Filing income tax returns: All you need to know in 9 points

Only 10 days are left for the due date for filing tax returns. How important is tax filing for you? What if TDS takes care of your tax payments? If you are unsure about whether you should file your return, here’s the whole truth about filing them.

Relevance of the due date

It is true that returns for FY2015-16 can be filed without penalty till March 31, 2017. But mistakes at the time of filing are not unheard of. Some taxpayers notice they’ve put an incorrect mobile number or have missed claiming a deduction. Many a times, an income may not have been included. Filing your returns by due date leaves a window for returns to be revised. Returns filed after the D-day (July 31) cannot be revised.

When TDS takes care of your tax dues

A lot of taxpayers are under the misconception that return filing is only for those who have a tax due. If all their income has been subject to TDS, there is no requirement to file a tax return. Remember, whether or not you have a tax due, return filing is mandatory if your income is more than Rs 2.5 lakh. This income is before allowing any deductions.

Filing return without taxable income

Foreign assets and income sources have taken centre stage in today’s times. Return filing has been made mandatory when you have a foreign bank account or other assets and your tax status is Resident. This applies irrespective of whether you have taxable income or not. Those who have ESOPs in entities listed outside India, or have retirement accounts, properties outside India while they are Resident in India for tax purposes, must file a return and submit details of these assets.

File to carry forward losses

Taxpayers who invest in stock markets and incur losses are averse to return filing if they don’t have any other significant income. But those with losses, especially short-term losses from equity markets, must file a tax return. Filing a loss return before the due date allows you to carry forward losses to future years. These can then be set off against capital gains in succeeding eight years.

Faster refund

The income tax department has mentioned in its recent communication that refunds shall be processed faster for returns which are submitted timely. Therefore, do not delay filing if you are seeking a refund.

Your financial track record

Come to think of it, how many of us keep a financial record of our earnings. These records come handy while applying for credit cards, loans and visas. So, filing your tax returns helps maintain a trail of what you have earned over the years.

Department is tightening its noose

Last year, the income tax department sent notices to lakhs of people who did not file tax returns but had TDS deducted, or investments in mutual funds, post office deposits etc. In fact, the department allowed an option to verify tax returns of past six assessment years. The department is getting its act together and has access to your income and investments. All this means, it helps to be proactive about filing rather than delay until a notice comes knocking.

Helping your government implement tax reforms

The government needs data to implement tax reforms. Unless you as a taxpayer declare tax benefits, deductions or exemptions claimed by you, the government has fewer means to gauge the success of its efforts. So file for the greater good!

Didn’t file in the past

Don’t worry if you have never filed a tax return or have missed filing in the last couple of years. File what you can now and make a fresh start. It’s a myth that the income tax department sends notices to those who start e-filing after a gap.

So file your return on time and ignore the naysayers.

Filing it up

Remember, whether or not you have a tax due, return filing is mandatory if your income is more than R2.5 lakh. This income is before allowing any deductions.

Return filing has been made mandatory when you have a foreign bank account or other assets and your tax status is Resident

Taxpayers who invest in stock markets and incur losses are averse to return filing if they don’t have any other significant income

The income tax department has mentioned in its recent communication that refunds shall be processed faster for returns which are submitted timely

Last year, the income tax department sent notices to lakhs of people who did not file tax returns but had TDS deducted, or investments in mutual funds, post office deposits, etc. Don’t worry if you have never filed a tax return or have missed filing in the last couple of years. File what you can now and make a fresh start.

This article was published in The Financial Express on 22 July 2016.

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