Come July and it’s time to file your annual income tax return. So all you need is to collate all your income sources, gather all the investments and expenses which are deductible from your income and ascertain your tax liabilities for the year.
But then how many of us are doing this exercise consistently every year? Well, if you are not used to filing your annual tax returns regularly, it’s time to pull up your socks and make sure you meet the deadline of filing your tax return, which is 31st July 2018 for all individuals including salaried taxpayers.
In the last budget speech, the Finance Minister has announced that filling the tax return is now mandatory by 31st July 2018 and any failure to meet this deal line will involve penalty! Yes, a penalty of Rs 5,000 will be levied if the return is filed after the due date but before 31st December 31 and Rs 10,000 if the return is filed after 31st December. However, in case an individual whose income is below Rs. 500,000, the maximum penalty levied will be Rs 1,000.
Apart from this requirement, it is in our interest to file our tax return on time and pay the tax on time. This will not only legitimize your income but will also give you sound sleep! Belo we have highlighted some of the important points as to why filling your tax returns in time are beneficial to you.
Become responsible citizen
- Filling annual tax return and paying tax is the responsibility of every individual who earns taxable income. The tax individual pay eventually goes towards nation building, be it infrastructure, healthcare, education etc. In fact, the declared income in the tax return becomes the legitimate income of that individual and he or she can do any transaction with such income without any question being asked in future.
Eligibility for loan
- If you are looking to apply for a loan whether for business, for a house or for a car, you will not be eligible to get any loan if you have not filed your tax returns.
Today, Income Tax Returns (ITRs) are the primary documents that any lender, be it Bank or NBFC will ask first before doing any sort of due diligence. Your ITR is a proof of your annual income. So when you apply for a loan, ITR gives clear indication about your income and your repayment capacity. Once the Bank or NBFC is satisfied with your income proof then only they will sanction and disburse the loan amount.
Loss set off
- Many times an individual may suffer a loss in any particular year may be in business or investments. The Income Tax Act provides adjustment or set off of such loss against profits or income of next year subject to certain terms and condition. This will help the individual to lower the tax liability of the future year when he or she earns higher profits or income.
However again, the primary requirement for claiming this adjustment or set off is that the individual must have filed income tax return in time. Any failure to adhere to this requirement will disqualify the individual to adjust or set off the loss against future income.
- If an individual owns any asset, say for e.g., Car in his or her name, Income Tax act allows him or her to claim depreciation on that asset. So if you are filling your tax return, you can surely get the benefit of depreciation as it is allowable expenses and one can claim deduction while filing the tax return.
Mandatory filing of the tax return
- If you are a salaried employee and your salary are paid after deducting TDS, than to claim refund or excess of tax being deducted by your employer, you have to file tax returns. Also in many instances, if an individual is involved in an immovable property transaction, ITR is compulsory as part of the documentation.
Saves yourself from Penalty and Prosecution
- These kinds of circumstances are always avoidable. If you have failed to file the tax return and at later date, tax authorities found your sources of income that will lead to a penalty, prosecution, and even imprisonment. So it is always advisable to adopt honest approach and declare income in your ITR.