Introduction
The process through which a taxpayer must
record all of his income generated within a fiscal year is known as ITR filing.
Individuals can complete their return filing through the official portal of the
Income Tax Department. ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7 are
the seven different forms that it has notified with.
Is
filing an income tax return necessary?
If your income exceeds the basic exemption
limit, it is required that you file income tax returns under Indian tax
regulations. Taxpayers are given advance notice of the income tax rate. In
addition to incurring late filing fines, filing taxes late will reduce your
ability to obtain a loan or a travel visa.
Importance
of Filing ITR
Following is the importance of ITR filing –
Making Tax Filings Shows That You’re Accountable
People who earn a specific amount of money
annually must file a tax return by the deadline required by the government. The
person is accountable for paying the tax as computed. Unpaid taxes will result
in penalties from the Income Tax Department. People who earn less than the
cutoff point for allowable income might voluntarily file returns.
Making returns shows that you are accountable.
Because the tax agency reports their revenue after deducting any necessary taxes,
it also makes it easier for persons and enterprises to engage in subsequent
transactions.
In
certain situations, filing returns is required.
Even though you don’t have to file taxes
because of your modest income, it may still be a good idea to do so
voluntarily. When registering immovable property, the majority of states need
verification in the form of the previous three years’ worth of tax returns. As
a result, noting the transaction when returns are submitted is easier.
A copy of your return may be required by your loan or credit card provider.
If you want to qualify for a home loan, it is a good idea to maintain a regular record of submitting returns because the lender will likely insist on it. You may even wish to file your spouse’s tax returns if you want to apply for a loan as a co-borrower.
Similar to this, credit card providers could
need proof of return prior to providing a card. Financial institutions may also
request your returns from the preceding few years before doing business with
you. The government might impose a requirement on them to do so, indirectly
incentivizing them to file returns on a frequent basis even when it is not
required.
If you
want to make a claim for an adjustment for past losses, you must submit a
return.
There are various advantages to submitting
forms on time, regardless of whether you earn the necessary revenue to do so.
Significant losses suffered by an individual or a corporation, such as
speculative and non-speculative, short-term and long-term capital losses, and
several other forms of losses, cannot be proven for exemption in subsequent
years when determining taxes.
As a result, it is best to file returns
regularly since you never know when you might need to request a reduction for
prior losses.
When it is necessary If your income is higher than the baseline exemption limit
If a person’s income exceeds the maximum exemption amount, they must file a return. The maximum exemption amount per person is:
Rs. 2.5 lakh for a single person;
Rs. 3 lakh for local senior citizens (60 years
of age or older but under 80 years of age); and Rs. 5 lakh for a super old
citizen who lives there (age 80 years or more).
The following exemptions and deductions that are available to an individual are not included in the calculation of this maximum exemption limit:
A capital gains exemption granted under Sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB.
Section 80C to 80U deductions.
As an illustration, Mr. A (age 50) sold a home and made a long-term capital gain of Rs. 10 lakh. He invested those capital gains and sought Section 54 exemption. In this instance, Mr. A’s total income before claiming exemption was Rs. 10 lakh, which is more than the permitted exemption amount. As a result, submitting a return is required.
Both residents and non-residents must abide by this requirement.
If you own property outside of India
An individual is required to provide a return of income if, possesses, as a beneficiary or otherwise, any asset (including any financial stake in any entity) that is situated outside of India; is a signatory on any account that is not in India; or possesses any asset (including a financial stake in any organization) that is located outside of India.
Individuals who are residents or ordinary residents of India are subject to this law.
If you fund a bank account with more than Rs 1 crore
If a person deposited Rs 1 crore or more in
one or more current accounts held with a bank during the previous year, they
are required to file their return.
The deposit made in the current account kept
with a post office has not been mentioned. A person may not be required to
provide his income if he deposits more than Rs 1 crore into a current account
with a post office and his income is below the maximum exemption limit.
If you spend Rs. 2 lakh on travel abroad
If a person spent more than Rs 2 lakh during
the previous year on travel abroad, whether for themselves or for someone else,
they are required to file their return.
If you use Rs. 1 lakh of electricity
If a person spent more than Rs 1 lakh on energy over the preceding year, they are required to file their return.
If your company generates more than Rs 60 lakh in revenue
A person is required to file their return if
the business’s annual gross receipts, sales, or turnover exceeds Rs 60 lakh.
If annual gross income from a profession exceeds Rs.10 lakh
If a person’s total gross income from their
occupation during the previous year exceeded Rs 10 lakh, they are required to
file their return.
If TDS and TCS total more than Rs 25,000
If the total amount of tax deducted at source
(TDS) and tax collected at source (TCS) in the individual’s case during the
previous year was Rs 25,000 or more, the individual (age less than 60 years) is
required to file their return.
If TDS and TCS total at least Rs 50,000
In the case of a resident senior citizen,
defined as someone who was 60 years of age or older at any point during the
applicable prior year, the threshold limit of Rs 25,000 will be equivalent to
Rs 50,000.
If the deposit is Rs. 50 lakh or more in a savings bank account.
If the total amount deposited in one or more
savings bank accounts during the previous year was Rs. 50 lakh or more, the
individual is required to file their return.
ITR Filing Late Fee Penalty
Huge penalties are imposed on the taxpayer if
the returns are not filed by the deadline. If the returns are not filed, the
person may experience extra hassles and repercussions in addition to penalties.
Individuals may be subject to fines ranging from Rs. 1,000 to Rs. 10,000
depending on when their returns are filed beyond the deadline.
Conclusion
In conclusion, both you and the nation gain
from filing your income tax return. Your taxes are used by the government to
fund the nation’s infrastructure as well as other services like defence and
healthcare. Additionally, if more individuals register, the government can
spend more money and provide us a better country.