The many benefits of filing your income tax returns on time
April, 10th 2017
The time for filing income tax returns is once again upon us. Most people regard this task as a burden. But filing returns will in the future help you account for certain incomes that may not be subjected to tax – stocks investments of over one year, for example. Many are not even aware that those earning income above a certain threshold, compulsorily need to file returns, even though their taxes are paid via tax deduction at source or TDS.
Every year, the income tax department takes steps to make the process of filing return simpler and to encourage more people to participate in this annual exercise. Some of the measures it has already taken include simplified tax return forms, allowing paperless filing of returns, providing pre-filled tax return forms, and so on.
The authorities have introduced a one-page ITR Form-1 (Sahaj). It’s meant for individuals with income up to Rs 50 lakh and owningone house property. Assets and liabilities section has been eliminated from the ITR-1 (Sahaj), as an individual with income over Rs 50 lakh cannot use it. ITR forms like ITR-2, ITR-2A and ITR-3 have been merged into a single ITR-2. ITR-4 and ITR-4S (Sugam) have been renumbered as ITR-3 and ITR-4 (Sugam), respectively.
From this year onwards, it is mandatory to provide the 12-digit Aadhaar number. If the assessee doesn’t have an Aadhaar card, then he needs to provide the enrolment ID. Also, an individual needs to disclose the cash deposited during demonetisation (between November 9 and December 30 last year) if the total amount was more than Rs 2 lakh.
Mandatory for many
According to income tax laws, filing return is mandatory for an individual who earns above the basic exemption limit. Also, a person who qualifies as ordinarily resident in India under income tax laws and fulfils any of the following two conditions must file his income tax return. One, he holds an asset, either as a beneficial owner or otherwise, including a financial interest in any entity located outside India, or has signing authority in any account located outside India. Two, he is a beneficiary of an asset, including any financial interest, in any entity located outside India.
Besides the above, an individual will also be required to file return of income if he or she fulfils any of these three conditions.
One, he wishes to carry forward a loss or wants to claim a refund. Two, he has long-term capital gains (which are exempt from taxation) from the sale of equity shares of a company, or sale of units of equity-oriented mutual funds, or sale of units of a business trust. Three, he has received income derived from property held under trust, wholly or partly for charitable or religious purposes.
Not only is filing your tax return a requirement under the tax laws, you also stand to benefit in many ways from doing so. If you apply for a housing, education or vehicle loan or for the registration of an immovable property, your application is likely to be processed much more easily and speedily if you have been filing your tax returns. It is also a mandatory prerequisite for the processing of your visa. Banks may not issue a credit card to you if you have not been filing your returns regularly. You can also use your tax returns as standard proof of income wherever required (say, when applying for a home loan). By filing your returns regularly, you also create a track record with the income tax department. Finally, by filing your tax returns and paying taxes regularly, you contribute your bit to the national income.
Consequences of not filing can be dire
If you don’t comply with the requirement of filing your tax return, you could be penalised. Union Budget 2017 has even proposed a fee for the late filing of tax return. If a person files a tax return after the due date but on or before December 31 of the assessment year, the fee will be Rs 5,000. In any other case, the fee rises to Rs 10,000. For those whose total income does not exceed Rs 5 lakh, the fee has been limited to Rs 1,000. Hence, you should start collating all the necessary data required for filing tax return and fulfil this obligation by the due date, which is usually July 31 following the end of the tax year.
Remember that with the advancement of digital technology, big data and automation, the income tax department’s ability to catch those who try to avoid paying tax has increased manifold. Different sources of information are linked to your identification number. Using them the IT department can track the myriad transactions you carry out during the year. It can also keep a tab on different sources of income that an individual has and check whether he reports all of them correctly while filing his tax return. If it notices dicrepancies, it has the authority to issue a show cause notice.
Keeping all this in mind, do file your income tax return before the due date. Not only will you sleep better at night, you will also contribute to a cleaner and more transparent economy.
To encourage more people to pay their taxes, thank them for their contribution, and to acquire a more people-friendly image, the income tax department has started to award certificates to tax filers. You could receive a platinum, gold, silver or bronze certificate depending on the amount of tax paid and whether your return was filed on time.