WHY INCOME TAX RETURN FILING IS IMPORTANT

INTRODUCTION

A person’s success is measured in numbers; the numbers in their bank account and the annual income shown in the income tax organization. These numbers can open doors, create opportunities for development and growth, or close the doors. Business owners and professionals will have the opportunity to knock repeatedly, by submitting their annual tax returns. The inclusion of your income tax return is not only for the purpose of declaring a person’s benefits to the Tax Department and paying the taxes, but it allows a person to receive other benefits, which may benefit a person in the short-term and long-term future. Let's look at the benefits of completing the tax return as a business owner or professional.

WHAT IS THE INCOME TAX RETURN?

Income tax returns are a form of assessment of income and Tax thereon to the Income Tax Department. The various types are ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7. If you submit a late return, you are not allowed to pass on any loss. The Income Tax Act, 1961, and the Income Tax Rules, 1962, oblige the citizens to file tax returns with the Income Tax Department at the end of each financial year. These returns must be submitted before the due date. The entire Income Tax Return form applies to a specific category of auditors. Only those forms completed by the relevant Auditors would be considered by the Indian Revenue Department of India. It’s hence important to know which type is the appropriate one for each situation. Income Tax Return Forms vary depending on the terms of the Auditor's revenue source & the Auditor category.

FILING OF INCOME TAX RETURNS, AN OBLIGATION BY LAW

Individuals, who complete any of the following conditions must legally submit their Income Tax Returns during the financial year:

• People with their total income (before any deductions exceed R2.5 lakh for FY or ? 3 lakh for adults or ? 5 lakh for very older people).

• Companies or firms whether you earn or lose during the financial year.

• Those who want to claim a tax refund.

• Those who wish to carry further the loss under the head of income.

• Citizens with property or financial interest in a business outside of India. (Does not apply to NRIs or RNORs).

• Citizens and officials signing into an external account. (Does not apply to NRIs or RNORs).

• Those who receive money from a trust-funded organization for charitable or religious purposes or a political party or research organization, news agency, educational or medical institution, trade union, nonprofit university or educational institution, hospital, fund debt fund, any authority, theme, or trust.

• Foreign companies taking advantage of the transaction agreement in India.

• NRIs, with an income of more than Rs.2.5 lakh on FY received or accumulated in India, are required to complete a tax return in India.

BENEFITS OF FILING INCOME TAX RETURNS

Filing for the ITR may prove to be helpful for you. Here are some of the ways in which you can benefit from filing the Income Tax Return. These are as follows:

1. It Works as A Legal Document

Income Tax Return has a large legal value. Recorded by the government. It serves as official evidence in two ways,

a. Proof of ownership

The return you complete can be used as proof of identity in a variety of situations such as when you apply for an AADHAR card or any other document. The government accepts it as proof of address again.

b. Proof of Income

As discussed, the ITR form contains a detailed list of all your earnings and expenses. On this basis, the tax you have to pay is calculated. Therefore, the ITR can be used as proof of income as other transactions such as buying a property require you to show proof of income. This can help self-employed people who do not get Form 16.

2. It Can Help You Claim a Withdrawal

In order to reduce the burden on taxpayers and to encourage more people to pay their taxes, the government allows certain deductions for you.

• These deductions and exemptions can be obtained from other investments and thus help to reduce the tax you pay in the end.

• TDS and discounts may also be required.

But in order to access these tax benefits, you need to complete an income tax return. If you have not applied for an ITR you cannot apply for a deduction.

3. Works as an Important Document When Applying for a Loan

If you decide to apply for a loan to buy something, say a car or a new home for your family or business, the bank requires you to bring some similar documents

• Aadhar Card

• PAN card

• Driver's license

• Photo ID etc.

Another important document asked is proof of your income. Banks generally requested an ITR three years ago. This is done to assess your past and present financial status and whether you will be able to repay the loan or not.

Not only when you apply for a bank loan, but the ITR can also be helpful to get you a credit card. Credit card companies also ask for your pre-payment and refund before giving you a card.

4. It Helps If You Plan to Go Abroad

Going abroad includes certain procedures that must be followed. If you do not include your ITR, it may block your plans to go abroad. The ITR form is one of the list documents required by the countries you want to visit.

This is because of the following:

• Having a history of completing income tax returns helps your case and also improves your chances of getting visa approval.

• Provides embassy information about your financial situation.

5. Avoid Penalty & Punishment

Taxes that apply to you are regulated by the Income Tax Act 1961. Therefore, you are required to pay taxes if you violate the exemption conditions. Therefore, if you are eligible to pay your income tax and yet fail to complete the Income Tax Returns, then you are attracting taxes. The tax officer may charge a fine of up to Rs 5000 Rs. Some severe penalties may occur if you do not file refunds. Therefore, you should submit an ITR to avoid such penalties and penalties.

6. Loss Can Be carried forward

Sections 70 and 71 of the Income-tax Act 1961 contain certain provisions to transfer losses from one year to the next. This means you can move your losses to the next year of testing.

Here are a few examples:

• Loss of property may be continued for the next 8 years of inspection and may be deducted from income from the property.

• Losses from the business can be carried forward and paid for by future income from the business.

If you do not file an Income tax return, you may not be able to transfer or reverse your losses. The introduction of income tax return not only helps but also benefits the nation. The taxes you pay are used by the government to build infrastructure and improve other national resources such as medical, defense, etc. If more people file, the government can spend more money and give us a better world.

CONCLUSION

Many people seem to think that filling out tax returns is voluntary and therefore wasting it is unnecessary and burdensome. As we will see, this is not a very healthy idea for tax compliance. Submitting tax returns is an annual work that is seen as the moral and social responsibility of every responsible citizen of the country. It is the basis for the government to determine the amount and methods of expenditure of citizens' funds and to provide the inspector with a platform for reimbursement, among other forms of assistance from time to time.

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Author:

Komal Sharma
Delhi
Adv. Komal Sharma, University of Delhi