Income under the Income Tax Act is divided into five different heads, and the total of these is considered the Gross Total Income (GTI).
Tax is to be calculated on taxable income, not on the gross total income. Deductions under Chapter VI-A must be subtracted from the GTI, and tax is then calculated on the remaining income. For the purpose of computing the total income on which tax is to be charged (after deductions), income from various sources is computed under the following heads:
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Salaries (Sections 15 to 17)
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Income from House Property (Sections 22 to 27)
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Profits and Gains of Business or Profession (Sections 28 to 44)
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Capital Gains (Sections 45 to 55)
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Income from Other Sources (i.e., residuary income which does not fall under any of the preceding heads) (Section 56)
(These heads have unique deduction rules, computation methods, and reporting formats.)
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Why File a Return Even if No Tax is Payable?
The question that arises is: “If I don’t have to pay tax, why should I file my return of income?” The answer is that you absolutely should file your return. The benefits of filing a Return of Income (ROI) include:
1. Loan and Financial Requirements
When any person seeks a loan from banks or financial institutions, they first ask for a copy of the last three years’ Return of Income. This is a formality; they may not go into the details of whether you have paid tax or not, but they require it for their records.
2. Visa Applications
If a person wishes to travel outside India, they require a visa. When applying for a visa, it is often necessary to attach copies of the last three years’ Returns of Income.
3. Claiming TDS Refund
We know that when a person receives interest, commission, dividend, or payment for any kind of contractual work, if the amount exceeds the TDS limit, tax is deducted by the payer. If the person’s total income is below the taxable limit, they will not receive a refund of the Tax Deducted at Source (TDS) unless they file a Return of Income.
4. Carrying Forward of Losses
If a person incurs a business loss during the year, they don’t have to pay any income tax. However, to claim the benefit of carrying forward the loss to future years, it is mandatory to file the Return of Income, and it must be done before the due date specified under Section 139(1). This allows business losses to be adjusted against business income in subsequent years.
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Capital Losses: Any loss incurred from investment in stocks or mutual funds (Capital Loss) can be carried forward for up to 8 years and set off against Capital Gains in subsequent years.
5. Building Financial History and Creditworthiness
Filing a Return of Income regularly serves as an official record of your financial transactions, helping you build a clean and traceable financial history. This is considered essential for better creditworthiness and future compliance. If your income increases in the future and tax becomes payable, there will be no need for lengthy explanations regarding your financial past.
6. Avoiding Notices and Penalties
When you are submitting your Return of Income regularly, you are less likely to receive any kind of notice or penalty from the department.
7. Simplifying Government Procedures
In the future, if you want to start a new business or register under any Act like GST, your filed returns will be helpful and simplify government procedures. Furthermore, many government schemes require proof of income or financial history, and a copy of the filed return will be useful at that time.
Looking at the above benefits, it is advisable to submit your Return of Income regularly, even if tax is not payable.
Author Bio
yes for certain reasons stated above
I am not sure about Visa application
Normally they need your liquid assets statements certified by a CA .