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ITR 2025: Which form to use, what documents you need, and how to save tax
If you want to file your income tax return smoothly, avoid errors, and potentially save on taxes, here are some essential tips by Shefali Mundra , Tax expert at Clear Tax
Choose the right tax regime
Taxpayers can choose between the old and new tax regimes. The old regime allows various deductions and exemptions, whereas the new regime offers lower tax rates with limited exemptions. Evaluate which regime benefits you more based on your income and eligible deductions. Many salaried individuals with high deductions (like 80C, HRA, and home loan interest) may benefit from the old regime, while those with simpler finances may find the new regime more attractive.
Pick the Right ITR Form
Choosing the correct ITR form is crucial. Filing the wrong one could result in your return being treated as defective.
ITR-1: Income up to ₹50L from salary, one house property, and other sources.
ITR-2: For those with capital gains, multiple properties, or foreign income.
ITR-3: Income from business or profession.
ITR-4: Presumptive income scheme for small businesses or professionals.
Gather Key Documents in Advance
Organize all relevant documents before you begin:
Form 16 from your employer
Form 26AS and Annual Information Statement (AIS)
Bank interest certificates, rent receipts, capital gains statements
Investment proofs (PPF, ELSS, insurance, etc.)
PAN and Aadhaar
Don't Miss Out on Deductions
Maximize your tax savings by claiming deductions under:
Section 80C (up to ₹1.5L): PPF, EPF, ELSS, principal on home loan
Section 80D: Health insurance premiums
Section 24(b): Interest on housing loans
HRA, LTA, and other exemptions if you qualify
Ensure that all claims are backed by valid documentation.
Check Your Tax Credit Details
Before filing, cross-verify the TDS reflected in Form 26AS and AIS against your actual income. Any mismatches must be clarified with the deductor to avoid refund delays or scrutiny.
How to decide between old and new regime?
If you claim deductions like Section 80C (PPF, ELSS), HRA, home loan interest, etc., the Old Regime may save you more.
If you have a simple income structure with minimal deductions, the New Regime may be more beneficial due to lower slab rates.
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Indian Express
12 minutes ago
- Indian Express
As the economy grows, so would tax collection; hopeful of meeting FY26 target: CBDT Chairman Ravi Agrawal
The net direct tax collections may have slowed down, but the Income Tax Department is 'comfortable and hopeful' of meeting the target for the ongoing financial year 2025-26, Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal said. In an interview with Aanchal Magazine, the CBDT Chairman listed several measures including the various 'nudge' campaigns being taken by the Department to boost compliance that has already resulted in filing of over 1.1 crore updated returns and collections of over Rs 11,000 crore. However, there is scope for further increase in the number of returns filed by taxpayers. Edited excerpts: There is a moderation in direct tax collections. Till July 10, it was 1.3 per cent down year-on-year. Is it because of the income tax benefits given in the Budget? How are you assessing the trend vis-a-vis the target? When this overall net tax collection (budget estimate) was given to us, at that point, this element (income tax cut) was also factored in while arriving at the figure and while estimating the tax buoyancy, this was factored in. We are hopeful that it will be done. So far as the reduction is concerned, that was primarily attributable to higher refunds outgo. Also, the fact that if you compare July last year versus July this year, the difference is that the due date for filing the return was July 31, and self-assessment tax was also coming. Since the due date has been shifted, that collection to that extent has basically taken a hit to that extent. But then, going forward, we feel that as the economy grows, so would the tax collection because ultimately taxes are derivative of economic growth. So, economic growth, and then better tax administration, would definitely yield. We are comfortable and hopeful of meeting the target. How is the Income Tax Department making use of digital technologies to boost compliance? On an annual basis, the department captures around 650 crore transactions data from different sources. These transactions are collated, and for about 40 crore PANs, Annual Information Statements (AIS) are generated. This has the data of your TDS, tax payment, any transactions that have been done with different parties, maybe immobile property, or shares or mutual funds or any other. That is reflected on the portal online that is available to the taxpayers. And it's not only available to the taxpayers, they are seeing it, which is an interesting statistic, to me it was very interesting. If you see in FY 2024-25, about 7.42 crore taxpayers actually saw their AIS. And the number of times they actually visited, on an average, if we see, it's about three and a half times. That means the visits to the AIS module of ours was 24 crore times. The point I'm trying to make is that one, you collate this information, this information is corresponding to more than 40 crore taxpayers and more than 7.5 crore taxpayers actually see this multiple times. This becomes a reference point basically for the taxpayer to see their ledger, take a call, what are the taxes to be paid like advance tax and all, whether it has to be paid or not and the return that has to be filed, what is the income that has to be reflected, which means that there is a wide acceptability of the information and the ledger in the form of AIS that is being shown to the taxpayer. It also reflects their confidence in the information that is being shown. 