Return of income is nothing but a proof of income earned. Return is merely a form which specifies the details to be filled in by the applicant filing income tax return. Income tax authorities allow you to self assess your income and accordingly pay taxes. Return filing is both mandatory and voluntary. Law puts a mandatory requirement when it falls within its definition. However any person not having any taxable income can still file his return.
Many people do not file their returns due to the following misconception:-
- Tax at source has been deducted by my employer on my salary and hence I don’t need to file my income tax returns!
- Government has stated that individuals who earn below Rs 5 lakh income need not file income tax returns!
- Filing of income tax return is time consuming, why waste time!
- Why worry now when deadline for filing tax return is far away.
- I have anyway missed the deadline for filing tax returns (July 31), so filing tax return is irrelevant now.
Many people tend to believe that his/her income tax return is a pin in a haystack for the income tax authorities and hence not declaring income or understating income may well be a better option to reduce tax liability. Deliberately hiding your income from the income tax authorities, to reduce your tax liability, amounts to tax evasion.
Any person who not only has his tax deducted at source in the form of TDS (Tax deducted at source), has to file return of income also so that he is saved from the proceedings and assessments of Income escaping assessments and Best Judgement Assessments and the penalty for non filing of return etc.
Liability of Filing Income Tax Return arises when your income crosses/exceeds the basic exemption limit even if it means that on account of you investment planning, your tax obligation may be nil. So for FY 2011-12, filing of tax returns is essential if-
- Individuals have taxable income exceeding Rs.180, 000 p.a.
- Women have taxable income exceeding Rs.190, 000 p.a.
- Senior Citizens have taxable income exceeding Rs.250, 000 p.a.
Filing Income Tax Return is important as Income tax papers are an important document. It is a proof of your income and other important details such as PAN card, address among other things are mentioned. Filing returns has advantages and hence it may make sense to file returns even if youâ€™re not needed to because it is an important document that has a lot of weightage.
The following benefits are available after filing of income tax returns:-
1.Â Tax Refunds can be claimed only when income tax return is filed. On the basis of the tax return filed, refund is paid at an interest of 8% p.a. with retrospective effect from April 1 of the year. If you have not filed your return, but TDS has been deducted in excess by your company, unless you file your income tax return, you will not get a refund and hence you may end up losing money.
2.Â Filing accurate returns saves you from the proceedings and assessments of Income by the income tax officials. If you come under the tax officialâ€™s scanner, then you may end up having to pay tax with interest on the tax amount payable and penalty too.
3.Â Non filing of return of income would attract Penalty of Rs 5,000. If you file your income tax return it would not attract the same.
4.Â A person having losses from his business, wants to carry forward his loss to the next year has to file return of income so that his loss is carried forward to the next year and adjusted from his income of the next year.
5.Â Income tax return is essential for making any investment and goes to prove that you have a valid source of income to make such investment.
Thus, Filing Income Tax Return is important as well as beneficial too. But rather than opting for traditional filing of return go for e-filing for faster processing of Income Tax Return and quick issue of Tax refunds.