Income Tax Return (ITR) is not only a legal obligation, but a matter of personal financial planning as well. Indeed, as a salaried worker, a trader on the stock market, a crypto investor, or a freelancer, it is important to know how to fill in the ITR in 2025 so that you do not lose your rights as a taxpayer.
This step-by-step tutorial is all you need to know about ITR filing of Assessment Year 2025, how to select the ITR form, the process of trading income and crypto income ITR, and the consequences of not filing ITR.
Key Takeaways
- To file ITR is to lock up your financial diary; it is indispensable for the protection of law and credibility in the future.
- In case you did not make a profit, the filing assists in carrying forward the losses such as seed packing to the next season.
- Selecting the appropriate ITR form is not any different to selecting the appropriate key, mismatch the incorrect key, and you will be unable to open the door.
- The crypto profits are taxed at a flat rate, similar to a fixed toll: there is no shortcut, no deduction.
- An incorrectly or failed ITR can compound into penalties, interests or even prosecution.
- It is best to file as early as possible, it is the first train; there are fewer delays and fewer people in lines.
- ITR status check is like tracking a parcel- you know what the status is.
What is ITR?
ITR (Income Tax Return) is a form used to report your income, deductions, taxes paid, and financial information.
Details to the Income Tax Department of India.
The ITR shows:
- How much do you earn
- How much tax did you pay
- Whether you are eligible for a refund
- Or if you still owe any tax
Why Filing ITR Is Crucial?
Most people have the wrong belief that those who make a low income or lose money in trading are not required to pay an ITR. Nevertheless, such a way of thinking may cause legal issues and financial loss. Here’s why timely and accurate ITR filing matters:
Legal Compliance:
It is also a legal requirement that you should be reporting all your income and transactions, whether you have made any profits or not.
Loss Adjustment:
By filing ITR, you can carry forward business or trading losses that you have so that they can be offset against the profits in the future.
Financial Credibility:
An ITR creates confidence in banks and embassies. It is frequently required in taking loans, credit cards or visas.
Refund Claims:
Your TDS (Tax Deducted at Source) might have been deducted after a few months, when your total income may not be taxable, then only you can claim a refund by filing an ITR.
Evading Warnings and Fees:
The large number of transactions, particularly in trading or in cryptocurrencies, may come under close examination. Making returns assists in avoiding the Income Tax Dep notices.
Income Categories Defined by the Income Tax Department
The kind of income you will have will define the ITR you should file. Income in India is categorised under five major heads:
Salary or Pension-This is money generated by working or a pension.
Income from House Property – Earnings from rental properties.
Business/Professional Income – Covered under it: Income as a freelancer, colleague, fair trade (faster/F&O), earning cash through YouTube, and other at-home occupations.
Capital Gains- Gains on the sale of investments like shares, mutual funds or property.
Income of Other Sources– This consists of interests and dividends, presents, crypto earnings and foreign income.
What is the penalty for filing a wrong income tax return in India?
In India, incorrect information, concealment of income, and wrongly reporting Income Tax Return (ITR) may result in a penalty, interest, and even, in case of serious facts, prosecution. The following is how the punishments will be changed depending on the type of mistake:
1. Penalty for Misreporting or Underreporting Income
Under Section 270A of the Income Tax Act:
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Underreporting of income:
Penalty = 50% of the tax payable on underreported income.
-
Misreporting of income (e.g., fake invoices, bogus claims):
Penalty = 200% of the tax payable.
2. Interest on Shortfall of Tax (Section 234A, 234B, 234C)
If you file a wrong ITR and pay less tax than required, interest will be charged:
-
234A: Delay in filing ITR (1% per month on unpaid tax)
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234B: Not paying advance tax (1% per month)
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234C: Shortfall or deferment in advance tax instalments
3. Penalty for Not Filing a Revised Return
If the wrong ITR is not revised before the end of the assessment year (or before the notice is issued under Section 143(2), penalties may be levied.
4. Revision of ITR
You can revise your wrong ITR voluntarily under Section 139(5) before 31st December of the relevant assessment year (or before assessment). There is no penalty if done in good faith.
5. Prosecution in Case of Willful Fraud
If the wrong ITR is filed deliberately to evade tax, and the tax evasion amount exceeds ₹25 lakh, it can lead to:
-
Rigorous imprisonment: 6 months to 7 years
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Fine: As decided by the court
What Should You Do if You've Filed the Wrong ITR?
- Revise it under Section 139(5) if the assessment hasn’t been done yet.
- If you’ve received a notice, respond accurately and pay any shortfall.