9 crore people are filing the returns and you have more than about 40 crore people in whose case this AIS has been updated. So therefore we can say that yes, there is a scope for further increase in the number of returns that have been filed. What is the role of AI in such analysis? In that context, now we come to what is the role of AI? So, one is, who ought to file the return is not filing. You have this data. Based on that, you can come up with potential cases and then correspond with them electronically. So whatever coordinates you have, you can inform. The second component is whosoever is filing the return, whether a correct return has been filed or not. In case, there is an obvious gap or something which needs to be flagged and from the taxpayer nudge him towards better compliance, and right compliance. And the third component is: if you find that the taxpayer is repeatedly committing a mistake, can there be a case of a harder nudge? So these are components of tax administration that we are working on and where AI is helping. Because AI is then raising red flags in all these transactions and saying: okay, this maybe you would like to consider. And based on that we do a ABC sort of analysis, the numbers are huge…every year some 9 crore people would file returns and then you have to do that analysis. This is the extent and volume of e-governance in the tax department. The direct tax department is huge and if you see the profile of the taxpayer, that spectrum is also really very very wide wherein on one hand, you have a technologically-challenged taxpayer to a very, very matured taxpayer who is very, very technology savvy. So you have to build a system to make sure that the wide spectrum of people are able to see and find value with it. We have seen on the indirect tax side also, like for GST, a move towards capturing the unregistered persons. Is there a similar move from the direct tax side to expand the tax net to the ones who are not filing returns? Basically, what has to be seen is that the taxpayers' base is also increasing. And also the number of people who are filing the returns are also increasing. More and more awareness once it comes, naturally the compliance will go up. So I would not put this number that all these 40 crore people were supposed to file the return and they ought to be our taxpayer. No, not that. But, yes, there is a scope for improvement. And then how do we nudge the taxpayer? How do we prompt the taxpayer to come look at their transactions and then if there is a requirement of filing a return, the person would. I think the awareness is there all across, the communication is also fast, so, by and large, now the taxpayer is also aware about the obligations. It's not that the taxpayer is not aware about it. They are taking that call. And once more and more the data gets matured and it gets populated and you are able to reflect it online, people will take care. Especially, younger generation. How is the Tax Department flagging these gaps to the taxpayers? Our systems create a 360-degree profile of taxpayers' financial transactions and flag any inconsistencies between their declared income and their financial activities. The in-house 'Project INSIGHT', uses advanced data analytics to collate information from various sources, including bank reports, financial institutions, sub-registrars of properties etc. The Department proactively nudges taxpayers suspected of making wrong claims or omissions to update their returns and pay the correct tax. The success of this approach is visible in the outcome of the 'nudge' campaigns. In the Foreign Income and Assets Nudge Campaign, based on matching data received under automatic exchange of information, 19,501 taxpayers were nudged. This resulted in 62 per cent of them revising their returns, and a total of 30,161 taxpayers declared foreign assets worth Rs 29,208 crores and foreign income of Rs 1,089 crore during the campaign period. For false claims, data analytics identified over Rs 9,000 crore in excess deductions claimed under Section 80GGC. Nudging taxpayers through SMS and emails led to a reduction of Rs 963 crore in deductions and the payment of Rs 409.50 crore in additional taxes as of June 18, 2025. The Virtual Digital Assets Nudge Campaign is also ongoing, wherein the taxpayers are being nudged through SMS and e-mail to revisit claims made in ITRs related to TDS under Section 194S versus Schedule VDA filings. The updated return facility (ITR-U) has seen significant success. As of June 18, 2025, a total of 8,892,395 updated ITRs have been filed, generating Rs 9577.06 crore in additional taxes. Overall, over 1.1 crore updated returns have been filed, collecting more than Rs 11,000 crore. By proactively providing taxpayers with information about their financial transactions, we encourage voluntary