Just the other day, I got a rather usual message from a teenage cousin. It was a troll message on the famous Alia Bhatt ( now you know why its rather usual :P). This is how the message goes (pardon me if you have already heard this one, because it is undoubtedly naïve)
Alia Bhatt: Dad, what is your plan for the weekend?
Mahesh Bhatt: Income tax returns!!
Alia: When did the first one release? 😛
To be honest, I know it is a poor joke. However, the only reason I put it here is to highlight the significance of filing Income Tax Returns [(Even Mahesh Bhatt files it ;)]. Also, the aim of this post is to assert the importance of filing returns when your taxable income is below the prescribed threshold.
Individuals, whose total income without allowing any deductions exceed the basic exemption limits are mandatorily required to file Income Tax Return (ITR).
So, what does total income, without allowing deductions mean?
For this, you first need to know the existing exemption limits, beyond which you are liable to pay tax.
For Assessment year 2015-2016, the basic exemption limits are the following:
- Individuals below the age of 60, the exemption limit is INR 2,50,000
- For senior citizens, whose age is between 60 to 80 years, the exemption limit is INR 3,00,000
- For super senior citizens, whose age is more than 80 years, the exemption limit is INR 5,00,000
Let’s say, Mr. X has an income of INR 2,80,000 and his deductions under section 80C come to INR 50,000 for A.Y. 2015-2016. Hence, taxable income is INR 2,30,000 (INR 2,80,000 – INR 50,000). Now, since this amount is below the thresholds mentioned above, the tax payable is nil.
However, here the striking point is – Mr. X is required to file his returns because his Gross Total Income (total income before allowing deductions) is above the exemption limit of INR 2,50,000 (assuming he is not a senior citizen).
Now, the question is “Why should one file the return when his/her income is below taxable limit?”
Filing income tax return does not necessarily means paying taxes. There are a number of benefits that will ease your life and future plans if you file tax return. ITR acts as a credential of your financial well-being and serves as an evidence of your income. Additionally, it makes you a good law abiding citizen (like how Mr. Modi says).
Since the inception of the e-filing facility, the process of filing the income tax returns has become very simple and it does not involve any paper work. Hence it is very convenient for an individual to file return electronically. In case, you want us to file your tax return, we have tied up with a professional entity (quite dear to us) in order to provide this facility. In case you might be interested in leveraging such a service, please mail us at firstname.lastname@example.org
Now, let’s see the benefits that accrue when you file your tax returns consistently.
- The return is a declaration of your income and it is the first document that banks or financial institutions ask for, when you apply for a home loan or an education loan or any other type of loan. Before granting loans, lending institutions would assess your financial credibility through your returns.
- If you are looking for higher education or employment abroad, ITR is the largely accepted income proof both in India and other parts of the globe.
- In case for a particular year, a tax refund is due after the adjustment of prepaid taxes (tax deducted at source), it is necessary to file tax returns to get that refund from the Income Tax Department.
- If you have incurred a business loss or loss under the head ‘Capital Gains’, you have to file the return within the due datein order to carry forward that loss to the next year. Therefore, in order to adjust your future income with the losses, return filing is a must.
- ITR filing is necessary for registration of immovable properties. Most states require the production of tax returns for the last 3 years.
- In order to process your Visa, many countries require the acknowledgement of tax returns as proof of an individual’s financial credibility.
- Last but not the least, it is your moral and social obligation to contribute to the development and progress of the nation by filing correct income tax returns and paying taxes (if any).
Well, this is it!
I know that most of you would be aware of most of the mentioned advantages of filing returns. However, considering that the tax filing dates are closing in, we thought it is apt to open with a post on “significance of filing returns”.
Please let us know of any doubts via comments or over email.