The Indian Income Tax department has evolved tremendously over the last decade.
You no longer have to fill a physical form to file your income tax return and go all the way to Aayakar Bhavan to submit it. You can complete this entire process online. Better yet, it takes the same amount of time that you’d spend watching an episode of Game of Thrones!
In India, our perception about income tax is mostly negative, we often refer to it as a “tax burden”. If we have earned this income, it is ours to keep. Why give any of it to the government?
However, when it comes to providing basic amenities, building infrastructure, improving power and water supply, our expectations are high. It doesn’t naturally come to mind, that all this expenditure bears a direct correlation with the taxes we pay.
Another common perception is that we need not file our returns since we are below the taxable limit. Well, you may be under the limit, but filing your taxes will only prove beneficial in the long run.
If you are over 18 years of age and earning any income, it is in your best interest that you file your income tax return.
I’ll jump right into the why’s.
1. To be a responsible citizen
Filing your income tax return is mandatory if your Gross Total Income is above the basic exemption limit. The basic exemption limit is Rs. 2.5 lakhs and in case of senior citizens, it is Rs. 3 lakhs (This is for Financial Year 2019-20).
As per the new amendments last year, you will have to pay a late fee if the return is filed beyond the due date i.e. 30th November 2020.
2. To claim your TDS refund and carry forward your losses
Are you a professional or freelancer providing services to any company? It is quite likely that they will be deducting TDS before they pay you. If this TDS exceeds your tax liability, you can claim a refund of this amount. However, this is only possible if you file your return.
Apart from this, if you have any short term or long term capital losses from the previous years, you can them carried forward to the next year provided you file your return.
3. To avail loans and credit facilities
When you apply for loans, banks ask for your Income Tax Returns of the past few years as a proof of your income. It is an important document which justifies your earning potential and in turn your capacity to repay the loan. This is true in case of all kinds of loans – home loans, vehicle loans as well as credit cards.
Avoid filing returns beyond the due date as it implies you’re irresponsible.
4. To travel abroad
If you’re applying for a visa to countries like the UK, the US, Australia, Canada, you’re required to furnish past returns along with other documents. Your Income Tax Returns is one of the most legitimate records of your income.
It gives them a reassurance that you’ve been earning steadily in your home country. This in turn implies that you are most likely not looking to settle in their country. Further, it proves that you have the ability to take care of your expenses on the trip.
5. To review your finances
Nobody likes to go over their bank statements every month. It’s quite a dull task.
Filing your Income Tax Return disciplines you to go over your incomes, expenses and investments at least once in a year. It gives you an idea of your financial position and how you’re doing as compared to the previous year. You could then reflect on your goals and figure out what more you can do to achieve them.
To sum up, filing income tax returns is more than just a compliance. It enables you to take control over your finances, making you more responsible.
It becomes all the more important if you’re a freelancer or independent professional. Your Income Tax Return will be your only document to establish your income, as you may not have a Form 16.
The due date has been extended to 30th November 2020 for FY 2019-20.
Go file your returns now, before you start watching another show on Netflix!
Check out the Income Tax Department Official Website here.
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