What Is an Income Tax Return?
An income tax return is nothing but a recorded document that tells the government about the taxpayer’s income. Suppose you don’t tell the government, you are likely to face penalties & problems afterward as it can be considered tax evasion. Thus, all the Individuals who come under the tax bracket must regularly file income tax returns. The Income Tax Department keeps reminding its taxpayers, from time to time, of the requirement to file their tax returns on time. Suppose an individual forgets to file his/her ITR, he/she can incur a penalty of up to ₹10,000. Also, any delay or postponement in the filing of income tax returns can also make you pay interest on the taxable amount you owe the government.
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Filing Income Tax Returns – Is It Compulsory?
The answer is Yes. All taxpayers should file their income tax returns on time and thus stay compliant. Those who fail to do so will incur penalties. It may hamper your chances of procuring a loan, a travel visa, or property registration. According to the Income Tax Act, the following entities must compulsorily file tax returns in India:
- People with a total income above ₹2.5 lakhs.
- Senior citizens with a total income above ₹3 lakhs.
- Super senior citizens with a total income above ₹5 lakhs.
- Companies and firms should file tax returns irrespective of their returns.
- Individuals who are seeking an income tax refund or who are carrying forward a loss under income head.
- Individuals residing in India who have either an asset or financial interest in some entity which is located outside India.
- Indian residents & signifying authorities in case of a foreign account.
- Those individuals who take over income from assets or property that are under one or several of the following: political party, educational institution, news agency, research association, infrastructure debt fund, a hospital, etc.
- Global companies that are doing business in India.
- Non-resident Indians who have made more than ₹2.5 lakh in India.
Why Should People File Their Income Tax Returns?
It becomes easier to acquire loans from financial institutions & banks.
It is important to remain compliant and on the correct side of the law.
It enables individuals to acquire tax refunds, as and when it is required.
It serves both the purposes, of an income and also addresses proof
It brings about fast visa processing & approval
It brings about the carry forward of losses
It enables individuals & companies to prevent penalties and pay interest on their tax liability
What Happens If You Don’t File Taxes?
These are the things that will happen if you do not file your income tax returns on time:
What Are The Consequences of Filing Late ITR?
The Payment Of The Penalty Fees
A penalty is a three-layer system that is there to discourage filing income tax returns within the prescribed date. In case the return is filed after the due date, then fees payable will be ₹5,000, otherwise, it will be ₹10,000. But for taxpayers whose annual income is under ₹5,00,000, the fees payable cannot be above ₹1,000.
Lesser Time for Updating Your Tax Returns
Suppose, you commit a mistake while filing Income Tax return, you should follow some rules to make the required changes. In the earlier times, taxpayers had the option of a 2-year window to review and resubmit erroneous ITRs. But the government recently lessened this window to only one year from the end of the financial year. So, the earlier you file your returns, the better & longer is your window for correcting your returns and changing mistakes, if any.
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Tax Amount Interest
If an individual or company doesn’t pay their income tax return on time, they have to pay 1% per month interest until they file their ITRs. The said interest is to be paid on the tax payable after reducing things like tax deducted at source, tax collected at source, advance tax, and other tax credits available.
Losses Not To Be Carried Forward
In case the tax return is not filed until the due date, the taxpayer won’t be able to carry forward any loss under ‘profits and gains of business or profession’ or ‘capital gains’.
About The Delay in the Method of Return of Income
When the return is filed, it is processed and checked twice by the Income Tax department’s central processing centre in Bengaluru. Only after it is verified if the liability or refund of the taxpayer gets defined. So, in case the taxpayer is claiming a refund, the late filing of the tax return may cause a postponed receipt of the tax refund.