Benefits of filing Income Tax Returns
Income Tax Return
The earlier we file better for us. But most of us delay it till last few days left. It’s better to file the return of income before 31st July. Maximum number of people think that since we have paid our taxes what’s the point of filing return of income before the due date. This attitude is not correct, even our taxes have been paid off still we should e file our return before 31st July as we might lose certain benefits.
- Firstly, if you have filed some information incorrect you can file revise return and file it before the due date of filing.A revised return u/s 139 (5) can be filed before the expiry of 1 year from the end of assessment year or before the completion of assessment whichever is earlier. So late filing will attract penal provisions.as belated return cannot be revised.
But wef 1-4-16 belated return u/s 139(4) can now be revised. However return filed under notice u/s 142(1) cannot be revised.
- Secondly, interest on refunds is lost by late filing of return of income. The interest is calculated from 1st day of April of the assessment year to the date on which the refund is granted, if the return of income has been furnished on or before due date specified u/s 139(1). If the return is not filed before due date of filing the interest on refund will be granted from date of furnishing return of income to date on which the refund is granted. The rate of interest will be 1.5% per month or part of month comprised in the period from the date of furnishing of return of income or payment of tax whichever is later.
- Thirdly, there can be carry forward of losses if there is return of income is filed. Only house property loss and absorbed depreciation can be carried forward. Losses under head business income, speculation business, Capital loss and loss under running and maintaining of horses cannot be carried forward. Hence people who have such business loss or capital loss should file return of income before the due date.
- Fourthly, if there is no filing of return of income before the end of the relevant assessment year then u/s 139(1) then penalty of Rs 5,000 may be asked to pay by the income tax authority.
For senior citizens who have taxable income less than basic exemption limit then after filing the return any tax deducted on the interest income on FD’s etc then refund can be claimed on such TDS deducted.
Thus efiling has made the process very easy in order to avoid last day crash of the website it is better to file return of income before due date and avail the benefits as above.
Benefits of Filing Income Tax Return
1. Avoid Penalty & Prosecution Notices
if you have deposited any amount in your bank account during the demonetization period or have entered into the high-value transaction, then you must file your Income Tax Return, as the income tax department has launched ‘operation clean money’ and many people who have done such transactions are being questioned. The best way to avoid this situation is to file your income tax return before the due date.
2. Create Credibility for Loan:
If you planning to take a loan in coming years, then you better get your ITR’s in place. Income Tax Returns of last three years is one of the basic documents required for taking home loans & education loan for your children. This helps banks in judging your pay-back capacity.
3. Rectify Mistakes:
In Case, you have already filed your ITR for FY 2015-16 (AY 2016-17), and now you discover that you have a mistake in your return either misreported or under or over reported your income and expenditure, then this is the last chance for you to revise your return before the tax department comes to you. For instance, you have income from FD, but you did not report it on your income tax return.
4. Carry Forward Your Loss from Home Loan:
If you have been paying your home loan EMI, but have not filed your return till date, then it’s the best opportunity to file your ITR and report your home loan interest payment as “negative income from house property” and take benefit of it (to be set-off from future incomes).
5. Avoid the defective return notice
To err is a human tendency. Chances of mistake may increase if you file your return just before the due date. Taxman may issue a defective return notice under section 139(9) of the Income-Tax Act, asking for the proof/ justification for the mistake and mismatch. The failure to respond can result in heavy penalties.
6. Protection against Black Money:
Events like “Demonetisation” can happen anytime! Any income not reported to the income tax authority comes under the radar of black money. So, avoid the unnecessary trouble in your already complicated life. File your income tax return every year diligently and avoid the risk of your hard earned money being termed as black money by the Income Tax officials.
7. Getting Credit Cards:
Having your very own credit card, can be a lifesaver in many situations of paramount importance whether you want to buy an expensive valentine gift or pay EMI of your Car Loan or Electricity Bill and you still has some time before your salary credits in your account. But, for enjoying such privileges again ITR comes in play at the outset at the time of application of your credit card.
8. Avoid the hassles of late return filing
Filing a return is not like shopping for a commodity online. It requires a strategy and a certain amount of care while filling up the form. So, filing it before the due date will save you tonnes of troubles later. You may need to rectify and revise your return later if you do it in the last minute.
9. Funding Documentation:
If you believe your business has the capability to be turned into the next unicorn. Then only working relentlessly will not do! You need to make your business number speak for itself. Many investors study your business scalability, profitability and other cost parameters from your business income tax return at the time of due diligence.
10. Registration of immovable property
Some states require your income-tax return of the last three years for registration of immovable property. Also, a legal sanction to income whether taxable or not helps you pad up subsequently to account for the wealth or the property owned.
11. Carry forward of losses
The losses incurred by an individual or a firm, belonging to the financial year of the return filed, under the head “profits and gains of business and profession” both speculative and non-speculative as well as capital losses under the head “income from capital gains” can be carried forward. However, one can claim this benefit only if they have filed their income-tax return before the due date prescribed. Filing your tax return before the due date will eliminate the chances of losses not being carried forward.
12. Review and Revise your Income Tax Return:
Okay, we all have been in that situation where we make a mistake in ITR and find about it later. Filing return early makes sure that you get enough time to review all the details. However, those who are unable to avoid silly mistakes, the department gives you time to revise and re-revise your Income Tax Return. Although this is possible only if you file your return within the time frame of the due date.
13. Premium Filing at Premium Time:
Consider a situation where you are stuck in a lot of traffic. What will happen? Either you will get a clear pass or you will get late to your office. And we all know the possibility of getting a clear pass. Similarly, when thousands of people try to file their return at the same time, the website experiences high traffic and might crash. Leaving you, late for filing your return. So, why file your ITR during the rush hour when you can easily avoid it by filing it earlier than others.
Consequences of not filing ITR on Time:
Penalty payment: A return filed till 31 December of the AY attracts a penalty of Rs 5,000 (Rs 1,000 if income is below Rs 5 lakh), whereas a belated return filed between 1 January and 31 March of the AY attracts a late fee of Rs 10,000. While earlier late fee was not mandatory, after the introduction of Section 274F in Finance Act, 2017, you can’t escape paying it.
Interest payment: You are also supposed to pay interest under Sections 234A, 234B and 234C of the Income Tax Act, 1961 on due taxes each month until you file returns.
Setting off losses not allowed: You are not allowed to carry forward certain losses to subsequent years for set-off. For instance, capital losses can be carried forward for the next eight AYs and can be adjusted against gains during these years, but only if the return is filed by the due date.
No interest on refund: If any tax refund is due to you and you file the return in time, you can earn interest on refund claim, that is, the excess tax paid on your income during the year as per Section 244A. However, in case of belated returns, you may lose the interest that would be due on the refund amount.
No provision to revise returns: also, there is a window to file a revised return. This is because filing a revised return is allowed only when original return has been filed within the due date.