compliance. How is the Department communicating with the taxpayers? We are communicating with non-filers…there is an ABC analysis that we do to find which people have entered into larger transactions, and who are not filing. Maybe a person had filed earlier in the earlier year, but has chosen not to file this year. So then you can identify those people and try to also see rational from our end through AI. What could be the reason that this guy has not filed now. For example, the person may have entered into an immovable property transaction in one year, and subsequently, it may not be so. It may be something like that the income does not fall above the threshold. You see all those cases, see the high-end cases and then correspond with them through emails in the database or from other data sources. Recently, there were search operations at 150 locations. Was it a similar exercise? This was basically an exercise in that direction. The taxpayer reports certain income, and while calculating their income, reports certain exemptions or deductions which are taken on face value and the system processes. But what we found through AI was that there were gaps, and they were really patterns that emerged, which reflected that the deductions and the exemptions that were claimed were not the correct deductions/exemptions. So, therefore, our pan-India exercise was undertaken to also flag and bring home the point that while we trust the taxpayer, but then at the same time, incorrect claims of deductions and exemptions are not acceptable, and we have not actually gone to the taxpayer per se. We have gone to the intermediary or the facilitator who is misguiding the taxpayer and identify those people. Those could be professionals or intermediaries. Through those, more than 1.5 lakh PANs have been identified. The exercise is still going on. At times, what happens is that the intermediaries give false promises of refunds, and potentially the taxpayer may not be aware of what is being filed. So one has to be cautious about it because it has implications. Since it is an end-to-end, e-enabled service that the tax department is providing, unless the taxpayer gives us the right coordinates of email and mobile, it becomes really very difficult for the tax department to correspond with the taxpayer. If an email of an intermediary is given, or a temporary email of an intermediary is given, then naturally the correspondence would go or the letter would go to that very email which is not being seen by anyone, and therefore, the taxpayer ultimately takes a hit. Like, we are committed to providing refunds as soon as possible. The average time for refunds is 17 days now (38 days in 2020-21) after returns are filed. But how do we give it unless, until the taxpayer actually gives the right coordinates. How is the Tax Department selecting cases for scrutiny? The Computer Assisted Scrutiny Selection (CASS) is a technology-driven system used by the Income Tax Department to select income tax returns for scrutiny, aiming to ensure efficiency, transparency, and objectivity. The CASS risk rules and selection parameters are regularly reviewed and updated to adapt to evolving tax evasion patterns, compliance behaviors, and policy changes. This includes incorporating new data sources like enhanced TDS and SFT reporting for more precise risk assessments. Approximately 0.3 per cent of all income tax returns filed annually are selected for scrutiny, including cases chosen under CASS and other mechanisms like reopening. The proportion specifically selected under CASS typically ranges from 0.05-0.2 per cent of total annual returns filed. For FY 2024-25, about 2.5 lakh cases were selected for scrutiny, representing only about 0.29 per cent of total ITR filers. The Department operates on a 'Trust First and Scrutinise Later' philosophy, focusing on high-risk cases rather than random selection. You mentioned email addresses being incorrect or temporary. Apart from electronic communication, is there any other method of communication which the tax department is exploring since PAN is Aadhaar linked and you can go back to check addresses? No, we would prefer only an e-route. One, that is trackable also. There's an audit to it also. And, ultimately overall you see that it makes our service fast. Look at the volumes. What we would encourage is correspondence through e-mails. The Select Committee has submitted its report on the new Income Tax Bill. There were a lot of concerns raised by digital rights activists about privacy about the storage of data which the tax department would be accessing during an investigation. Say, there is personal or privileged communication between family members or doctors/lawyers. How will the income tax department ensure that that trust is not breached or misused during a probe? First, from a regulatory point of view, statutory permissions are there which mandate the tax department to actually not part with the data in an unauthorised manner. It's a legal obligation. Having said that, practically, in practice, how are we going to go about it? We have put in place a mechanism where this information or this data is scrutinised in a sanitised environment by authorised people. And also, the data which gets raised but which pertains to the privacy domain, is redacted and only the relevant data is investigated. We are also