ITR Computation in Excel: Meaning, Format, and Other Relevant Areas
Updated: Jun 25
The Indian Income Tax Act, 1961 encompasses all aspects of administration, levy, collection, and recovery of Income Tax in India. But this is not a layman's cup of tea. Simply because of the technicalities of the provisions, rules, and regulations make them difficult to interpret and apply. The laymans are not able to understand: How to file an Income Tax Return (ITR)? Where to file the ITR? What are the consequences of non-filing? What is the ITR Form? What is the ITR Computation? and likewise.
Table of content
The Tax Expert plays a vital role in making any assessee a Tax Compliant assessee. Today the Tax Experts are not just restricted to their regular offices but can be found and taken help from anywhere at any time. One such expert-driven help is provided by TaxBuddy. In this article, we will understand the basics of ITR Computation and the Role of TaxBuddy in making you a Tax Compliant assessee.
ITR Computation: Meaning
To ‘compute’ means to ‘calculate’. Computation of Income is the process of calculating an assessee’s income and determining the applicable tax for the financial year under consideration. Income Tax Return (ITR) Computation is a summary which presents the taxable and exempt incomes, deductions and tax liabilities and tax payment details of an assessee. Moreover, the assessee’s personal information like: name, address, email id, mobile number, date of birth, PAN, aadhaar number, and bank details, are also included in the ITR Computation sheet.
Heads of Income
Chapter IV: Computation of Total Income of the Income Tax Act, 1961, specifies Section 14 and Section 14A for computing the total income of the assessee. To be specific, Section 14 provides the ‘Heads of Income’ whereby the various sources of income of the assessee can be classified under five broad categories. As per Section 14, an assessee’s income will be classified in any of the following categories of income:
Income from Salary: If an assessee is working as an employee during the financial year for which he is filing his ITR, the income earned by him from his employer will be taxed under the head ‘Income from Salary’.
Income from House Property: If an assessee earns income by way of rent from a let out of a property owned by him, such rental income will be taxed under the head ‘Income from House Property’. The let out property may be a residential building, flat, shop, or land attached to it.
Income from Capital Gains: An income earned from the sale of capital assets is taxed under the head ‘Income from Capital Gains’. This head includes not only gains arising from the sale of capital assets, but also losses arising from its transfer.
Income from Profits and Gains from Business and Profession: If an assessee is engaged from any business or profession during the financial year, an income arising from such business or profession is taxed under the head ‘Income from Profits and Gains from Business and Profession’.
Income from Other Sources: This is the residual head of income whereby income that is not chargeable under any of the four heads is taxed under the head ‘Income from Other Sources’. Examples of income taxable under the ‘Income from Other Sources’ are: interest income, income from dividends, winnings from lotteries, income by way of gifts, and so on.
Format of ITR Computation
Below image is a typical format of how an ITR Computation looks like of an assessee:
Content of ITR Computation
A usual ITR Computation sheet would more or less will present the following information of an assessee:
Basic information of Assessee: The basic details of an assessee like name, address, PAN, Aadhaar number, email id, mobile number, financial year, assessment year, type of return, residential status, and bank details, are generally presented under this section.
Sources of Income: The income earned by the assessee through various sources are reflected under this section.
Gross Total Income: The Gross Total Income (GTI) is the sum of income earned by the assessee from all the sources.
Deductions under Chapter VIA: Chapter VIA allows an assessee to claim deductions from total income. However, the assessee can only claim eligible deductions under Chapter VIA that are based on the provisions of the Income Tax Act, 1961.
Total Taxable Income: After subtracting all the eligible deductions from the Gross Total Income, the total taxable income is arrived at, on which tax is payable.
Tax Payable: The tax liability of an assessee is computed in this section. The tax payable is determined based on the applicable tax rates.
Rebate under Section 87A: A rebate is a reduction in the tax burden usually given to assessees having lower taxable income. Note: For F.Y. 2023-2024, a resident individual will be allowed to claim a rebate under New Tax Regime of INR 25,000, if the total income is up to INR 7,00,000 compared to the rebate under old tax regime of INR 12,500 if the total income is up to INR 5,00,000.
Tax After Rebate: The tax payable after rebate is determined by subtracting the amount of rebate from tax payable.
Surcharge: It refers to the additional charge that the assessee must pay on the total tax if their income exceeds a certain threshold. The surcharge percentage is different for different assessees.
Higher Education Cess (HEC): The HEC is collected by the Government to provide and improve the healthcare and education infrastructure of the country.
Gross Tax Payable: Gross tax payable is the total of Tax after Rebate, Surcharge, and Higher Education Cess (HEC). It represents the gross income tax liability of an assessee.
Reliefs under Section 89 to Section 91: The relief under Section 89 is available only to salaried employees for the salary received in arrears, gratuity received, payment for compensation of termination of employment, and likewise. Moreover, Reliefs under Section 90 and 91 are allowed under Income Tax provisions relating to Double Taxation when certain conditions are met.
