund (PPF), Employees’ Provident Fund (EPF), Equity Linked Savings Scheme (ELSS), tax-saving fixed deposits, and life insurance premiums. The maximum deduction allowed under this section is Rs 1.5 lakh.
However, under the new tax regime, Section 80C deductions are not available. Taxpayers who choose the new regime can only claim deductions under Section 80CCD(2), which allows deductions of up to 10% of the employer’s contribution to the National Pension Scheme (NPS). Additionally, businesses can claim benefits under Section 80JJAA for employee-related costs and under Section 80CCH for contributions to the Agniveer Corpus Fund.
Home Loan Interest Payment (Section 24B)
Taxpayers who pay interest on home loans or home improvement loans can claim deductions under Section 24B. This benefit is available under both the old and new tax regimes, with a maximum deduction of up to Rs 2 lakh allowed for home loan interest payments.
House Rent Allowance (HRA) and Exemptions (Section 10(13A))
Individuals residing in rented properties can claim an exemption on House Rent Allowance (HRA) if their rent exceeds Rs 1 lakh annually. This exemption is covered under Section 10(13A) of the Income Tax Act, making it beneficial for those who meet the criteria.
Health Insurance Premiums (Section 80D)
Section 80D allows taxpayers to claim deductions for premiums paid on health insurance policies. The maximum deduction available is Rs 1 lakh annually, which can be claimed for coverage of the taxpayer, their spouse, children, and parents. For taxpayers below 60 years of age, the limit is Rs 25,000. However, for senior citizens (aged 60 and above), this limit is increased to Rs 50,000.
Penalty for Late Filing of ITR (Section 234F)
Section 234F introduces penalties for late filing of ITR. If the return is filed after the due date, a penalty of Rs 1,000 is applicable for those with income below Rs 5 lakh. For income exceeding Rs 5 lakh, the penalty increases to Rs 5,000. Additionally, delays in filing ITR can lead to interest charges under Sections 234A and 234B, further escalating the taxpayer’s liability.
