Why File Income Tax Return? Here is All You Need to Know!!
Alok Agrawal Senior Director with Deloitte India said that apart from being a good corporate citizen, an income tax return also serves as a proof of income earned by an individual and total tax paid. So it is always advisable to file one’s tax return even when the taxable income falls below the basic exemption threshold (currently the limit is Rs 2.5 lakh for ordinary individuals, Rs 3 lakh for senior citizens and Rs 5 lakh for super senior citizens),” he said.
The last date for filing ITR in India is on the 31st of July 2018 post to which you’ll be charged a penalty of 5000/- is the call taken by the Government of India. Filing your tax return on time will offer certain benefits like:
ITR is an authentic and detailed proof than Form 16 which shows your income and taxation along with other sources.
Income Tax returns being a strong proof of your income source for banks, it becomes easier to avail loans.
ITR receipt being sent to your preferred address will be an authentic residential address proof.
Until and unless you file your ITR there is no scope to carry forward losses to the next financial year.
To claim any interest accrued on your income from bank interests you need to file ITR.
On time Income tax return filing will avoid the penalties to be charged after the due date.
Filing of ITR will improve your CIBIL score to avail loans and credit cards.
Helps in buying high coverage insurance policies.
For visa processing, the department asks for copies of past tax returns.
ITR is an authentic document for self-earning employees.
Income Tax Return filing though is an important process, to go about it needs a lot of groundwork as you need to understand the taxable income to be entered, what are the exemptions and deductions, the changing rules by the government and more.
Let’s look into the challenges faced while filing ITR: (4 most important)
Calculation of taxable income:
The first step in filing your Income Tax Return is to identify and calculate your taxable income.
The basic things required to compute is:
Analysis of Bank statements
Income from salary which includes basic salary, commissions and bonuses, and allowances
Income from house property
Income from business or profession
Income from capital gains
Income from other sources
To be sure of entering all the income it’s mandatory to procure the 26AS from the government website.
Reforming of tax rules and regulations:
The Government of India comes up with new rules every year for the filing of ITR. For eg. This year there is a penalty of rs.5000/- charged for the late filing of tax returns which is 31st July 2018. Further, if this is also missed and anyone filing after December 31st, 2018 will be charged Rs. 10,000/- as the penalty.
Also, the tax slabs have been changed which is 5% for the income range between 2.5 lakh to 5 lakh; 20% for annual income range between 5 lakh to 10 lakh and 30% for income range above 10 lakh.
If you own more than one home, then till the year 2018 the entire interest paid on the home loan was allowed as the deduction under Section 24B, but now it has been restricted to Rs 2 lakh in a financial year. Earlier, the complete loss from house property was allowed to be set-off without a ceiling, but it is now restricted to Rs 2 lakh in a financial year and the remaining loss can get carried forward for the next 8 years.
GST Details mandatory to file ITR
Initiating from this year, the exact turnover details need to be mentioned while filing Goods & Services Tax. While filing ITR you need to enter the GST details which will be verified by the Income Tax department. Ensure that all your documents are authentic and ready with you before 31st of July.
On-time declaration of tax proofs to the employer
For all salaried individuals, it is important to declare and submit all their tax-related proofs to the employer to gain the benefits of the tax. At the time of e-Filing of ITR, you can claim all the exemptions and deductions through Form 16 provided by the employer.
If there are any mistakes or mismatch at the time of filing returns, immediately intimate to your employer and get it rectified,
Nonsubmission of documents on-time will result in excess TDS payout which can be claimed while filing ITR.
The filing of Income Tax Returns though seems to be cumbersome, also offers benefits for the individuals. With various rules, forms and conditions chalked out by the Government, understand, identify and if not able to do it on your own take expert advice. File your ITR on time to avoid penalties and reap the benefits. To avoid last minute rush and commit mistakes, plan your process of filing ITR way in advance.
Hope this discussion has given you an understanding of why to file ITR and what are the challenges faced. So don’t wait until the last moment, think in advance and take expert advice from your financial consultants to avoid any defaults.