Why You Must File Your Return of Income within Stipulated Time Frame:-
July 31st is fast approaching and once again it’s time to file Income Tax Returns. On and around the due date, the I-T website becomes the country’s most visited website; its servers handle thousands of users per minute, which could possibly cause the website to slow down considerably (which is a good reason why you should ideally file returns much ahead of the due date!). While most of us know this, in this article we will highlight the Who’s and Why’s of going through the annual income tax ritual, before going on to a few important things to keep in mind while filing returns.
Who needs to file tax returns?
Quite a lot of people have the misconception that as long as they have no tax dues, i.e. if TDS has been applied on their salary or other income, or if they do not have any refunds to claim, then they do not need to file returns. But that is not the case. It’s beneficial to file returns regardless of the income level or tax dues/payment done. We will see why.
Why file tax returns?
Three good reasons to file income tax returns:
1.Sometimes, more tax gets deducted from your salary/income than what you need to pay. This can happen when your tax savings are not fully disclosed to the HR on time, or if you have made donations eligible for tax deductions, or if you have incurred some expense permitted for tax deduction.
Now when you file returns, you can claim such amount as refund. So it goes without saying that unless returns are filed, refunds cannot be claimed (and we would end up making voluntary donations to the taxman!).
2.These days, I-T returns are a mandatory part of documentation in many visa processes, especially those of US, the UK, Canada or Europe. And we are sure nobody would want to spoil an international family vacation or watching the much-awaited world cup tournament at an international venue for a reason like not having filed their I-T returns!
3.Do you think you might need to borrow money from the bank any time in the next few years? Most lenders these days ask you for three years’ I-T returns.
Now we come to a couple of not-to-miss things while filing tax returns.
Three things to keep in mind while filing income tax returns:
1.Do not miss the deadline
More often than not, the July 31st deadline gets extended by up to one or two months. But it is better not to take the extension for granted because if the returns are not filed on time, there could be negative implications:a.If there are any losses to be carried forward to the following assessment years, then such losses can only be carried forward if the returns are filed by the due date (except in the case of house property).b.After filing the return, if you discover errors in your return submission, then there is no chance of revision unless the return was filed by the due date.c.If the return is not filed until the end of the assessment year, the tax officer can impose a penalty of up to Rs.5,000. If you owe taxes and still don’t file returns, then you may be liable to pay additional interest, along with other penalties for avoiding taxes.Besides these major reasons, you should also note that any tax refund which is receivable by you will be delayed in case you have not filed the returns on time. Refunds can usually be expected anytime between two months to two years of being acknowledged.
2.File returns online
Ever since I-T returns filing was offered online, a lot of people have switched to this mode. The I-T Returns filing portal is quite simple and easy to use for laypersons. There are mandatory checks to ensure mistakes are minimized. Apparent mistakes are pointed out so you can correct them before submitting your return. In addition, I-T returns with refund claim cannot be filed on paper anymore. Any income tax return with a refund claim must be filed online. Also, tax return with gross total income in excess of Rs.5 lakh must also be filed online. After you submit your I-T return, the same has to be verified, without which a return is not considered as filed. Verification can also be done in a paperless manner on the I-T website, or by generating an OTP via Aadhaar linkage, or through net banking. Ensure you use one of these methods to verify the tax return and complete the e-filing process.
3.Report all income
Often, people tend to miss out reporting incomes like interest on deposits. These need to be disclosed and the relevant tax is supposed to be paid if applicable. For example, if TDS is applied at 10% on interest, and your income tax slab is higher, then you need to pay the additional tax.We wish you all a stress-free tax returns filing season. Consult a professional in case of any queries.
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CA Ayush Agrawal