now coming up, we are in the process of defining procedures wherein these things could be made more tight to take care of a taxpayer. It is a genuine concern of the taxpayer. But, then you see, how do you investigate? There's a mobile, there is a personal chat also here, there's a financial transaction also. So, say, it's WhatsApp, it's both. You got to maintain the evidentiary value of this mobile also. It cannot be that at that point in time, you say I'll take this but I'll not take the other part. There would be continuity. So, therefore, to maintain the evidentiary value, you have got to capture the data in toto. But then once you have captured the data, it's the responsibility of the tax department to ensure that whatever investigation is done, only the relevant data is actually analysed, and the other data is redacted. So will there be specific rules for the new investigation process based on the new bill? If you see the manual that we have come out with, the search and seizure manual, we have put that also as one of the requirements. We are also coming up with the digital manual for analysis of digital evidence. There also we would be actually taking care of it. So, we will address it. What is the pendency of cases in direct taxes? And how are you going to address it? Yes, there is a pendency. About 5.5 lakh cases are pending. So we have taken certain steps. For example, last year we came up with this VSVS 2024 scheme (Vivad se Vishwas Scheme), and 40,000 people participated in that. To that extent, those were taken care of. Now, what we have done is that we have expanded the numbers of commissioner appeals. Officers who were doing appellate ones. We have also given appeal work to principal commissioners. We have tried to profile appeals with similar issues, Identify which can be low-hanging fruits for easy disposals. We have tried to give numbers, scores to the appeals, which actually prompt the officers to dispose of more appeals. So these are the steps that have been taken. In fact, if you see last year, we disposed of about 1.75 lakh appeals at the first appellate level in FY25, which was a substantial percentage increase of 55.18 per cent over 2023-24. And more so, the number of disposals were more than the number of new appeals instituted. So that in fact, for the first time, this came down but we are very conscious about it. The Select Committee was also insistent, and rightly so, that we should actually work on reducing the appellate pendency. Primarily this happened because at the time of Covid, the appeal disposal was not so high. So all those things were there. But we are taking all the steps. So this year, you are looking at reducing… Yes. In a big way, we are trying to reduce. We have already set for ourselves a target of more than 2 lakh for this year, but then we will not rest at that and we'll try to (reduce it) further. Aanchal Magazine is Senior Assistant Editor with The Indian Express and reports on the macro economy and fiscal policy, with a special focus on economic science, labour trends, taxation and revenue metrics. With over 13 years of newsroom experience, she has also reported in detail on macroeconomic data such as trends and policy actions related to inflation, GDP growth and fiscal arithmetic. Interested in the history of her homeland, Kashmir, she likes to read about its culture and tradition in her spare time, along with trying to map the journeys of displacement from there. ... Read More
Hans India
9 hours ago
- Hans India
India's direct tax collections double as incomes rise, compliance grows
India's total gross direct tax collections (before adjusting for refunds) have more than doubled in the last five years, reflecting the high economic growth and improved tax compliance in the country, which has been encouraged with the introduction of the new digital technology. The increase in collections is backed by a 36 per cent jump in the number of Income Tax returns filed in the last 5 years, with around 9.19 crore ITRs submitted in FY 2024-25 compared to 6.72 crore in FY 2020-21 due to the robust expansion in the taxpayer base. The country's total gross direct tax collection stood at Rs. 12.31 lakh crore in 2020-21, which rose to Rs. 16.34 lakh crore in the financial year 2021-22, figures compiled by the Finance Ministry show. The trend continued in 2022-23 and 2023-24 as well, with the amount reaching Rs 19.72 lakh crore and Rs 23.38 lakh crore, respectively. This growth stems from a combination of economic recovery and improved efficiency in tax collection, according to an official statement. By FY 2024-25, the total Gross Direct Tax Collections climbed to an impressive Rs 27.02 lakh crore, which showcases the strength of the Indian economy combined with improved taxpayer compliance and the government's actions to expand the tax base, the statement said. The Indian tax ecosystem has witnessed remarkable growth through various technology-driven initiatives in a phased manner. The current series of PAN (10 digit alphanumeric) was launched in 1995 offering advantages like unique identification, information matching leading to widening of tax base. Linking of PAN with Aadhaar was undertaken in 2017 to improve compliance and eliminate duplication. Further, in recent years, initiatives like the setting up of the Centralised Processing Centre (CPC) in 2009 and