Tax Payable after Relief: Tax payable refers to the net tax to be paid by the assessee after considering all the Taxes, Cess, Surcharge, and giving effect to Relief.
Interest and Fees under Section 234: Section 234A to Section 234D specifies the interest for the delay in the payment of income tax by the assessee. Section 234F specifies the fees for the delay in the filing of income tax return by the assessee.
Total Tax Payable: The Total Tax Payable is the sum of Tax Payable after Relief and the Interest and Fees as per Section 234.
Refund Due: If an assessee has paid more income tax than what he should have paid in actual, he will become eligible for Income Tax Refund.
Bank Details: This section will include information about the assessee’s bank accounts that were operational during the financial year for which an Income Tax Return (ITR) is being filed. The reason for including Bank Details in ITR Computation is: in case if an assessee has an Income Tax Refund, the same will be credited to the valid bank account as provided by him at the time of ITR filing.
Details of Taxes Paid: The details pertaining to the taxes paid by the assessee in the form of Self-Assessment Tax or Tax Deducted at Source will be reflected under the head details of taxes paid.
Advance Tax: The payment of advance tax is made on an estimated basis of income that an assessee will earn during the financial year. The advance tax is paid for the current financial year.
Tax Deducted at Source (TDS): TDS is a part of income tax which has been deducted by the payer at the time of making certain payments to the recipient. This TDS is treated as tax already paid by the recipient.
Tax Collected at Source (TCS): TCS is a type of tax which is collected by the seller of a specified goods or services and is deposited with the Government. The payer will be able to claim the TCS benefit while determining his Income Tax liability.
Self-Assessment Tax: The tax liability remaining after the payment of Advance Tax, TDS and TCS, is paid in the form of Self-Assessment Tax. It is paid for the previous financial year for which the Income Tax Return is being filed.
Difference between ITR Computation and ITR Form
Often, a layman interprets ITR Computation and ITR Form as one and the same. However, there is a thin line of difference between the two. The following table shows the difference between the ITR Computation and ITR Form:
Importance of ITR Computation
The Income Tax Computation Sheet is more useful than the entire ITR form of an assessee. Here is why you need an ITR Computation:
For Loan Application: Banks often prefer a previous year’s ITR Computation Summary of the loan applicant, along with the acknowledgement of the ITR filed.
For VISA Application: ITR Computation is also useful when applying for a VISA in any foreign country. In a few countries, proof of ITR filing has become a requirement when applying for a VISA. Along with ITR Acknowledgement, ITR Computation has become a mandatory requirement.
Applying for Credit Card: ITR Computation Summary can be submitted while availing the credit card facility from a bank. ITR Computation is useful for banks to determine the sources of income and thereby helps to evaluate the financial capacity of the applicant.
ITR Computation in Excel
ITR Computation can be prepared using Excel by following the below process:
The basic details of the assessee like Name, PAN, address, Aadhaar Number, date of birth, residential status, should be entered.
The financial year, assessment year, and the type of return should be added.
The ITR Computation should begin by listing all of the sources of income, along with the details and amount of income earned from each source.
The details of exemptions should be entered accurately and properly.
Once all the details of income, exemptions, deductions and set offs are entered, the total income is determined by adding and subtracting the respective items.
On the total income, the tax liability of the assessee based on the effective tax rates will be calculated.
The applicable rebate under Section 87A will be subtracted from the gross tax payable.
On the amount of tax after rebate, an applicable surcharge and a 4% Higher Education Cess (HEC) will be added.
The relief under Section 89 to 91 will be considered on the value of tax.
The interests and fees under Section 234 are added to the value after considering relief.
The aggregate tax liability is computed after adding interest and the tax liability.
The taxes already paid in the form of TDS, TCS, advance tax, and self-assessment tax will be subtracted from the aggregate tax liability and the net tax payable is determined.
TaxBuddy’s ITR Computation: Key Highlights
ITR filing is a nightmare for most people, but for Tax Experts, it is a cakewalk. TaxBuddy is one such platform which enables its users to file the Income Tax Return at their convenience. Some key features of TaxBuddy’s ITR filing process is highlighted below:
Simple to use for ITR Computation: The interface of TaxBuddy is very simple whereby the users are prompted with Q&As. Based on the answers of the Q&As, the heads of income is determined and the requirement of any further information is provided. Once all of the information has been gathered, the Tax Expert creates an ITR Computation summary and shares it with the user for review. After receiving final approval from the user, the Tax Expert files the ITR and shares the ITR Form and acknowledgement with the user.
Accurate ITR Computation: The accuracy of ITR Computation work is enhanced because of the digitization of the entire ITR filing process. Moreover, all the information of the ITR computation is provided by the user which itself is first hand information, thus the accuracy of ITR return filing process is further improved.
