This is the last day for filing your tax return. The computation of total income earned during a financial year, calculation of tax liability on the earned income, the process of filling up the required tax forms and the submission of such forms is the entire process of tax filing. Any individual who earns an income from any source during a financial year is required to file tax return. This includes income from salary, house or property, capital gains and any other source. If your income is over Rs 2.5 lakh, then it is compulsory for you to file your income tax returns. However, even if it is lower than Rs 2.5 lakh, you should file your returns as the record of it would be helpful in many financial transactions. If you do not file your taxes, you lose out on various benefits and you even incur penalties.
Let us understand what non-filing your tax means:
# Inability Of Claiming A Tax Refund
If you are employed and receive a salary, your employer deducts TDS and then credits your salary. If you make tax-free investments, your taxable income reduces. As such, due to the TDS already deducted by your employer, if your tax liability is lower than the TDS already deducted, you would be eligible for a tax refund. Moreover, if your total income is below Rs.2.5 lakh and TDS has been deducted, you would be eligible for a tax refund. For these or any other cases where you are eligible for a refund, you have to file your taxes. Only if you file your returns, you may get an opportunity to claim a refund.
# Inability To Carry Forward Losses
Losses from business or profession, capital loss, etc. are allowed by the Income Tax Department to be carried forward to the next assessment year. If you do not file your returns, you cannot carry forward any loss suffered by you to the next financial year’s tax calculations.
# Tax Filing Creates A Financial History
If you file your I-T returns, you create a financial history whether your income is taxable or not. This history is important when you are seeking loans or credit from financial institutions. Thus, your ITR forms an important financial document.
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# Non-Filing Might Result In Penal Interest
You would be charged a penalty if you don’t file your taxes if your income is in the taxable limit. Even if TDS has been deducted, tax filing computes your actual tax liability. You can see if the TDS deducted is sufficient or lower than the tax liability. If TDS is lower, you have to pay the extra tax liability. If you do not do so, you would be penalised for short-paying your taxes. You might even be legally prosecuted for tax evasion.
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Filing of your Income Tax Returns is, therefore, important whether or not your income is taxable. The fact that you are earning an income should be the reason enough to file your taxes. However, before you file, keep the following points in mind:
• The tax slabs might change any year. Any change is communicated in the Union Budget.
• Linking of Aadhar Card has been made mandatory when filing taxes.
• File your taxes in the correct form.
The online medium has been facilitated from where you can file your taxes easily. So, file your taxes and reap the benefits.
(The author is CEO, Bankbazaar.com)