Financial Year 2022-23 is going to end and ITR Filing season is going to start soon. Income Tax Return Filing is our liability as well as our moral responsibility. Income Tax Return (ITR) is a document that is filed by taxpayers in India every year to report their income and pay taxes due to the government. It is a declaration of the total income earned by the taxpayer during the financial year and the corresponding tax liability. It is an annual statement that contains the income earned during the year, deductions claimed, and tax payable on the income earned. Filing ITR is mandatory for individuals and businesses whose income exceeds the specified limit set prescribed in Income Tax Act, 1961.
Sources of Income
In India, Income is taxable under these Sources, Income taxable under the head Salary, under the head House Property, under the head Business or Profession, under the head Capital Gain and under the head Income from other sources. On annual basis, we categorized our incomes according to these head and file our returns according to specified sections. The different types of ITR forms are ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7. The type of form that a taxpayer needs to file depends on their status and the nature of their income. Selecting wrong ITR form may create problem, so be careful while selecting ITR Form.
Who needs to file Income Tax Return?
It is mandatory for individuals, Hindu Undivided Families (HUFs), and businesses whose income exceeds the specified limit to file Income Tax Return. In case of Partnership Firm and company it is mandatory to File ITR in case of Loss also. However, individuals with income below the specified limit can also file ITR voluntarily to claim refunds or for other purposes. NGO’s running in the form of Society/ Trust/ Section 8 company are also need to file ITR before due date to claim benefits of Section 11 & 12
The Due date for Filing ITR is normally 31st July in case of Non Audit Cases. You can file belated returns till 31 December. If you missed that date, then you can file your pending Return with the help of Form ITR-U, which allows you to file their pending ITR of last 3 years. If you have missed ITR Filing for A.Y-2020- 21, A.Y-2021-22, A.Y-2022-23, then you can file them with help of ITR-U. For ITR filing for A.Y-2020-21, 31.03.2023 is the last date. After which ITR Filing for A.Y-2020-21 is not possible except in case of Section 148, where department do income escaping assessment.
Benefits of Filing Income Tax Return
A. Compliance with the Law
Filing Income Tax Return is a legal requirement in India, and non-compliance can result in legal and financial consequences. By filing ITR, taxpayers comply with the law and avoid any penalties or legal issues.
B. Claiming Refunds
Filing ITR is also beneficial for taxpayers who are eligible for a refund. If the tax paid by the taxpayer is more than their tax liability, they can claim a refund by filing ITR.
C. Proof of Income and Financial Status
Filing ITR serves as proof of the taxpayer’s income and financial status. It is a crucial document that is required for various purposes, such as loan applications, visa applications, helps in taking high value Term insurance and other financial transactions.
D. Loan Approval and Visa Application
Filing ITR is essential for individuals who apply for loans or visas. Banks and financial institutions require ITR as proof of income and financial stability, and without it, loan applications may be rejected.
Consequences of Non-Filing Income Tax Return
A. Legal Consequences
Non-filing of Income Tax Return can result in legal consequences, such as penalties, fines, and prosecution. The Income Tax Department has the power to initiate legal action against taxpayers who fail to file ITR within the due date or do not file it at all. This can result in hefty fines and legal charges, which can be stressful and time consuming.
If you fails to file your ITR, then department can assess your income on the basis of information available with them in the form of Best Judgment Assessment, Income Escaping Assessment. Information available with department may be wrong. If you fail to file ITR then they presume that incorrect information as correct and you have to pay heavy penalties on that.
B. Financial Consequences
Non-filing of ITR can also have financial consequences. It can lead to the loss of certain benefits, such as claiming refunds or carry-forwarding losses to future years. It can also affect the creditworthiness of the taxpayer, which can make it difficult to secure loans or credit cards.
Read More: WHY DO YOU GET INCOME TAX NOTICE? REASONS AND REMEDIES
An income Tax Return is a crucial document that every taxpayer in India needs to file to comply with the law and report their income and taxes. Individuals and businesses need to understand the correct types of ITR forms, the income limit for filing ITR, and the benefits and consequences of filing or not filing ITR. By filing ITR, taxpayers can claim refunds, prove their income and financial status, and avoid legal and financial consequences.