Income tax as stated is tax on the income earned by an individual, company, or any other entity. It is the most important source of income for the government, which is then utilised in providing various benefits in the form of national security, welfare benefits, infrastructure and lots more. Income tax returns (ITR) is nothing but filing of information on the income tax portal about the various incomes received by us throughout the financial year i.e from April 01st to 31st March along with assets owned if any.
However, ITR can be mandatory or optional depending upon the total income earned. A ITR is a self-declaration so no requirement of any professional help, although for the first time filing you may approach the helpdesk of income tax to resolve your queries. The form is self-explanatory and does not need any attachments while filing the form, however it is advisable to maintain the income and investment proofs.
Let us understand some basics of Income tax return before we turn to how beneficial it could be. Before we begin, please be aware the below limits are only for individuals.
Who should file ITR
Individuals whose gross annual income is above exemption limit as specified below:
|Below 60 years||2,50,000|
|Above 60 but below 80 years||3,00,000|
|Above 80 years||5,00,000|
Therefore, If your age for example is 35 and your total income before any deductions or expenses exceeds Rs. 2.5 lakhs, it is mandatory for you to file ITR. In addition to the above exemption limit following are some of the criteria where ITR becomes mandatory even though the income is below exemption limit.
- If an Indian resident holds any asset outside India or is a beneficiary to an asset located outside India or is a signing authority of any account located outside india.
- A person who has deposited an amount in excess of Rs. 1 Crore in one or more bank accounts
- A person who has spend in excess of Rs. 2 lakhs on foreign travel for self or any other person
- A person who has spent more than Rs. 1 lakh on electricity consumption in aggregate.
Due date for filing ITR
For all individuals the due date for filing ITR is July 31st every year.
What is assessment year and previous year
The two very important phrases in ITR, which every taxpayer must be aware of. Assessment year is the period during which the income earned is assessed or checked or verified, therefore to assess income for the period 01st April 2021 to 31st March 2022, the assessment year shall be 2022-23 and at the same time the previous year shall be 2021-2022. To put it simply, a financial year is in which the income is earned and the assessment year is in which the ITR is filed for such income.
Brief explanation about ITR forms:
- ITR-1: When you have income up to Rs. 50 lakhs and it is in the form of salary or one house property or income from another source. Mostly for salaried people whose gross income does not exceed 50 lakhs can file ITR using this form.
- ITR-2: Here the difference from above is when there is more than one house property income or there is capital gain or lottery income or holding any foreign assets or tax payer is a director or holding investment in unlisted equity.
- ITR-3: This is in case the source of income is from business or profession.
- ITR-4: This is applicable when an individual has income as specified in ITR-1 along with income from business or profession requiring audit.
Benefits of filing timely ITR
Claiming tax refund: A very common benefit yet unknown to many, is only when you file the ITR, it is only when you become eligible for any Income tax refund. This situation happens when the tax deducted is higher than total tax liability.
Carry forwards losses: An abrupt gain or an unplanned income can cause havoc in your tax planning, however If you have any carry forwards losses, meaning losses occurred in previous years, then these abrupt gains could be reduced to the extent of losses. This benefit is only available if you filed a timely ITR.
Easy loan access: Although for salaried individuals form 16 could deem sufficient, but for income earners via business or profession, this is a major proof of income through which they can avail loans.
Beneficial in case of absence of inheritance deed: When an individual dies without any will or details with regards to his assets, the ITR can be one of the sources to identify his assets and wealth.
Visa process: If you are planning for a foreign travel or business visa application, ITR becomes the most essential document as many foreign countries check the financial stability of travellers before granting the requisite visa.
While filing ITR has its own financial as well non-financial advantages, it also serves as a social responsibility to file the ITR and pay your tax and support the country. In addition to that the penalties for tax avoidance are much higher including penal provisions, and with automated inter-connected databases, the government can catch you anytime for tax evasion. Therefore be a responsible citizen and file your ITRs on time.
Viral Bhatt is the Founder of Money Mantra - a personal finance solutions firm