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Should file your income tax returns in time

Yatheendradas C.k. at 09:21 PM - May 29, 2019 ( ) Views: 92


Last Updated : May 29, 2019 10:38 AM IST | Source: Moneycontrol.com
Here's why you should file your income tax returns in time
Where an individual files a tax return after the due date, interest is levied at the rate of 1 percent, per month, for each month of delay following the due date of return filing on any remaining tax payable
Moneycontrol Contributor@moneycontrolcom

Divya Baweja, Divya Agarwal and Pooja Verma

Filing of income tax returns (ITR) is around the corner and authorities have already released the necessary utility for such filing. People consider it a tedious task and procrastinate, thus starting late, which then leads to delay in filing or in an incorrect filing. The due date for filing ITR for individuals is July 31 of the following year. Thus for the tax year 2018-19, the due date is July 31, 2019.

There is also a provision available to file returns after the due date. The returns so filed are treated as belated. Further, an individual is also given a window to revise the tax return in case any error or omission is noticed after the original return has been filed. The due date of filing a revised or belated tax return say for the tax year 2018-19, is March 31, 2020.

It is important to be aware of the circumstances under which it is mandatory for an individual to file tax returns. Firstly, in cases where income exceeds the maximum exemption limit (for general category Rs 2.50 lakh, for senior citizens 60 years or above Rs 3 lakh and for senior citizens 80 years or above Rs 5 lakh) specified under the Income Tax Act, 1961 (IT Act) for various categories of individuals, it is mandatory to file a tax return.

Also, in situations, where an individual incurs a loss from the business/profession or under the head capital gain and wishes to carry forward such loss to subsequent years to take a set-off against future years’ income, it is mandatory to file ITR on or before the due date.

Further, where the total income of an individual is less than the maximum exemption limit, but tax has been deducted at source (TDS), a return will need to be filed to claim the refund. This situation is commonly seen in case of senior citizens and non-resident Indians. Comprehensive and timely review of Form 26AS (annual statement of income and tax deducted thereon) will ensure identification of such situations to avoid loss of tax refund.

Timely filing of tax return is important to avoid interest and late fee implications. Where an individual files tax return after the due date, interest is levied at the rate of 1 percent, per month, for each month of delay following the due date of return filing on any remaining tax payable.

In addition, an individual has to mandatorily pay a late filing fee of Rs 5,000, in cases where the return is filed on or before December 31, and Rs 10,000, if the return is filed post-December 31. However, the late filing fee cannot exceed Rs 1,000 where the total income of an individual does not exceed Rs 5 lakhs.

Along with filing the tax return on time, it is equally important that the filing is accurate and complete. Each year, the tax department notifies new tax return forms to reflect changes made in tax provisions and disclosure norms. New tax return forms notified for the tax year 2018-19 require additional disclosures such as specifying the conditions for determination of residential status in India; in case of non-resident individuals, additional reporting of the number of days spent in India, country of residence and the respective taxpayer identification number.

In case an individual is a director in a company, details such as name and Permanent Account Number (PAN) of the company, whether its shares are listed or not and Director Identification Number (DIN) are required to be reported in the tax return form. Additional reporting in Foreign Asset Reporting (FAR) schedule is introduced in respect to depository accounts, custodial accounts, equity and debt interest and insurance details.

Above disclosures will require additional time for the collation of necessary information and hence it is important to start the return process early. This year tax return forms have been notified immediately after the end of the tax year, giving taxpayers adequate time to gather the requisite information and file the tax return on time.

With the advancement of technology and high-end processing systems, it has become easy for the tax department to track transactions carried out by an individual through various sources. Thus, it becomes all the more important to correctly report the income and make appropriate disclosures to avoid notices or scrutiny at a later date.

Keeping the above views in mind, it is prudent that ITR is filed before the due date to ensure that all taxes are paid well in time and to avoid last minute stress and hassles. Furthermore, it will help in better planning of taxes and will facilitate informed decisions.

Author Divya Baweja is Partner, Deloitte India. Divya Agarwal is Senior Manager and Pooja Verma is Deputy Manager with Deloitte Haskins and Sells LLP.

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