Secure way of filing ITR: The tax filing is secure. Meaning all the information obtained by the user is kept safely. Moreover, the user is kept in a loop continuously till the time of completion of the filing process.
Assistance in payment of income tax: The TaxBuddy’s ITR Computation provides a step-by-step guide to the user if there is any tax liability that he has to pay before the filing of ITR. Thus, a TaxBuddy’s user will be able to make secure payments on his own.
Expert-driven tax filing: The TaxBuddy’s Expert assistance is available to the users anywhere at any time at the comfort of their home. Not just Indian residents but Non-Resident Indians as well, are provided with the Tax Expertise so as to ensure the compliance with the Tax Laws. Also, read Income Tax for NRI. As a result, TaxBuddy provides ‘peace of mind’ to its users.
Assistance in replying to Income Tax Notices: At TaxBuddy, Expert assistance is not limited to the filing of ITR but also extends beyond that. The Experts assists users in case they receive any Income Tax Notices allowing them to become a Tax Compliant assessee at ease.
Tax Planning by Tax Experts: ITR filing with TaxBuddy is more than just ensuring that assessees are tax compliant. With TaxBuddy, users can plan their taxes well in advance and reap the most benefits within the purview of Income Tax laws. The TaxBuddy’s Tax Experts assist users in tax planning and helping them save their maximum taxes.
The signature format of TaxBuddy’s ITR Computation is presented below:
FAQs:
Q1. Is there any difference between ITR Form and ITR Computation sheet?
ITR Form is prepared at the time of filing the Income Tax Return (ITR) with the Income Tax Department. ITR Computation is prepared as per the requirement of the assessee.
Q2. Why is ITR Computation so popular?
Banks and other financial institutions prefer ITR Computation over the entire ITR Form because ITR Computation is a summary of the whole ITR Form.. As a result, it is an important document in providing evidence of the assessee’s sources of income and tax liabilities.
Q3. Can an ITR Computation be modified?
ITR Computation is usually prepared through various options available with the assessee namely: using Microsoft Excel, using Softwares for ITR filing, Tax Return Preparer, and so on. It can be revised by the assessee or by the tax preparer himself. However, ITR Computation should always align with the ITR Form for any relevant financial year.
Q4. Can an assessee prepare ITR Computation on his own?
Yes. ITR Computation is generally prepared to ease the users of the ITR Forms. It provides a summarized information of the sources of income and the tax liabilities of the assessee. As a result, the assessee can prepare an ITR Computation at his own convenience.
Q5. What are the prerequisites for preparing an error-free ITR Computation?
To prepare an error-free ITR Computation, following precautions should be taken:
Assessee should provide correct and accurate information while preparing his ITR Computation.
Basic details of the assessee should be entered correctly in the ITR Computation.
The information of all the sources of income should be entered in the ITR Computation accurately.
The information related to deductions from taxable income and exemptions of income should be entered correctly.
The applicable tax rates and other provisions should be applied correctly to determine the tax liability or refund of income tax.
Q6. What are the benefits of preparing ITR Computation in Excel?
Preparing an ITR Computation in Excel has the following benefits:
It enhances the arithmetical accuracy of tax calculations.
Excel is a tool that aids its users to create, edit, view, and share the data quickly and efficiently.
Using Excel functions like formula and format, the assessee can prepare ITR Computation with minimum or no error. Excel can be customized as per the convenience and need of the assessee.
There is no limit in presenting the information in Excel. Moreover, by using appropriate features and functions of Excel, all the relevant information of an assessee can be presented in a reader-friendly manner.
Q7. What is the meaning of ‘Basic Exemption Limit’ under Income Tax?
The Income Tax Act, 1961 requires all assessees to pay income tax on income above a certain threshold, known as ‘Basic Exemption Limit’. For instance, the basic exemption limit for an individual for the F.Y. 2023-2024 is INR 2,50,000; which means if an individual earns an income above INR 2,50,000, he will be liable to pay income tax as per the applicable rates for the said financial year and also would be liable to file the Income Tax Return (ITR).
Q8. What is the meaning of Total Income of an assessee?
Total Income of an assessee is calculated by subtracting all the applicable deductions from the gross total income. Income Tax is computed on the total income of an assessee.
Q9. What are the consequences of an error in the Income Tax Computation?
Any incorrect or inaccurate information will lead to subsequent errors in the ITR Form, and thereby it will lead to error in tax computation and liabilities. An ITR Computation is taken as a base in preparing the ITR Form at the time of filing the ITR with the Income Tax Department.
Q10. Can an assessee have multiple ITR Computations for different sources of income for a single financial year?
No. For a particular financial year, there will be only one ITR Computation of an assessee. Multiple sources of income are reflected in the single ITR rather than preparing multiple ITRs. The ITRs are prepared financial year-wise rather than income-wise.
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