It is time to file your income tax returns. The last date for filing your return is July 31. Before you start on the process, we breakdown the basics of the income tax returns process for you.
Here we tell you everything about who is eligible for filing returns and the advantages of filing returns timely.
Who is required to file Income Tax Return?
Anybody who is less than 60 years of age and has an annual income more than Rs2.5 lakh has to file income tax returns, according to the Income Tax Act. For senior citizens, the cut-off is Rs3 lakh, and for those who are more than 80 years old, the cut off is Rs5 lakh.
However, there are several other criteria for an individual or a company to fulfil for filing income tax returns. They are as follows:
- It is mandatory for a company to file income tax returns if the company has incurred an income or a loss during the financial year.
- Return filing is compulsory if you want a refund.
- You have to file your income tax return if you are a resident of India but have property or financial interest in an entity outside India. The same is true is you are a resident of India but have signing authority in a foreign account.
- The return has to be filed for any income from property under a charitable trust, religious purposes, research or for a political party, medical institution, hospital or any other institution.
- You must file a return if you have entered into any transaction under the Annual Information Return.
What is the filing of income tax returns, and why is it required?
In simple terms, your Income Tax Return is a summation of all your incomes from different sources in the said financial year, your tax liabilities, the tax you have already paid and any refunds you are liable to. It is important to file your income tax return as is it is a disclosure of your income. It is considered legal proof of your income.
Filing your income tax return on time has many perks. You can apply for refunds if your tax liability is lower than what you have already paid. Income tax returns are also important while applying for loans. Some banks also ask for IT returns against an application for credit cards. If you are a corporation, you can apply for tenders. If you are a startup, you can apply for funding if you have filed your income tax returns timely. Even if you are not eligible for income tax returns, it is advisable to file your returns as it is a legal proof of your income and can be used later for loans or credit cards.
Importance of filing income tax return
An income tax return is a legal document that stands as your proof of income. Even if you are not eligible for filing a return and are not mandated by the Income Tax department, it is advisable to file your IT return. Apart from financial discipline, filing income tax returns has several advantages.
If you are looking for a personal or home loan, you will be required to submit your previous IT return documents. Some banks also ask for IT returns for approving credit card requests. For those who are eligible for a refund i.e., if they have paid taxes more than what they are liable to pay-- filing an income tax return is mandatory.
How to file an income tax return
Filing your income tax return may seem complicated and difficult. However, once you understand all your income sources and deductions, it becomes easy for you to file your returns.
Income tax returns can be filed offline or online. You can also pass on the job to a professional who will file a return on your behalf for a nominal fee. The income tax return form is called ‘Sahaj’. It can be downloaded from the website of the income tax department or collected from the nearest branch of the IT department.
The Sahaj form is also available online and can be filled online by creating an account on the Income Tax e-filing website. You can download the software from the government portal onto your computer, fill up your return and upload it to the website. You can also fill up the details on the website and submit it there. Once you complete your return process, the ITR-V form is generated. This form has to be verified within 120 days of your return filing. The verification can be done physically or online.
FAQs
What happens if I don’t file my income tax return?
If you are eligible to file your income tax return but fail to do so in time, a penalty may be levied by the assessing officer. You may also be served a notice by the Income Tax department. According to the section 271F of the Income Tax Act, a person who is required to furnish a return of his income as required by the provision to sub-section (1) of section 139 fails to furnish such return on or before the due date, he shall be liable to pay by way of penalty, a sum of five hundred rupees.
I am an NRI. Do I still have to file income tax returns?
Yes. Non-resident Indians, too, have to file returns in India if their income from sources in India exceeds Rs2.5 lakh. All income generated in India is taxable, and hence returns have to be filed.
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