It feels just like yesterday that tax-saving season was here. We were so excited to launch our tax-saving website for you! Time really does fly, because it’s been 3 months already, during which we also launched our full website! And lo and behold, tax filing season is here!
Over the next few days, we’re going to help you understand the basics of filing your Income Tax returns yourself. If you still want to stick with letting your Chartered Accountant file them for you, at least you’ll know what to discuss with her.
In this post, we’ll be going over some basic questions of what is an Income Tax Return, why you should file it, and what is the filing deadline.
What is an Income Tax Return?
Income tax is an annual tax paid by us to the Government of India (the central Government). The tax is calculated based on our income from various sources, like salary, rent, interest, capital gains, business profits, and such. All income earned during the previous Financial Year (April 1 – March 31) is tallied and taxes are filed for the current Assessment Year (January 1 - December 31).
So, for example, you will now be filing taxes for the Assessment Year 2016-17 (January 1, 2016 to December 31, 2016), based on the income you earned in the Financial Year 2015-16 (April 1, 2015 to March 31, 2016).
An Income Tax Return is a statement of your earnings from various sources of income, deductions based on certain investments and expenses, the corresponding tax liability, details of tax paid and any refunds that have to be given by the Government.
What is the deadline for filing my Income Tax Return?
The annual deadline for filing Income Tax Returns is July 31, for individuals.
Why should I file an Income Tax Return? Are there any penalties involved?
If your gross total income (income from all sources) in the financial year exceeds Rs. 2.5 Lakh, you are required to file an IT Return, irrespective of whether you owe any taxes or not.
If you are expecting a tax refund from the Government, then you must file an IT Return for your refund claim to be processed.
Even if you have ZERO tax liability, or earn less than the minimum taxable income of Rs. 2.5 lakh, regularly filing IT returns can serve as proof of income. This is especially useful at the time of applying for loans from banks, as an IT Return plays the role of a Government approved proof of income.
Late filing of returns will draw a monthly penalty of 1% of the tax liability. Additionally, you lose the option of revising your returns in the subsequent year. This is applicable where you have filed your return in time, but notice an error in the filing within the next year. A revised return can be submitted in this case, but only if you had submitted the previous year’s return before the July 31 deadline.