Why everyone should file Income Tax Returns?

Are you perplexed and unable to decide whether to file an ITR? Have you heard elsewhere that if your income is less than the basic exemption level, you should skip filing an ITR? Before you decide not to file your ITR, read on to learn about the benefits of submitting even if you are not required to do so. You’ll be pleased you did it in the end. Let us look at why everyone should file Income Tax Returns?

Before we get into the core of the matter, we need first understand Income Tax Returns (ITR).

Key Abstract

The Government of India creates Income Tax Laws. Individuals, Hindu Undivided Families (HUFs), companies, firms, LLP, associations of persons, bodies of individuals, municipal authorities, and any other artificial legal person are subject to taxation. The imposition of tax on a person is determined by these laws based on his residency status. Every individual who qualifies as an Indian resident is expected to pay tax on his or her worldwide income. Taxpayers must follow specific regulations while filing their Income Tax Returns each fiscal year (ITRs).

What is Income Tax Return?

ITR is a type of form in which individuals submit income and tax information to the government of India. ITR is a type of form that gives information about a person’s income and taxes that must be paid throughout the fiscal year (Starting from April 1 to March 31st next year).

Depending on the company, job description, and other sources of money, revenue can take numerous forms. Income may be divided into various types:

• Salary income; and 
• Income from other sources 
• Profit from a business venture
• Residential property rent or income
• Profits from capital gains.
• Other sources of income, such as dividends, royalties, interest on deposits, and so on.

The Income Tax Department requires each individual to file a separate ITR for each type of income. According to the Income Tax Department, there are seven different sorts of ITR Forms that must be filled out depending on the nature and amount of the taxpayer’s annual income.

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Types of Income Tax Return

There are seven distinct types of ITR Forms, according to the Income Tax Department. These are their names:

ITR 1: Individuals can submit Form ITR – 1 if their total income is up to 50 lakhs in salary plus one residential property, excluding lotteries and agricultural income of up to 5000 rupees.

ITR-2: Individuals and HUFs who are ineligible to submit ITR 1 but have income and profits from a profession or business must complete this form.

Form ITR – 3: This form is completed by any individual who earns money from a business or profession.

ITR – 4: This form is required for every resident of India who earns up to Rs. 50 lakh from any profession or business as described in Section 44AD, 44ADA, or 44AE of Income Tax Act, 1961.

ITR – 5: The following entities complete the ITR—5 form:

• Firms
• Body of Individuals
• Cooperative Societies 
• Limited Liability Partnerships (LLPs) 
• Persons’ Association
• Local Authorities
• Artificial Judicial Person
• Insolvent Estate 
• Deceased Estate
• Investment Fund
• Trusts for Business

ITR – 6: With the exception of those requesting exemption under Section 11, which is revenue from religious or charitable property, firms fill out this sort of form electronically.

ITR – 7: Companies can use this form in compliance with the Income Tax Act rules. The following are the typical provisions’ requirements for filling out the ITR – 7 forms:

• Section 139 applies to those who own property for charity or religious purposes (4A).
• Political parties (Section 139(4B))
• Section 139(4C): Medical institutions, news organisations, educational institutions, and scientific research institutes, as well as institutions or associations included under sections 10(23A), 10(23B), and 10(23C) (23B).
• Section 139(4D) exempts colleges and universities, as well as any other institution, from complying with the Act’s income and loss reporting requirements.

Why everyone should file Income Tax Return?

Filing ITR displays Indian people’ sense of responsibility. Only through ITR does the government learn about its residents’ yearly accounts and transactions, which ultimately aids in strengthening the country’s economic aspect and establishing advanced action plans for the benefit of the country.

Here are a few reasons why you should file your income tax returns:

• Filing tax returns demonstrates accountability and is very important in a variety of scenarios.
• You will also need this information if you apply for a loan or a credit card.
• If you want to make a claim for compensation for previous losses, you must have ITR records.
• Furthermore, it will be beneficial and profitable if the findings are updated.

There are also some benefits for filing up of ITR, which are as follows:

• It Avoids Penalty: There is a penalty for late submission of an ITR! Failure to submit an ITR by the due date stated by the Income Tax Department may result in a penalty of up to Rs 10,000, according to Indian Income Tax legislation.
• Carry your losses forward: Individual taxpayers must file their Income Tax Returns on time in order to claim specific losses, such as losses from capital gains, losses from a company or profession, and so on. This implies that you can deduct some losses from relevant income, minimising your future tax bill. This cannot happen until the taxpayer files a tax return.
• Interest Saving: Failure to file an ITR on time may result in the imposition of interest on the tax payable. Sections 234A and 234B allow you to avoid paying interest on late taxes if you file your ITR on time. For late ITR filing, there is no penalty relief.
• Simple Loan Approval: Filing the ITR will assist people when applying for a vehicle loan, a mortgage loan, and so on. Furthermore, all financial institutions may request a copy of your tax returns as proof of income. This document must also be submitted in order for the loan to be approved.
• Request a Tax Refund: Most individual taxpayers with passive income, such as term deposit interest or dividend income must submit a tax return in order to get a tax refund. Furthermore, papers must be filed even for salaried taxpayers who had excessive taxes withheld in order to get a refund of the extra taxes.

Due dates for filing of Income Tax Return for FY 2021-2022 (AY 2022- 23)

The following are the due dates for filing of Income Tax Return for FY 2021-2022 (AY 2022- 23):

Penalties for non-filing of Income Tax Return

If the due date for filing the initial income tax return is missed, a belated return can be filed later after the due date. The Income Tax Department also stipulates when the overdue return must be filed. This deadline has been pushed back three months to December 31st of the assessment year (unless extended by the government).

However, a penalty of Rs 5,000 would be levied for late submission of the return. If the person’s total income is less than Rs 5 lakh, the cost is limited to Rs 1,000.

Takeaway

If you thought filing your taxes was a time-consuming task, you may rest assured that it is not. The only thing you need to remember is which ITR to file and which returns to file. Many people appear to believe that submitting tax returns is optional, and hence disregard it as unneeded and onerous. As we will see, this is not a very healthy attitude about tax filing.

Filing tax returns is a yearly action that is seen as a moral and social obligation of every responsible citizen of the country. It serves as the foundation for the government to establish the quantity and mode of expenditure of people, as well as a platform for assesses to claim refunds and other types of relief from time to time. Hence it should be done without negligence.

Further, if you have received Income Tax Notice, from the Income Tax Department and you want to file Reply to Income Tax Notice, then connect to Legal Window and get the efficient solution for your problem