The majority of individual taxpayers either file their own ITRs or are interested in learning more about how ITRs are filed. Since income tax is a complex law, an ordinary tax payer is bound to commit certain mistakes while filing the ITR Forms. As we know, In this year the government has extended the deadline to file an income tax return (ITR) for the FY 2020-21 by three months i.e., the date has been extended from September 30, 2021 to December 31, 2021. In this article, We are going to discuss the same in detail -
In simple terms, your Income Tax Return is a list of all of your income from various sources during a financial year, the taxes that you have already paid, and any refunds that are simply due. It is important to file your income tax return because it discloses your income. The ITR is regarded as legal proof of your income. Any citizen under the age of 60 with a taxable income of more than 2.5 lakhs is required to file an ITR under the Income Tax Act. Remember that an individual's basic exemption limit is determined by the tax regime he or she chooses in FY 2020-21. If a person chooses the new tax regime, his or her basic exemption limit will be Rs 2.5 lakh, regardless of his/her age. Under the new tax regime, senior citizens are not entitled to a higher exemption limit. But, If an individual continues to pay taxes under the old or current regime, the basic tax exemption income limit will be determined by his or her age. The basic exemption limit under the old tax regime for FY 2020-21 is as follows:
|Age of a person
|Basic Exemption limit
|60 years of age & Below
|Between 60 to 80 years of age
|80 years & Above
1) ITR is required when you apply for loans - As we discussed above that ITR is not just a document but it is also a proof for our yearly earnings. So in case if you are planning to purchase a house in near future by availing a bank loan, it is very important to file your ITR. Your loan may also get rejected on that terms. Filing a loan application even if you have no taxable income increases your chances of getting approved for a loan when compared to those who earn the same amount but do not file an income tax return.
2) ITR is required to claim any tax deductions - Even if you do not have a tax liability, you must file an income tax return under various sections of the Income Tax Act in order to receive a tax benefit .i.e., you can avail the benefit of tax deduction if you're gross income is higher than Rs. 2,50,000 & if you are eligible for certain deductions such as 80C, 80D & etc in that financial respective financial year.
3) ITR is important if you own any foreign assets - If you own any foreign assets as an Indian citizen, you must file an ITR as required by law. This includes bank accounts in other countries aswell. Failing to file an ITR can result in a fine and is also considered an economic offense.
4) One can adjust any capital gains or losses - Many of us put our money into the stock market. As a result, when you invest, you either make a profit or lose money. If a capital loss occurs in any given year, that loss can be carried forward for up to eight years in order to offset capital losses in the future. This benefit is only available if you file your taxes on a regular basis.
5) To get tax refunds - For most salaried people, income tax is deducted at source, and then the salary is credited to the bank account. When you file your tax return, you must include all of your earnings, expenses, and deductions. If the total amount of tax paid exceeds the amount of tax due, the difference will be credited to your bank account. This is a huge advantage of filing a tax return, because you can only get a refund if you file a tax return.
6) Helps in avoiding a penalty - Individuals who do not file tax returns face a penalty of Rs 10,000 under section 234F of the Income Tax Act. As a result, if you file your tax returns on a regular basis and on time, you can easily avoid the penalty. As a result, we should avoid penalties and reap the benefits of timely filing of tax returns.
7) Assists in obtaining visas for a number of different of developed countries - Countries such as the United States, the United Kingdom, and many others in Europe have made it mandatory to submit acknowledged tax returns as proof of income. They want to make sure you have enough money and business in India to come back. When you want to send your children abroad to study, you'll need to file tax returns. To obtain a Student Visa for your children, you must present valid tax returns as a sponsor.
If you have a pending tax liability, you will be charged penalty interest if you file late. So keeping the repercussions in mind regardless of whether one's salary is taxable or not, one should always file an income tax return.
Lastly to sum this up, It is unethical to fail to file a tax return when you are required to do so. However, if you want to get the most out of your income tax return, keeping an eye on the tips and making plans for yourself can be beneficial.
- TEAM IFA