Essential Guide to Filing Your Income Tax Return (ITR) in India

Filing your Income Tax Return (ITR) is now more important than ever due to the host of advantages it brings and penalties it helps avoid. This understanding is crucial for both individuals and businesses. Not only does it unlock financial benefits, but it also safeguards you from potential legal trouble. This article will explore the importance of timely and accurate ITR filing, highlight its advantages, and discuss the savings possible by avoiding penalties.

For the sake of understanding, I have divided the article in three portions mentioned below:

1. When a person is liable to file Income Tax Return

2. What is the time limit to file ITR?

3. What are the consequences of non-filling

Let’s understand the above-mentioned topics one by one: –

Know Your Cue: Understanding When You Must File Your Income Tax Return

Following are the circumstances which lead to filling of Income Tax Returns:

1. Income Based Criteria: First and the foremost basic criteria is when you are earning more than the basic exemption limit, you are liable to file tax return whether tax is payable or not. In India, basic exemption limit is ₹ 2,50,000. So, if your Gross Total Income (income before any deduction like for life insurance etc. u/s 80C) is more than ₹ 2,50,000, you are liable to file ITR.

Some misconception among common Indians regarding return filling:

i. Tax exemption limit is ₹ 5,00,000 as we don’t have to pay taxes up to ₹ 5,00,000: This is wrong. Tax exemption limit is ₹ 2,50,000 and there is rebate of ₹ 12,500 for taxes when your total income (after deductions) is below ₹ 5,00,000.

ii. Return filling is not mandatory when tax payable is nil: This is the biggest myth prevailing mostly among government employees that since all of our tax payable has been deducted by the employer, now we are not liable to file return as there is nothing due. This is wrong. If you are earning more than ₹ 2,50,000 annually, you have to file ITR even if tax payable is nil.

iii. Filling of Income Tax Return increases chances of being caught: Being a tax compliant citizen can save you from penal action of Income tax department. So disclose all the facts truly in your Income Tax return.

2. Mandatory filling of ITR: As per Section 139(1), every company and partnership firm are required to furnish their Income tax return irrespective of the earning. ITR is required to filled even if there is loss for that FY. 

3. Other criteria: Above mentioned are the basic and well-known criteria. Let us dive in some fewer known facts that can lead to mandatory filling of ITRs. These are: 

• Foreign Travel: If you are travel freak and have incurred expenditure of an amount or aggregate of the amounts exceeding ₹ 2,00,000 for yourself or any other person for travel to a foreign country then you are mandatorily liable to file your return.

• Electricity Consumption: If you have incurred expenditure of an amount or aggregate of the amounts exceeding ₹ 1,00,000 towards consumption of electricity during the FY, then be ready to file your tax return.

• Cash deposit in accounts: If someone has deposited an amount or aggregate of the amounts exceeding ₹ 1,00,00,000 in one or more current accounts maintained with a banking company or a co-operative bank, then he has to file his ITR for that year. Limit is ₹ 50,00,000 in case of Saving account.

• Turnover criteria: If annual turnover in case of business exceeds ₹ 60,00,000 or in case of profession exceeds ₹ 10,00,000 then you should have to file your ITR mandatorily.

• TDS/TCS deducted during the year: If the aggregate of tax deducted at source and tax collected at source during the previous year, in the case of the person, is ₹ 25,000 or more, then you have to file your ITR. In case of senior citizen, limit is ₹ 50,000 or more.

Stay Ahead of the Curve: The Ultimate Guide to Filing ITR at the Optimal Time

Firstly, its essential to clear misconception of people that due date and last date means the same, but they don’t. Due date means the date to file return without incurring penalty whereas last date means date beyond which return cannot be filled. Following table summarizes the due date & last date for filling return:

Also, Updated return can also be filled at any time within 24 months from the end of the relevant assessment year provided this return decreases the loss reported or refund claimed or increases tax liability. 

Tax Regrets: Why Not Filing Your Income Tax Return Can Haunt You Later

Filling your return timely is your statutory liability which is sufficient cause to motivate you to file it timely. Yet I can give a numerous reason for filling it timely. These are:

• Saving your money: Late filling return hurts your pocket from two sides, firstly penalty u/s 234F which can be charged up to ₹ 5,000 and also interest to be charged u/s 234A @ 1% per month.

• Increasing your income: Timely & properly filling your return can lead to refund of tax deducted or collected along with interest @ 0.5% per month from 1^st April of the Assessment Year. 

• Carry forward of Losses: If you have incurred losses in current year, then department won’t give you tax, but will allow you to set off your losses in future periods. But for this right, you have to file your return and too on timely basis, i.e. on or before due date (except in case of loss from house property) 

• Saving from going Jail: This is the least known and used method but Income Tax Department has the power to prosecute a willful non-filler of return. The provision states that if a person willfully fails to furnish his Income tax return and the tax amount evaded exceeds ₹ 10,000, then he will be punishable with rigorous imprisonment of period 6 months which can be extended up to 7 years.

Considering all the facts and provisions, its very important to file your return timely and properly. After all its your hard earned money, that don’t deserve to be wasted.