Important to file an income tax return every year
Why it is important to file an income tax return every year
Income tax is a type of tax levied on an assessee’s total income for the fiscal year. It is important for every person to file an income tax return every year because if an IT return is filed every year, they will not face any difficulty in getting loans, getting visas, traveling outside India, and many more. It is more important that they complete their responsibility to follow statutory compliance on time and avoid a fine. Also, you can claim the income tax or TDS refund; for example, if the TDS deduction was high but the computed income tax on taxable income at the time of filing the return of income was comparatively low, then the balance tax can be claimed as a refund in the return of income.
TDS is normally deducted as per the prescribed rules of the Income Tax Act of 1961, but at the time of computation of the final income and tax payable thereon, the final tax liability may be more or less. Here, taxable income depends on exemptions, allowances, deductions, rebates, etc.
Apart from the TDS claim, excess payments of advance tax or self-assessment tax can also be claimed as refunds, similar to the above, or short payments can be paid with interest if any.
Also, assessees can admissible business expenses only when statutory compliance is followed by the businesses related to such expenditures for a particular financial year only once they file their return of income.
To avoid late fees, it is also important to file an income tax return every year.
Today, in this article, we are going to learn about why it is important to file an income tax return every year.
The Income Tax Department prescribed a total of 7 types of ITR forms for filing in India, which include ITR-1 to ITR-7, but the question arises: which form will be right for you or applicable for you, in which you can file your income tax return? So let’s discuss here how many types of ITR forms there are (Types of Income Tax Return) and which form you have to fill. Also, who can file a nil or zero ITR form?
Let’s first understand: What is ITR?
Before filling out the ITR form, it is important to understand what ITR is. And why should it be filled? Income Tax Return, or ITR, is a form in which a person gives information about his income for one financial year and the income tax will pay. Usually this period starts on April 1 and ends on March 31, i.e., the previous financial year for which assessees can file returns in the subsequent year, which is also called the assessment year. E.g., for income dated April 1, 2023, to March 31, 2024, assessees will be liable to file a return of income on or before the due date in the years 2024–2025 (here, 2023–2024 will be the financial year and 2024–2025 will be the assessment year).
For the years 2023–24, if the annual income of a person is more than Rs 2.50 lakh as per the old tax slab or more than Rs 3.5 lakh as per the new tax slab, then he will have to file an ITR. They can also voluntarily file a zero (nil) ITR if their income is less than this limit.
What do you understand by zero ITR?
Income tax returns are not just for individuals who are liable for income tax. Apart from normal ITR, the zero ITR form is also a type of ITR return, which is also called nil income tax return filing. If a person is out of the tax slab, which is prescribed by the Income Tax Department, and still can file the tax return form voluntarily, then it is considered a zero ITR filing. As per the Income Tax Act, it is not mandatory for low-income individuals to file an ITR.
Why it is important to file an income tax return every year
In simple terms, if you want to claim a refund from the Income Tax Department, you will have to file an income tax return every year to claim your extra pay tax or rebate. An income tax return is a form that is filed with the tax-assessing authority. It provides information to the department about income, expenditures, and taxes related to it. Apart from this, if you want to apply for a loan or visa or want to invest abroad, then this form is compulsorily required for many of such works.
Here is some additional information about the types of ITR forms:
As we describe, there are only 7 types of ITR forms: ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7, etc.
ITR-1: A resident (other than not ordinarily resident), if a salaried employee has income from salary, property, rent(from 1 house property), pension, interest, or agriculture (income up to Rs 5,000), he will file the ITR-1 form. This is also called SAHAJ. However, the total income of the individual should not exceed Rs 50 lakh for filing this form.
ITR-2: This form is usually filed by individuals or Hindu Undivided Family (HUF) not having income from business or professions who have earned more than 1 rental income through properties or assets apart from salary income or other sources. Taxpayers falling into this category have a total income of more than Rs 50 lakh, and income from agriculture may also be more than Rs 5,000.
(Note: ITR 2 can be filed in the above cases if you are not eligible for ITR-1).
ITR-3: This form should be opted for by individual taxpayers and HUFs who earn income from a profession or are business owners. Taxpayers who have income from investments in unlisted shares, capital gains, are partners in a company, are directors of a company, or whose business pension turnover exceeds Rs 2 crore should file this form.
(Note: ITR-3 can be filed if you are not eligible to file any other ITR’s like ITR 2, ITR4, and ITR5, etc.)
ITR-4: Individuals, HUFs, and partnership firms (other than LLP’s) who are residents of India and earning income from any business or profession in specific categories (like doctors, lawyers, transporters, etc.) under 44AD, 44 ADA, and 44AE and not more than 50 lakhs in a financial year and having agriculture income up to 5000 have to select ITR-4. It is also called easy form, or sugam.
ITR-5: This ITR-5 form is for institutions. Entities (other than individuals, HUFs, companies, or those filing ITR 7) who have registered themselves as firms, LLPs, AOPs, or BOIs need to fill out Form ITR-5.
ITR-6: ITR-6 is for those organizations that are not claiming exemption under Section 11 of the IT Act, 1961. Companies like limited or private limited, one person, LLP, etc. filing income tax returns under this section can only file them electronically.
ITR-7: This form should be filed by persons including companies required to file returns under u/s 139 (4A), 139 (4B), 139 (4C), and 139 (4D), such as political parties, scientific research associations, hospitals, medical institutions, universities, funds, news agencies, and other educational institutions, colleges, universities, or business trusts.
For further clarification or selection of ITR forms, you may discuss or read more at Kcorptax Online ITR Fling.
Come to also know about income tax refunds.
Many times it happens that a taxpayer pays more tax than his final assessed tax in a financial year (FY). In such a situation, an income tax refund is available. In simple language, an income tax refund is the additional tax paid by you that is returned by the Income Tax Department. Taxpayers who file their ITR within the stipulated time will also get interest on this refund. This can be possible if you pay an income tax return every year and file an ITR for all those years.
As you checked as above, there are various benefits to online ITR filing every year, and you are also compulsorily required to get a tax refund from an assessee. Apart from this, it will also be necessary for all to complete tax compliance every year to avoid unnecessary hassle or penalties.
Also Read: What is the penalty for non filing ITR