Many of us have the thought that filling an Income Tax Return is voluntary but that's where the law gets us. Every individual whose income comes under the taxable laws of the government, is liable to file an Income Tax Return (ITR), every financial year. An ITR is a form of self assessment where you have to showcase your annual income, the source and amount of that income and accordingly pay taxes, as applicable. The government releases a set of Income Tax Slabs for every financial year in which the basic exception limit for every individual is set, based on their age, residential status and undoubtedly, their annual income. According to the Financial Year 2019-20, the taxation is applicable to those who earn more than INR 2.5 lakh per annum. The increase in level of income will levy taxes up to 5%, 20% and 30%, respectively.
The whole process of filing Income Tax Return might seem nonessential and burdensome to some of us but not doing so can lead to dire consequences. Besides, with the emerging digital world, it has become much easier to file the ITR without facing any hassle. Not many of us know but, filing the ITR before the due date has many benefits. To avail various services, you may be asked for the details of your Income Tax Return.
Here's why it is important to file Income Tax Return within the due date:
1. High Penalty Rates
For every year, the last date to file the income tax return is usually 31st July, unless the date is extended by the income tax department. Based on the FY 2018-19, if you fail to file the returns on or before the last date, a late fee of INR 5,000 is levied but that is only till 31st December. If you file the return after 31st December, a hefty amount of INR 10,000 has to be paid as penalty. This penalty is applicable to those individuals whose annual income is INR 5 lakh or above. Otherwise, for people with annual income below INR 5 lakh, an amount of INR 1,000 has to be paid as fine.
2. Visa Filling
Apart from the penalties, several government departments require your ITR documents for verification of your income. For visa applications especially for continents like, UK, Europe, US, and Canada, visa authorities require details of your income tax returns of last 3 to 5 years. These documents will assure the visa authorities of the fact that you will return back to the country and not settle there.
3. Error Free Documentation
The income tax return not only includes your earnings but also your assets and liabilities. Filing of such lengthy documentations can lead to many unwanted errors and most certainly will be considered unlawful. But don't worry, these errors can be rectified by filing a revised return before the last date.
4. Other Services
Planning to start a business? Keep your timely paid IT return documents ready. To check if you can keep up with the payment obligations, government will ask you to show the previous five years' income tax return papers. Also, if you're applying for a loan, the financial companies may ask for the documents to assess your income flow based on which they will lend you the loan.
However, ITR regulations in India change every financial year. Government releases notifications about the new regulations after the budget amendments. Mostly the return filing starts from 1st April, so keep yourself updated and file the return at the earliest to avoid last minute stress and hustle.