Many of us are not confident about whether we should file an income tax return. Is filing tax returns an open invitation to income tax officers for more scrutiny? What happens if I do not e-file? I have paid all my taxes, why should I file my tax return?
It is a no-brainer that those who have taxable income must file a tax return. But at a deeper level, how does return filing help you? Here’s what you need to know.
Compulsory tax filing for income above ₹2,50,000
If your total income in FY 2015-16 is more than ₹2.5 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 ₹2.5 lakh, whether or not you have any taxpayable. It is compulsory to file your return electronically if your income exceeds ₹5 lakh.
E-file to get tax refunds
The Income Tax Department has no way of knowing that a refund is due to you unless you file a tax return. By filing a tax return, you provide details of your total income and tax deducted on it; any excess TDS is refunded to you. So if you are worried that a bank or an employer has deducted excess TDS, just file your return and claim your tax refund.
Compulsory for residents with foreign assets or foreign bank account
If you are resident in India and you hold a foreign bank account or you own an asset outside India you must file a tax return in India. This applies when you own a house outside India or when you have a financial interest in an entity outside India. You must file your tax return and provide details of these holdings, irrespective of whether you have taxable income or not.
E-filing has benefits
Having a proof of your tax filing comes in handy if you are planning to apply for a home loan. Lenders usually rely on tax returns as proof of income. Visa authorities also request for tax return information before approving your application. If you are a freelancer, tax return may also be required if you are applying for a credit card.
Should you prepare for unnecessary scrutiny?
Income tax officers may seem like emissaries from hell, but they do not unnecessarily trouble you. The department wants you to file your tax return. You won’t suffer only because you filed one. Don’t worry if you did not file returns in the past — just file whatever you can now. 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 wait until you hear from them.
Penalties for non-filing
Your assessing officer may levy a penalty of ₹5,000 if your return is not filed within a year of the end of the financial year to which it belongs. Your refunds, if any, will be delayed. If you have tax losses you may stand to lose those if you do not file by the due date. Clearly, you don’t gain anything by delaying or postponing this very important task. So do remember to file your returns on time!
This article was published on Huffington Post on 5 June 2016.