- Consider consulting a tax expert if misreporting is involved.
How to File ITR for Trading Income
Step 1: Gather All Trading Documents
Tender your contract notes, profit and loss statement, broker statement and bank transaction summary of that financial year.
Step 2: Identify the Type of Trading Income
Intraday and F&O trading are treated as business income.
Trading based on delivery (purchasing and retention of shares) is considered capital gains.
Step 3: Choose the Correct ITR Form
In case you declare an income as a business (via intraday, F&O, or regular trading), use ITR 3.
ITR 2 should be used in case of having delivery-based trade-only capital gains and zero business income.
Step 4: Calculate Turnover and Expenses
Turnover is computed through the total absolute profits and losses from the trades.
Keep a record of charges like the brokerage charge, internet fee, and advisers’ fees, and other costs to be incurred in a trade.
Step 5: Prepare Financial Statements
In case of filing as a business, you should get ready a simple profit and loss statement and a balance sheet.
In case of presumptive taxation under Section 44AD (in case the assessee is eligible), detailed financial statements may not be needed.
Step 6: Fill in the ITR Form
Income through reporting business under the Schedule 4, Schedule 5 (Business and Profession) (ITR 3).
Report the Capital gains under the Capital Gains schedule (ITR 2 or 3).
Add the tax already paid (TDS, advance tax, etc.).
Step 7: File the Return
Log in to the income tax e-filing portal.
Select the appropriate assessment year and ITR form.
Fill in the details and submit the return.
Step 8: Verify the Return
Aadhaar OTP, net banking, or a signed Aadhaar OTP to be sent to CPC to e-Verify the return.
Ensure verification is completed within 30 days of filing.
Step 9: Keep a Copy for Records
Save the acknowledgement and filled return on your records and use it in future.
Step 10: Track the Status
You can log in to the portal at regular intervals to view the status of your ITR: has it been verified or processed or should anything be done.
How to check the income tax return status online in India?
Here is a step-by-step guide to check your Income Tax Return (ITR) status online in India:
Check ITR Status with Login on the Income Tax e-Filing Portal
Step 1:
Visit the official portal of e-Filing of Income Tax at incometax.gov.in.
Step 2:
Enter log-in details, PAN (as User ID), password and the captcha code.
Step 3:
After logging in, you can navigate to the top menu and select e-File.
Step 4:
Choose Income Tax Returns and then select View Filed Returns.
Step 5:
On the site, you will access a list of returns you have filed. Select the Assessment Year.
Step 6:
To view the status of your ITR, click on the option “View Details.”
Now you can view your status of return, e.g., submitted, successfully verified, processed, defective, or refund issued.
Common ITR Statuses and What They Mean
- Submitted: The return has been filed but not yet verified.
- Pending for e-Verification: You need to verify your return using Aadhaar OTP, net banking, or by sending ITR-V by post.
- Successfully Verified: Your return has been verified and is now awaiting processing.
- Processed: Your ITR has been successfully processed.
- Defective: There is an issue with the return, and you need to respond to a notice.
- Refund Issued: Your refund has been processed and credited.
- Refund Failed: Refund processing failed due to incorrect bank details.
- Case Transferred to Assessing Officer: Your return is under review by a tax officer.
Important Notes
- Always verify your ITR within 30 days of filing to complete the process.
- If your return is marked defective, respond as soon as possible to avoid invalidation.
- If your refund has failed, update your bank details and request a refund reissue on the e-Filing portal.
Which ITR Form Should You File in 2025?
Filing the wrong form can lead to rejection or investigation. Here’s a breakdown of the ITR forms and their applicability.
ITR 1 (Sahaj) – For Simple Income Profiles
Who can file:
- People earning from salary, one house property, and other sources (excluding lottery, racehorse winnings, etc.)
- Total income should be less than ₹50 lakhs.
Not applicable for:
- People who have their income from capital gains, crypto, more than one property, or business/trading activities.
ITR 2 – For Capital Gains and Multiple Properties
Who can file:
- Individuals whose earnings are more than 50 lakhs.
- Income of additional house property.
- Mutual funds, shares or crypto capital gains.
- Foreign earnings.
Not applicable for:
- people with income from a business or profession, such as traders.
ITR 3 – For Business Income and Traders
Who must file:
- people involved in F&O, intraday, or crypto derivatives trading.
- Business owners, freelancers, and professionals.
Key advantages:
- It permits the write off of business expenses like laptops, the internet, software subscriptions, and education courses.
- Gives a loss carry forward and set-off against future income.
- Needed among full-time/active traders and consultants.
