If you believe that because the bank has deducted TDS on your bank deposits and your employer has deducted taxes from your salary, you do not need to file an ITR or that you can file an ITR with ease because all taxes have been paid, then this article is for you.
Also Read: Income Tax Advisory services
The Internal Revenue Code specifies when it is necessary to file an ITR. In fact, in addition to being a legal necessity, filing an ITR on time has numerous advantages, and failure to do so may result in fines and interest on unpaid taxes. In extreme cases of tax evasion, the Income Tax Department may also investigate.
When does it become required to file a tax return?
If your gross total income exceeds the basic threshold limit of Rs 2.50 lakh for an individual, Rs 3 lakh for a senior citizen, and Rs 5 lakh for a super senior citizen, you must file an income tax return. Even if there is no tax liability, this is required.
Aside from that, ITR filing is required in the following situations:
- If you want to get a refund on your taxes, follow these steps – i.e. when the amount of TDS deducted from various sources of income exceeds the amount you are required to pay.
- To deduct and carry forward any prior year’s loss – Yes, if you have capital losses in a year that cannot be offset by a taxable gain in the same year, such losses can be carried forward and used against future taxable profits.
- If a resident has a financial stake in any overseas assets, such as assets located outside of India, or is a signatory authority on a foreign bank account.
A few new conditions for mandatory ITR filing were added in Budget 2019:
- If your annual electricity bill surpasses Rs.1 lakh,
- If you have spent more than Rs. 2 lakh on a foreign vacation, either for yourself or for others.
- If you have deposited an amount (or an aggregate of amounts) in one or more current accounts that exceeds Rs 1 crore.
What happens if you don’t file your income tax return on time or at all?
The term “belated return” refers to a return that is filed after the due date. In today’s technology-friendly world, you can choose the option of online tax filing services. Only until the end of the assessment year, i.e. until March 31st of the following year, can you file a late return.
- If you owe no taxes, you should:
If you are unable to file your Income Tax Return by the due date, you may file it later, but you may be charged a penalty of-
- 5,000 rupees if filed after the deadline but before the 31st of December;
- If you file between January 1st and March 31st, you will receive a reward of Rs. 10,000.
If your annual income is less than Rs. 5 lakhs, the maximum penalty is Rs. 1,000.
- If you owe taxes as well, follow these steps:
If there are unpaid taxes, in addition to the penalty specified above, an extra 1% simple interest per month will be levied from the due date until the return filing date.
So, if you have an outstanding tax bill of Rs.10,000 and file your tax return three months after the due date, you will be required to pay a 3 percent interest penalty (1 percent per month x three months) on the balance tax bill of Rs. 10,000, i.e. Rs. 300, plus a penalty of Rs. 5,000.
Filing of Tax Returns
Every earning individual has the responsibility to file an income tax return as a responsible citizen of the country.
Even if your income falls below the minimum exemption limit or you have already paid your taxes due, it is important to file ITR every year before the due date, even if your income is below the exemption threshold or if you have already paid all of your taxes.