It is important for a taxpayer to know the circumstances under which it is mandatory for an individual to file tax returns. In every case if individual’s income exceeds Rs 2.50 lakh, it is mandatory to file a tax return. Income tax return is very different from tax challans generated while making the tax payment. ‘Income tax return’ is a form in which taxpayers declare details of income, deductions, exemptions, and taxes payable on their taxable income.
Filing ITR not only keeps you tax-compliant, but also offers the following benefits:
1. Early filers get faster and higher refund:
Tax laws has provisioned less Interest on refund if you file after due date. Actually, the interest is payable on your refund amount from April 01, 2020 to the date your refund is processed if you file before due date. In case you file after due date the interest is payable from the date you file ITR. So you lose the interest on refund from April 01, 2020 to the date you file return. Keeping in view the 6% p.a. lower rate of interest of refund as compare to 12% or 18% in mutual funds the yearly loss is being ignored by taxpayers.
2. Revision of ITR possible if you filed original return before due date.
If you file your returns early, you will get enough time to root out errors. In a haste to meet the deadline, you may forget to include certain sources of income or miss claiming a deduction. You can file a revised return before the end of the next assessment year, which is March 31, 2021 for FY 2019-2020.
3. Cannot carry forward Losses on sale of property, shares or other assets.
Individuals cannot carry forward losses of the current financial year to the next financial year until an ITR is filed. As per the income tax law, individuals are not allowed to carry forward losses and set them off against future years’ income if the ITR is not filed within the due date. Hence, it is important to file your income tax return on time in order to claim the losses in future years.
4. Penalty for Not Filing ITR, if delay or forget till end of FY.
Effective from FY 2017-18, the Income Tax Department levies a penalty upto Rs 10,000 under section 234F on individuals who do not file their income tax return. Filing ITR on time avoids unnecessary penalties. Even though the penalty has been kept at Rs 1,000 if your annual income is not more than Rs 5 lakh, as a law-abiding citizen, it is your duty to file your tax returns.
5. Penal Interest on Unpaid Tax increases with every month.
If you don’t file ITR on time, the belated return could lead to extra interest on monthly basis for the remaining tax payable by you. In most of the cases customer who have interest income from bank or any other income, need to pay self-assessment tax with interest for delayed payment. You should file your return early to avoid higher interest amount on tax payable.
Apart from the above mentioned benefits there are numerous more benefits like speedy processing of returns, used as proof of income while planning for visa or loan soon etc.
One of the main benefit of filling your returns early is that you will face less fee & competition to avail the services of a tax expert.
Hence, do not wait for till the end and let us help you file your tax return.