ITR 4 (Sugam) – For Presumptive Income under Section 44AD/44ADA
Who can file:
- Companies whose turnover is small (up to rupees 2 crores) or people with an income of less than 50 lakhs.
- People who take the presumptive taxation system do not declare any income at 6 per cent (digital receipts) or 8 per cent (cash receipts)
Not applicable for:
- People who have foreign income, capital gains, crypto trading, or more than one house property.
Other ITR Forms
- ITR 5-The companies, partnerships, societies and groups of individuals.
- ITR 6– Companies (Not including those not taxed under Section 11).
- ITR 7 – Charitable/religious trust, political parties and prescribed institutions.
How to File ITR for Cryptocurrency Income
As cryptocurrency investments increase, tax legislation has taken a different shape. This is how crypto income is treated in the Indian tax laws:
Crypto Spot Trading: In crypto spot trading Profits generated by paying and selling cryptocurrencies such as Bitcoin or Ethereum are charged on a flat rate of 30 percent and no deductions, or losses, follow.
Crypto Derivatives (Futures and Options): These ones are business income. You can offset expenditures, losses may be set off against other business income and sometimes may be carried forward. A filing should be made using ITR 3.
As far as the exchanges are concerned, it would be recommended to use FIU-regulated exchanges in India, like Delta Exchange, where INR transactions are possible, so the documentation can be better to meet the tax obligations.
Consequences of Not Filing ITR
When you fail to file ITR, it may lead to:
Notice: Section 139(9) and 148 may be issued by the Income Tax Department due to non-filing and wrong reporting respectively.
Penalties and Interest: There is a late filing fee up to 5000 in addition to interest under Sections 234A, 234B and 234C.
Turnover Consideration: In the case of traders, the authorities may assume to take the turnover of the entire trading is income when the returns are unfiled, resulting in high tax collections.
Wastage of Refunds: TDS and tax refunds which go unclaimed would expire and lapse even before a refund is claimed by the due date.
Legal Implications: Legal complications of tax are often solved with the partial payment of tax prior to trying upper authorities or higher courts.
Tips for Smooth and Error-Free ITR Filing in 2025
- Organise Financial Documents: Keep your trading statements, crypto reports, bank records, and TDS certificates ready.
- Use AIS and TIS Tools: Reconcile your income with the government’s records via the Annual Information Statement and Taxpayer Information Summary on the income tax portal.
- File Early: Avoid a last-minute rush and get faster refunds.
- Consider Professional Help: For ITR 3 or complex filings, consult a chartered accountant or use trusted tax filing platforms.
Do NRIs need to file ITR?
Yes, NRIs (Non-Resident Indians) are obligated to submit an Income Tax Return in India only in case they obtain taxable income in India. They are not subject to tax in India because of their global income, but they might be required to file ITR in case they receive income in India, such as rents, capital gains or interest received in their NRO accounts.
When NRIs Must File ITR:
- Income earned or received in India exceeds ₹2.5 lakh.
- Share, mutual fund or Indian property capital gains.
- Desire to avail the TDS withheld towards Indian income.
- To carry forward losses (e.g., from capital assets).
- The profit of a company that is run or established in India.
When NRIs Don’t Need to File ITR:
- Indian income is below ₹2.5 lakh and
- No capital gains or TDS involved.
- The only income is the interest of the NRE account (tax-free).
It is not only important to avoid penalties when filing your ITR on time, but it also has to do with your financial responsibility, which is your credibility in the long run. Be it a salaried employee, a crypto trader or a crypto investor, the right form of ITR file means being tax efficient and compliant.
In case of traders in stock or crypto trading, ITR 3 will be the most suitable in most cases since expense provisions and adjustment of losses will be possible.
Congratulations on finishing this blog! Hope this was informative and you decided to read more on the share market, share trade strategies, mutual funds and all that concerns personal finance. do remember to follow StofinIQ on a regular basis to get regular updates, tips, and information.
FAQ
Any person (including NRI) whose total Indian income is less than 2.5 lakh and who neither has capital gains nor TDS deduction is not supposed to file ITR.
Yes, when their Indian source income (such as rent, capital gains or income on an NRO account) is more than 2.5 lakhs or when they wish to claim any TDS Republican or carry forward the losses.
The filing deadline for ITR for Financial Year 2024-25 (Assessment Year 2025-26) has been extended to 15 September 2025 for non-audit cases instead of 31 July 2025.
The ITR will assist you to disclose your income, pay tax, receive refunds, and carry forward losses, and it can be used as evidence of income to obtain a loan or visa and that you are obeying the law.
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