Who Should File Income Tax Returns & When ?
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Updated date : 10 January 2020
Filing Income Tax Return is mandatory for those whose income is above the taxable limit. In order to avoid any last minute difficulties, it is very important for taxpayer individuals to calculate their respective tax condition and initiate the process of income tax return.
Before you start filing your tax return it is very imperative to know who should actually file a tax return.
Any salaried individual is compliant to file an income tax return in case his/her gross taxable income surpasses the maximum amount in which the tax is not chargeable during the fixed financial year. For the residential and non-residential individual, the total income up to Rs2.5lakh is not taxable. For senior citizen individuals more than 60 years of age up to Rs3lakh of total income is not taxable and for super citizen residents above 80 years of age up to Rs5lakh of total income is not taxable. In case, the individual owns an overseas account then they may also have to file tax return irrespective of the income.
Although, tax-paying can seem to be a herculean task for most of the individuals it has a lot of advantages.
Benefits of Filing Income Tax Return
- First and foremost it undoubtedly makes you a responsible citizen of the country.
- Filing your tax return regularly can increase the chances of availing a suitable home loan in case you apply for one in future.
- Many credit card companies ask for the proof of income tax return prior issuing the card.
- As the tax department of the country records all the income, it is easier for salaried individuals to take the loan and fulfill other financial goals with minimum complications.
- Income tax return is also very compulsory if the salaried individual wants to adjust claim against the pass losses. Filing tax return is also beneficial in case someone wants to file the revised return, as revised return can only be filed if the individual has filed the original return.
It is wise to file income tax even if the income ranges below the taxable income. Discussed below are some reasons why a person should consider filling ITR.
ITR Help to Know Your Exemption Limit- In every financial year, the limit to which income is taxable is updated by the finance minister of the country. It is important to keep an eye on whether your income is eligible for tax exemption or not.
Why should you File your Returns?
Filing income tax return has a plethora of benefits. Irrespective of your income is below the exempted line or not it is important for you to file income tax. Moreover, it is always wise to file ITR for non-taxable income.
Here are 5 Perks to File ITR
- You can Adjust your Capital Gains and Losses- Filing ITR can be beneficial for those who invest in the equity market and buys or sells shares regularly. With the help of income tax return, one can adjust their short-term losses against the capital gains. Moreover, the adjustment made can be carried further for eight years when you file income tax return for the respective year.
- ITR is Required to Claim Any Tax Refunds- The tax deducted can only be refunded if the taxpayer submits the income tax return for the respective year. After filing the income tax return you can claim the desired tax exemption on any TDS or payment of rent for NRIs or TDS deduction on fixed deposits by banks. One can file online tax refunds once the income tax return is filed for the respective year.
- ITR is Required When you Apply for Loans- Income tax return is not just a financial document but it is also a proof of your yearly earnings. So, in case you want to approach for loans from any bank then you are required to submit the copy of your ITR to bank and NBFCs. Filing return regardless of having no taxable income will enhance your chance of getting an approval of your loan as compared to those who have same earning but do not file income tax return.
- ITR is Required to Claim any Tax Exemption- Income tax exemption up to Rs2.5lakh is applicable on the gross income. So, in case the income is higher than Rs2.5lakh and you are looking for various tax deductions to bring your income below that level then it is important to file income tax returns. Under different sections of Income Tax Act, it is mandatory to file income tax return in order to avail tax benefit even if you don’t have the tax liability.
- ITR is Compulsory if you Own Foreign Assets- As a citizen of India if you own any foreign assets then you are bound to file ITR as per law. This includes overseas bank account. In case you fail to file ITR then it can possibly lead to the fine and is also considered to be an economical offense.
The income tax return forms applicable to individuals are available in 4 different categories.
ITR-1- This form is applicable to the salaried individuals, pensioners, income from one house property or other sources than the lottery with no losses to be passed onward and no foreign tax relief to be claimed.
ITR-2- Income Tax Return form 2 is applicable for those who do not have any income from business or proprietary firms.
ITR-3- This form is applicable for business owners and professionals and individuals who are involved in a projected business.
ITR-4- This form is applicable for individuals who have income assessed on a reasonable basis.
As compared to the earlier process, nowadays, the online filing of income tax return has become extremely easy and hassle-free. While filing the ITR online you are not allowed to upload any document and all the income-related documents are retained in support of claims of exemption, income disclosed, etc.
Failing to file returns could result in legal implications for the individuals, especially if they file a revised return in future. As per the Income Tax Act, non-filing of returns can lead to penalty amount of about Rs 5,000. Moreover, filing return can result in loss of interest refund. In case you have pending tax liability penal interest is applicable for the delayed filing. So keeping the repercussions in mind one should always file an income tax return irrespective of their salary is taxable or not.
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