Well, it’s that time of the year again. You are split between whether or not to file your income tax return this year. You end up weighing in the pros and cons of Filing IT return until you get fed up and decide to do it from next year onwards. This is what happened to me until one particular year I decided to take the plunge and file my tax returns. Well, this didn’t exactly bring any miracles but it did bring a certain level of benefits which I am going to discuss here now.
If you are not convinced about how filing income tax return can help you, this article is just for you. The good news here is that the Income Tax Department has made the entire process extremely simple especially in the recent days. If you have the collected the right forms (Form 12B and Form 16) from your employer, filing is just a few clicks away. Let’s take a look at why filing income tax return is necessary for every earning member in the country.
1. To claim tax refunds
If you want to claim tax refunds on investments made, it is absolutely necessary to file your IT return. At the time of income tax declaration in your company, you may have under-declared your investments in a bid to have a realistic tax payment estimate. However, over the course of the year, you may have invested in something that may have attractive returns. If this is the case, you can claim refund on the TDS (tax deducted at source) paid from your monthly salary. All you have to do is submit proofs of investment along with your income tax return. The eligible Amount will be refunded to your bank account automatically.
2. To create a financial history
Since the moment you start earning, your Financial History leaves a trail of breadcrumbs that can be easily tracked by various rating agencies. If your financial history is positive, you are likely to have easy access to everything ranging from loans to VISAs. By filing your IT return every year, you can show a positive financial history that can be tracked for the above mentioned purposes.
3. To avoid penalties
If the two reasons mentioned above didn’t convince you, it is worth noting that late payment of taxes or late filing of IT returns are typically followed by penalties. The deadline for filing income tax return in India every year is July 31st, unless extended for some reasons. Anyone with gross income about Rs.2.5 lakh per year must file returns. Late payment of taxes (if not deducted as TDS) could attract a fine of Rs.10,000. Late income tax filing could attract penalties up to Rs.5,000 (if filed before December 31st) or Rs.10,000 (if filed after December 31st). If you wish to avoid these penalties, you must file your IT returns on time.
4. To avoid additional interest on tax liabilities
If you owe taxes to the government, late payment will also involve an additional interest amount on the amount due. In addition to the penalties imposed for late filing or late payment, you must pay additional interest on the tax you owe to the government. The IT department collects 1% of the tax amount as fine every single month. For instance, if you owe a tax amount of Rs.10,000 and the payment is delayed by 3 months, the IT Department will charge an additional interest of Rs.300 along with the late penalties.
5. To buy high value life insurance covers
IT return filing will be helpful If you want to purchase high-value life insurance covers. In this case, the company will ask for your income tax return in order to evaluate your earning potential. This must be provided alongside your income proof. This is especially necessary if you are buying coverage for over Rs.50 lakh. If you don’t have the necessary documents to support your income, the company is likely to reject to insurance application.
If you are filing IT returns for the first time, you may ask for an experienced friend to guide you. There are professional services available for this. However, this is just a waste of money in my opinion. With e-filing options, the IT department has made it extremely simple for everyone to file their returns. All you have to do is create a login account with your PAN number and fill in the required details. Once you upload your Form 16 or Form 12B, everything else is almost self-explanatory. Once you have entered the details, make sure that the tax amount is tallied and submit it for verification. The IT department will send you a verification note to your email ID once the process is complete.
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