Summary: The supplied article explains why filing a return of income may be advisable even where no tax is payable. It describes the five heads of income and distinguishes taxable income from gross total income after Chapter VI-A deductions. The article identifies several benefits of regular return filing, including maintaining records for loans and visa applications, claiming TDS refunds where income is below the taxable limit, and carrying forward business and capital losses. It states that business losses require filing the return before the due date under section 139(1) for carry-forward, while capital losses from stocks or mutual funds may be carried forward for up to eight years and set off against capital gains. The article also states that regular filing can help maintain a traceable financial history, support future compliance and business or GST-related procedures, and provide proof of income or financial history for government schemes.
Income under the Income tax Act, is divided in to five different heads, and total of that is to be considered as Gross Total Income.
Tax is to be calculated on taxable income and not on gross total income. From the gross total income deductions of Chapter VI-A are to be deducted and on remaining income, tax is to be calculated. For the purpose of computation of total income on which tax is to be charged, after deductions, income from the various sources is to be computed under the following heads:
1. Salaries. (Section 15 to 17) (Section 15 to 19)
2. Income from house properties. (Section 22 to 27) (Sec 20 to 25)
3. Profits and gains of business or profession. Section 28 to 44) (Section 26 to 66)
4. Capital gains. (Section 45 to 55) (Section 67 to 91)
5. Income from other sources (i.e. residuary income which does Not fall under any of the preceding heads). (Section56) (Sec 92)
(Above heads have unique deduction rules, computation methods and reporting formats).
The question arise in mind that when I have not to pay tax, why I should file my return of income? The answer of above question is that you should file your return of income, because the benefits of filling return of income, are:
1. When any person required to take loan form banks or any financial institutions, they first of all ask for the copy of last three years return of income. This is a formality, no one going in to details, whether you have paid tax or not, but for record they ask.
2. If any person would like to visit outside India, he required VISA. When he apply for VISA, it is necessary to attach copy of last three years return of income.
3. Claiming TDS Refund: We know that when a person received interest, commission, dividend or any kind of contractual work, if it exceed the limit of TDS, tax is to be deducted by payer. If the income of a person is below taxable limit, if he does not submit return of income he will not get the amount of TDS.
4. Carried Forward of Losses: During the year a person incurred any loss in his business, so he has not to pay any income tax, but to claim carried forward of loos in future it is mandatory to file his return of income and that too before the due date of submitting return u/s 139(1). The benefit of filling return of income is business losses can be adjusted in the coming year, when there will be business income.
Capital Losses: If any loss incurred from investment in stocks o mutual funds can be carried forward up to 8 years and set off against capital gains in subsequent years.
5. Filling return of income regularly, serve as an official record of your financial transaction, helping you built a clean and traceable financial history, which will considered as Better Creditworthiness and Future Compliance. If your income increase in future and tax is to be paid, no need to explain.
6. When you are submitting your return of income regularly, you may not receive any kind of notice or penalty from the department.
7. In future if, you wants to start new business or register for any Act, like GST, it will be helpful to you, for simplifies government procedures.
Many government schemes require proof of income or financial history, copy of return file will be useful at that time.
Looking to the above benefits it is advisable to submit your return of income regularly, though tax is not payable.
