If you are a homemaker and get interest and rental income, you might wonder if you need to file Income Tax Returns (ITR) as well.
In this article, we will cover everything you need to know about filing ITR.
Calculate your income
Individuals with an annual income of more than ₹2.5 lakhs must file ITR. People with lesser income can also file ITR.
To determine if you fall in the taxable income slab, you need to add all your income, such as interest and rental income. For instance, if you receive ₹20,000 per month from one rental property, i.e., ₹2.4 lakhs per year and ₹50,000 as interest from your FD investments. So, your total income is ₹2.9 lakhs which is above the basic exemption limit of ₹ 2.5 lakhs. This means that you need to file ITR.
In this step, you can also calculate your taxable income. Subtract your investments under the various tax-saving investment options such as Public Provident Fund (PPF), National Saving Certificate (NSC), Equity Linked Savings Scheme (ELSS) and other deductions from your total income. Your taxable income will be your total income minus tax deductions.
Choose the correct ITR form
The next step would be to select the correct ITR form. If you don’t have any capital gains from mutual funds and stocks and receive rental income (less than ₹ 50 lakhs) from one property, then you can file ITR-1. You can add interest income from savings accounts, fixed deposits and rental income in ITR-1. However, if you have capital gains and receive rental income from more than one property or the total rental income is more than Rs. 50 lakhs, you need to file ITR-2.
Income from fixed deposits
If you are a homemaker, you might have booked FDs with your money or may have received money from your other family members, such as your spouse. If you have booked the FD with your income, then the interest income will be added to your income. You need to disclose it under the ‘Other income’ section.
Also, if you receive more than ₹ 40,000 ( ₹50,000 if you are a senior citizen) as interest income from your FD, the bank will charge 10% TDS on the entire interest income before crediting your interest near the end of the financial year.
You can submit form 15G/15H to the bank at the start of the financial year to not deduct TDS if your total income is under the taxable limit. Form 15G is for individuals under 60 years and form 15H is for people above 60 years.
Individuals with a total interest income above ₹ 2.5 lakhs cannot submit form 15G even though they might not have any tax liability. However, people whose interest income is less than the basic exemption limit and have no tax liability can submit Form 15G.
FD holders can submit form 15H if the interest income exceeds the basic exemption limit provided that the total taxable income is less than ₹ 3 lakhs for senior citizens and ₹ 5 lakhs for super senior citizens.
If you are eligible to submit the 15G/H form but haven’t submitted it, you can still get the TDS amount refunded to your bank account by filing ITR.
If you receive rental income from one house property, which is less than ₹ 50 lakhs, and don’t hold any directorship in any company, you can add your rental income under the head “Income from house property” under ITR-1.
Otherwise, you need to file ITR-2.
Income from home-based business
Reporting the income might be unnecessary if you provide tuition or run any home-based small business, such as catering or baking.
“It’s all right for homemakers to skip reporting income if they earn less than ₹2.5 lakhs per year through such work. But, if they want to be more official or earn more than that amount, it would be a good idea to file ITR-3 or ITR-4 and add the income as a business income,” said Balwant Jain, a Tax and Investment expert.
Income from investments such as mutual funds
You might invest money in mutual funds or stocks for different financial goals. If you redeem your investments, the difference between the redemption and investment values is called capital gains. For instance, if you invested ₹ 1 lakh in a mutual fund and redeemed when the value of your investments became ₹ 1.5 lakhs, ₹ 50,000 will be considered capital gains.
In this case, you need to add these gains in ITR-2 if you don’t have any business income. You can find and download your capital gains report on your investment portal.
Investments done with money received from your spouse
As a homemaker, you may get money from your spouse to invest in mutual funds or book FDs. Also, your spouse might have made investments in your name.
When you receive any asset other than a house property from your spouse, the income from these assets will be deemed as your spouse’s income. This is called Clubbing of Income and applies under Section 64(1)(iv). The relationship between husband and wife must exist for the clubbing of income to be valid.
It is also important that clubbing of income wouldn’t be applicable if the spouse acquires the asset out of the money she has saved from the money she receives for her personal use or household expenses.
If you are a homemaker, filing ITR can be beneficial even if your income is under the taxable limit. You can file it online or take help from a tax professional.
Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.