Individuals, especially the salaried class, always ask: why should I file my income tax returns when all taxes have been already deducted from my salary?
Many assume that the filing of tax returns is a harrowing experience. There are some myths associated with these filings. A common fear is that the taxman comes knocking at the door if the tax returns is filed. The fact remains that each individual having taxable income has an obligation to file his/her income tax returns for the relevant financial year. The finance minister recently indicated that salaried employees earning below . 5 lakh and not having any other sources of income would be exempt from filing the income-tax returns.
The due date for filing tax returns by individuals depends on the category one belongs to. In case of individuals whose accounts are required to be compulsorily audited, the return is to be filed by 30 September. For the rest, July 31 is the due date.
BENEFITS OF TAX FILING
Filing of tax returns ensures that the individual is compliant with the tax laws.
There are other benefits also. By staying with in the timelines, the individual would be able to manage his financial affairs effectively. For instance:
• The acknowledgment for filing the tax returns would come in handy incase a visa is required to be obtained; the document would serve as proof of the financial soundness of the individual.
•If a loan is required to be obtained from a financial institution, the tax returns would be required to prove the ability of the person to repay the loan
• Excess taxes paid by an individual either by way of tax deduction or advance/self-assessment tax can be refunded only by filing tax returns.
CONSEQUENCES OF NON- FILING
A default in complying with the regulations with respect to tax returns leads to interest liabilities and in some cases penalty as well. The default may be with respect to delayed filing, non-filing, incorrect income disclosure, etc. The individual is exposed to notices from the tax office, dealing with which could be a harrowing experience.
Consequences that are normally disregarded till too late deserve a special mention. An individual may lose out on an opportunity to revise the tax return if the return is not filed in time. Further, if an individual has a loss under one head of income, which cannot be set off against another, he may carry forward such losses to the subsequent financial years for future set-off. For instance, if the individual has loss from house property which could not be set off against any income during a financial year, he could declare the loss in the tax returns and carry forward the same to the following year.
In the succeeding year, if he has any income from house property, the loss may be utilised to set off against such rental income. The individual would lose this benefit if he has not filed the tax returns declaring such losses within the due date. This would have an impact on the tax liability as well.
NEW TAX RETURN FORMS
New tax return forms have been introduced by the tax department for the financial year 2010-11.
The tax department has said that the new forms make filling of the tax returns less cumbersome. However, there are certain challenges that one may have to overcome. For instance, manually-filed returns, SAHAJ, are required to be printed in a specified colour–such facility may not always be available.
Mentioning of a bank account number has been made mandatory, even in case no refund is due – some individuals may not have a bank account in India.
We hope the tax department will take these issues up quickly so that the filing of tax returns this year is a smooth affair for all.
Let's resolve to file our tax returns well in time with in the deadline and be relaxed.
