With budget presentation done, it is high time for us to understand the importance of filing income tax return.
Every person earning an income above the basic exemption limit is liable to pay Income Tax, no matter what the nature of income is! The income tax act applies to every salaried person, businessmen, landlords, real estate brokers, commission agents, and even an ordinary individual without any recurring income. Wonder how? He might at some point sell off his personal assets or happen to win a lottery or a game, or even get a gift or treasure.
Important Dates for Filing Income Tax
- Assessee having a turnover of more than 1 Crore (or auditable under any other Act) – September 30
- Others – July 31
Types of Income that attract income tax
- Salary, Wages, Pension, Other perquisites from employer
- Business Income
- Interest, dividends, or other income from investments
- Sale of various assets from property to shares
- Winnings from races, games, lotteries
- Discounts, bonuses etc on certain deposits
- Any other revenue including cancelled debts
What if you don’t file Income Tax returns?
If you do not furnish your IT Returns on the said dates, then you are liable for the interests and Penalties imposed by the income tax department.
- Late fee u/s 234 F amounting to 10,000
- Interest u/s 234 A at 1% per month
- Penalty for underreporting of income u/s 270 A, The penalty in such a case would be a sum equivalent to 50% of the amount of tax payable on the underreported income.
- Timely filing helps in bank loan documentation as bank insists to submit the Income Tax Returns of preceding years to ascertain financial stability.
- Unless you file the income tax return within due date you cannot recompense the losses to the assessment years (with certain exceptions).
- Banks can reject the Credit Card application if you did not file an ITR.
- Some embassies inquire for past ITRs for a hassle-free visa application procedure.
- If an insurance policy presumes you are a tax evader, buying an insurance policy with a higher cover will be hard.
- If one plans to fill a Government tender, ITRs of preceding 5 yrs have to be submitted.
- Claiming of Refund of TDS on some investments made in the name of an individual can be processed only if IT return is filed.
- Your taxes are being used for the development of the country, hence you are obstructing nation-building when you evade tax.
Moreover, there is a myth among common people that if TDS is deducted on behalf of us, we don’t have to file IT returns.
It is not true, suppose an NRI residing abroad has a bank account in India, and the Indian Bank on paying bank interest will be deducting TDS u/s 195. Mere deduction of TDS wont make you out of the liability to file IT returns, as Returns is based on Gross Total Income. As far as an NRI is concerned, he can claim TDS refund if his Indian income does not exceed 250000. So it is mandatory to file IT returns stating your income details.
Since Income Tax is a mandatory and often a complex filing cum payment system, the best way is to consult a Tax Return Preparer, or ideally a Chartered Accountant at the earliest. It is important to ensure that you are not barred from taking the available exemptions, and you aren’t made to pay unwanted interests and penalties.