Income Tax is a tax levied by the Government of India on the income of every person. The provisions governing the Income-tax Law are given in the Income-tax Act, 1961. Taxes are collected by the Government through three means: a) voluntary payment by taxpayers into various designated Banks. For example, Advance Tax and Self Assessment Tax paid by the taxpayers, b) Taxes deducted at source [TDS] from the income of the receiver, and c) Taxes collected at source [TCS]. It is the constitutional obligation of every person earning income to compute his income and pay taxes correctly.
Under the Income-tax Law, the word income has a very broad and inclusive meaning. In case of a salaried person all that is received from an employer in cash, kind or as a facility is considered as an income. For a businessman his net profit will constitute his income. Income may also flow from investments in the form of Interest, Dividend, Commission, etc. Further, income may be earned on account of sale of capital assets like building, gold, etc.
Income shall be computed as per relevant provision of Income-tax Act, 1961 which lays down detail condition for computation of income chargeable to tax under various heads of income. NRI or not, any individual whose income exceeds INR2,50,000 (for FY ending 31st March 2015 or INR2,00,000 for FY ending 31st March 2014 if you are wondering about last year) is required to file an income tax return in India. Note that for an NRI, income earned or accrued in India is taxable in India.
Summary: If your total income in FY 2015-16 is more than INR2.5 lakh you must file a tax return. Do remember that this income is before allowing deductions. You must file a tax return if your gross income exceeds INR2.5 lakh, whether or not you have any tax payable. It is compulsory to file your return electronically if your income exceeds INR5 lakh.
The due date for filing income tax return for individuals, July 31, is fast approaching but a lot of people still do not realize the importance of it. They think that if one has paid all one’s taxes there is no adverse consequence even if one misses the tax return filing deadline. However, this is not correct. Even if all your taxes have been paid you would still lose out on certain benefits if you do not file your income tax return by the due date. Yes, it is a correct that if you do not have any tax to be paid then you can file your IT returns till March 31 of the following year, but you will still miss a lot of great benefits!
Here’s just few of them.
Cannot revise a belated return
If you file your income tax return for FY 2015-16 after the due date you cannot file a revised return or correct the errors that you discover later.
Loss in interest on refunds
In case you claim a refund in your return of any advance tax paid/TDS, you would lose some of the interest (currently 6% per annum paid by the tax department) on such refund.
No carry forward of losses
If you file a belated return you cannot carry forward losses (except loss from house property).
Delayed return where tax remains unpaid
If you have any unpaid tax liability, filing your return after the due date would result in levy of penal interest @ 1% per month from the due date of filing the return till the actual date of filing.
Penalty to be paid
If you do not file your tax return even by 31st March of the relevant assessment year (i.e. the year immediately after the financial year for which the return is to be filed) but no taxes are due, a penalty of INR 5000 can be levied by the tax authorities on a case-by-case basis.
Other things – plenty of them
Need a loan? Want to study abroad? Want a government job? IT returns are a valid proof for pretty much all government purposes, immigration requirements and other avenues where you need to establish your identity and trustworthiness.
Income tax officers may seem merciless and the process itself may seem highly complicated, but they do not unnecessarily trouble you. The department wants you to file your tax return. Don’t worry if you did not file returns in the past — just file whatever you can now. Don’t think that TDS deducted by your company is enough – you still to close the loop. Just don’t make excuses! This is an important action by you in the interest of your country and an example for your children. And in case you are planning that common excuse of not having a form 16, well this is for you:
The Income Tax Department has information from various sources about your investments and expenses and is likely to send a notice to those who do not file. Why live in their fear? Why have to run?
(Note: I have taken most of the information from the government portal. Some other details (and the image about form 16) are from news websites. Other images are from Pixabay.)