As the name implies, income tax is a type of tax collected by the government on income received from various sources. It is a direct tax that is paid to the Indian government by the taxpayer. Income tax is one of the government’s key sources of revenue, which is then used to fund public services, pay government debts, and provide goods and services to residents. Individuals and businesses pay income tax, which is calculated based on their earnings or profits.

Income Tax is computed as the product of the tax rate and the taxpayer’s taxable income, with the tax rate increasing as the taxable income rises. The tax rate varies depending on the type of taxpayer and their age and income. The government, on the other hand, has several measures that provide credits to taxpayers in the form of a refund when they file their Income Tax Return in order to lessen the tax burden.

Is it necessary to file a tax return?

If your income exceeds the basic exemption limit, you must file your income tax returns according to Indian tax legislation. Taxpayers’ income tax rate is pre-determined. A delay in filing returns will not only result in late filing costs, but it will also make it more difficult to obtain a loan or a visa for travel.

Who is required to file a tax return?

Income tax is only required to be paid by individuals or corporations who fall into particular income bands, according to the Income Tax Act. The entities or enterprises listed below are required to file ITRs in India on a regular basis:

  1. Individuals under the age of 59 with a total annual income of more than Rs 2.5 lakh. The maximum increases to Rs. 3 lakh for senior persons (aged 60-79) and Rs. 5 lakh for super senior citizens (aged 80 and above). It’s worth noting that the income amount should be determined before taking into account the deductions available under Sections 80C to 80U, as well as additional exemptions available under Section 10.
  2. All registered businesses that generate revenue, whether or not they have generated a profit throughout the year.
  3. Those who desire to receive a refund for any excess tax deducted or income tax paid.
  4. Individuals with holdings or financial interests in companies based outside of India.
  5. Treaty-advantaged foreign businesses that conduct business in India.
  6. In a single financial year, NRIs who earn or accrue more than Rs. 2.5 lakh in India.

The Benefits of ITR Filing on Time

Taking losses from previous years and carrying them forward to future years. When ITRs are filed on time, losses from the current fiscal year can be carried forward to the next fiscal year.

  • Avoid becoming liable for interest: To submit an ITR, you must pay all due taxes in full. If you file your ITR beyond the due date, you will be charged an extra 1% interest per month or part of a month on the outstanding unpaid tax under Section 234A of the Act. It’s a good idea to pay your taxes and file your ITR within the deadlines.
  • Avoid Section 234F penalties and late filing fees: If you file your ITR after the deadline, you may be charged a late fee of up to INR 10,000. It is in addition to any other penalties imposed by the Act.
  • Various ITR Forms Applicability: There are currently seven ITR forms, ranging from ITR 1 to ITR 7, used to file tax returns by various groups of taxpayers. The ITR form that applies to every taxpayer is determined by a number of factors, including the taxpayer’s legal status and category, the amount of income earned, the sources of money earned, and so on.

ITR-1: Individuals who are residents (other than not normally residents) and have total income up to Rs.50 lakh, including income from salaries, one house property, other sources (interest, etc.), and agricultural income up to Rs.5000, must file a Sahaj or ITR-1.

ITR-2: Individuals and HUFs who do not have revenues or gains from a business or profession should file Form ITR-2.

ITR-3: This form is for individuals and HUFs with income from company or profession profits and gains.

ITR-4 (Sugam): If your business generates a presumed income, you must complete this form. Individuals, HUFs, and Firms (other than LLP) who are residents and have total income up to Rs.50 lakh and income from business and profession estimated under sections 44AD, 44ADA, or 44AE must file this form.

Why a taxpayer must file ITR?

Whether your income is subject to income tax or not, you should file your income tax return on time because it provides you with numerous benefits.

  • Stay Away From Penalties: There is a penalty for filing an ITR late! According to Income Tax norms in India, filing an ITR after the due date specified by the Income Tax Department might result in a penalty of up to Rs 10,000.
  • Avoid receiving a notification from the Internal Revenue Service. If you do not file your ITR by the deadline, the IRS may send you a notice. And that could turn into an unwelcome headache for you. As a result, it is always preferable to file your ITR on time.
  • Approval of a loan becomes simple. ITR filers have an easier time getting their loan requests accepted by lenders. The bank will require a copy of your ITR statement as evidence of income statement when you apply for a loan.

The ITR report is a required document for loan approval. Those who do not file an ITR may have a tough time getting a formal lender to approve their loan request.

  • Losses can be carried forward: You can carry over losses to later years if you file your ITR before the deadline, according to IRS guidelines. This provision will assist you in lowering your tax liability on future earnings.

Aside from the benefits listed above, taxpayers who file their ITR on time receive their Income Tax Refund faster than those who do not.

What are the Benefits of Filing a Tax Return?

Immediate processing: Income Tax Return (ITR) acknowledgement is rapid. More significantly, if there are any refunds, they are processed faster than with paper returns.

Increased precision: E-filing software that has built-in validations and electronic connectivity is easy to use and reduces errors significantly. Paper filing is prone to mistakes. When a paper-based form is converted to an electronic system, human mistake in data entry is a possibility.

Convenience: There are no time or location constraints when filing returns online. E-filing is available 24 hours a day, 7 days a week, and you can file whenever and wherever you like.

Trustworthiness: Better security than paper filing because your information is not available to anyone by intent or by accident. Details of your income can slip into the wrong hands at your chartered accountant’s office or the Income Tax Department’s office if you file your taxes on paper.

Access to historical data: While submitting returns, you can simply access previous data. Most e-filing systems securely preserve data and make it easy to access it when filing subsequent returns.

Receipt confirmation: You will receive rapid confirmation of filing through email on your registered email id, both at the moment of filing and later.

Usability: E-filing is friendly and the detailed instructions make it easy even for individuals not very conversant with.

Banking over the internet: Direct deposit for refunds and direct debit for tax payments are both convenient. You can file now and pay later, and you can choose when your tax payment will be deducted from your bank account, among other convenience options.

Paying taxes not only aids the government in collecting funds to meet the requirements of a country’s residents, but it also aids taxpayers in receiving a variety of benefits if they pay their taxes on time. India is still a developing country, and we can only make a difference as citizens and taxpayers by supporting the government on time and receiving the services and commodities that we require to thrive.

Reach PhoenixTax for filing Income Tax return in Tambaram, Chennai.