the TDS Reconciliation Analysis and Correction Enabling System (TRACES) in 2012 led to automated processing of ITRs and issuance of refunds and resolving mismatch of Tax Deducted at Source (TDS), respectively, the statement said. The introduction of Tax Information Network (TIN) 2.0, a new tax payment platform, has been a trendsetter. With multiple payment modes, real-time credit of taxes, and faster processing of refunds, the department has not just streamlined the process but empowered taxpayers with greater flexibility and convenience, the statement said. With the establishment of the Demand Facilitation Centre at Mysuru, a central repository for outstanding demand has been created, which is a single reference point for both the taxpayer as well as the departmental officer. In the last decade, focusing on global technological revolutions, the Income Tax Department (ITD) launched PROJECT INSIGHT, building an integrated data repository, creating a "360-degree profile" of each taxpayer. This Data Warehousing and Business Intelligence platform represents a paradigm shift in how the department leverages data analytics for improving compliance and widening the tax base. Further, the Faceless Assessment Scheme launched in 2019 targets to enhance transparency, efficiency, and accountability by eliminating the physical interface between the taxpayer (Assessee) and the tax officer (Assessing Officer) through features like Automated Random Allocation and Electronic Communication. The Annual Information Statement (AIS) was implemented on the Compliance Portal of the Income Tax website on November 2021 which provides taxpayer's financial activities across the financial year, including records related to Tax Deducted at Source (TDS), Tax Collected at Source (TCS), stock market transactions, mutual fund investments, and other relevant financial data. Besides, the introduction of pre-filled returns, facilitated by the Annual Information Statement (AIS) and Taxpayer Information Summaries (TIS), facilitates filing returns. NUDGE, which stands for Non-Intrusive Usage of Data to Guide and Enable Taxpayers, has also been introduced, based on behavioural economics and psychology, which refers to a subtle suggestion or influence or intervention that can change the behaviour of individuals in a predictable way without limiting their freedom of choice. Accordingly, Section 139(8A) inserted by the Finance Act, 2022 permits taxpayers to file an updated I-T return within 24 months from the end of the relevant assessment year with effect from April 1, 2022.
Mint
11 hours ago
- Mint
TDS was deducted on employee health insurance payout. Can I get a refund ?
During the previous financial year, my wife had an emergency caesarean delivery, and the baby was admitted to NICU for 5 days. A bill of ₹ 74,505 was generated, of which ₹ 62,833 was approved by the employer. At the time, the hospital had applied for the renewal of income tax exemption status under section 17(2) of The Income Tax Act 1961, read with rule 3A(1) & 3A(2) of Income Tax Rules, 1962, but the certificate was still awaited. Due to this, the sanctioned amount was subject to a tax deducted at source (TDS) of ₹ 19,604 and only ₹ 43,220 was credited. However, the hospital has received the tax certificate now with retrospective effect from 1 July 2024. As a result, the employer will not be liable to deduct tax u/s 192 of the Income Tax Act,1961 for such a sum. I wish to avail the refund of this TDS through income-tax return (ITR). Under the income-tax laws, the value of any benefit or amenities provided by the employer to an employee is taxable as perquisites, subject to prescribed exceptions. As per the related provisions, medical reimbursements given by the employer for medical treatment of specified diseases/ailments to employees or their specified families are not considered taxable in the hands of employees, subject to satisfaction of specified conditions. It is assumed that your case falls under the prescribed diseases/ailments, the retrospective approval certificate of the hospital covers the period of treatment, and all other conditions are satisfied. Hence, the reimbursements may be considered as non-taxable. Since the reimbursements were taxed at the withholding stage and a tax was deducted at source by the employer, you may consider the same as non-taxable while filing your income-tax return (ITR) for the FY 2024-25. While filing the ITR, you may directly exclude the non-taxable reimbursement amount from the salary reported in Schedule Salary (S) under Section 17(2). As this is a non-taxable reimbursement and not an exempt income, the same may arguably not be reported as an allowance exempt under Section 10 in Schedule S, or in Schedule Exempt Income (EI). In case of any queries from the tax authorities (say on account of variance with the salary reported by an employer in Form 16), it will need to be responded, accordingly. You should also retain supporting documents, such as the hospital's approval certificate and medical bills, to justify the reduced salary reported in the ITR, if required. Also note that this is a non-taxable reimbursement and does not form part of the specified disallowances under the new tax regime. Hence, the above treatment can be considered irrespective of the tax regime. Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
