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Why you should file your Income Tax Return (ITR)?
Have you ever wondered how the highways, bridges, railways, government schools, and hospitals get built? Who pays for them? If you are unsure of the answer, it is us the taxpayers who pay for these various welfare schemes. Income tax is one of the many taxes that the government collects from the public. It refers to a type of tax that governments impose on income generated by businesses and individuals, as per the Income Tax laws. And the revenue thus generated from ITR filing is used to build and grow our nation. Put simply, the taxes that you pay, including Income Tax, goes towards government expenditure. This expenditure could be Recurring Expenses (like salaries paid to government servants) and Non-Recurring expenses (like infrastructure projects). The government declares all its expenses and income in the Annual Union Budget. Think of it as the government’s Profit and Loss statement.
Paying taxes on your hard-earned money could be upsetting but it is how we contribute to the nation. Income tax is filed with the income tax department by way of an ITR. Income Tax Return or ITR is a tax return form used by taxpayers to report their income and assets to the Indian Income Tax Department. This helps you and others enjoy services like free checkups at government hospitals or benefit from subsidies on energy, agriculture, etc. Rather than thinking of ITR filing as cumbersome and inconvenient, think of it as a nation-building exercise.
What is Income Tax Return or ITR?
An Income tax return (ITR) is a form used to file information about your income and tax to the Income Tax Department. A citizen of India has to pay taxes on his/her global income. The income can come from sources like salary, business profits, capital gains, interests and dividends, and income from house property, among others. It is mandatory to file your ITR if your income is more than the basic exemption limit. According to income tax laws, filing of Income Tax Return is mandatory for some and voluntary for others. However, it is highly recommended as income tax return filing comes with a host of benefits that we shall discuss further on.
Who Should File an ITR?
Every citizen of India has to pay tax on their income to the Government of India as per the Income tax rules and regulations. The following list of individuals and Non-Individuals are required to file ITR. Non-individual entities must mandatorily file their ITR online, also known as Income Tax e-Filing.
Individual Entities | Non-Individual Entities |
---|---|
Trust | |
Resident Individual | Hindu Undivided Family (HUF) |
Non-Resident Indian | Limited Liability Partnership (LLP) |
Association of Persons(AOP)/ Body of Individuals (BOI) | |
Domestic Company | |
Foreign Company |
There are separate forms for ITR filing for both individual and non-individual entities.
What are the different ways of filing an ITR?
You can file your ITR either online or offline. The last date for filing the same is 31st July of every year. Never wait until the last day to hurriedly perform this important exercise.
Offline ITR: Here’s the process to be followed if you wish to manually file the ITR.
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Fill up the physical ITR form and submit it to the Income Tax Office in your jurisdiction.
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Upon submission, you shall receive a numbered and duly stamped acknowledgment slip.
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Offline filing is permissible only if the income is less than 5 lacs, the income should not be generated in a foreign country and no refund is to be claimed.
Online ITR or E-Filing: If you wish to file ITR online, there are two ways- Fully Online and Partially online.
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Fully Online: Go to the Income Tax website, and create an ID. Log in with the user Id and password, select the appropriate form and fill out the required information.
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Partially Online: Firstly, download the relevant ITR form and complete it. You then have to log in to the IT website with your ID and password and upload the completed form Whether online or offline, the choice completely depends on you.
Why Should you File your ITR?
Unless you do not cross the exemption bracket, you are mandatorily required to file Income Tax Return. However, every taxpayer should file his/her ITR. The following are the reasons to file your ITR.
Benefits of Filing your ITR on Time
Apart from the penal and prosecution consequences of non-filing of ITR, the benefits of doing the same are multifold.
Filing Income Tax is our moral duty as responsible citizens of this country, apart from the many financial and non-financial benefits it entails. And it is a small part that we all play in making our country bigger and better.
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Contribution to the nation: Your tax contribution is one of the biggest revenue sources for the government. This money is used for the many developmental projects undertaken by the government.
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Penal Consequences: Non-compliance with Income Tax laws can attract a fine of Rs 10000 under section 234F. It can also lead to imprisonment, where the term can vary between 3 months and 2 years. If the tax you owe to the income tax department is higher, the prosecution period may extend to seven years. In case you have underreported your income to evade a higher tax, a penalty of up to 50% of the tax due may be imposed.
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Off Setting of Losses: If you have incurred losses other than house property loss, you cannot set off these losses against future gains if the return has not been filed within the due date. House property losses can be carried forward to the subsequent years.
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Processing of Refunds: If you are entitled to a refund for excess taxes paid, non-filing of ITR on time can delay your refund claim.
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Acts as a legal document: Your ITR is a legally binding document to act as both identity proof and income proof.
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Access to Loan and Credit Facilities: Since the ITR form contains details of your income and profits, it is a vital document for lenders to ascertain your credit history. It makes the process easier while applying for loans, credit cards, etc. Regular ITR filing is an indicator of you being a regular taxpayer.
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Ease of Visa Processing: Proof of income is an important parameter when you apply for a Visa. And an ITR is legitimate proof of your income.
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Obtaining Tax Clearance Certificate: In case you have performed a high-value transaction (sale of a house for instance) or sent or received funds from a foreign country, you are required to obtain a Tax Clearance Certificate. Income Tax Return is a mandatory requirement in such cases.
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Registering Immovable Properties: Most states in India require your IT returns for the registration of immovable properties.
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Income tax e-filing: Filing your ITR online is a hassle-free, convenient and quick way to get your ITR filed and the facility is available round the clock.
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