FINANCE TIP OF THE DAY
Can you afford your loan?!
Know the quantity of loan you can afford. The banks may sanction loan based on your income but you should look at your monthly expenditure and see if you can afford the maximum that banks offer. As a thumb rule, remember not to let your credit exceed 40% of your income!
Why file tax returns?
Filing tax returns is an annual activity which must be fulfilled as a moral and social obligation by every citizen of this nation. This is a means for the government to determine the amount and means of expenditure of the citizens and also provides a platform for the assessee to claim refunds and other forms of relief from taxation as is applicable at that point of time. The government mandates a specified amount of income which requires to be filed as a tax return within a pre determined due date. The tax as applicable must be paid by the assessee failure of which will invite interest and penalties from the IT department. While most people are aware of the requirement of filing tax returns many are still unclear about the overall implications and repercussions of not filing returns on time. The last date for filing returns is 31st July for financial years ending on 31st march. In case of assesses whose accounts require to be audited as per provisions of the IT Act the date is generally 30th September.
Legal and Social Implications of Filing Tax Returns
There are several allied issues which are associated with the filing of tax returns. Filing the returns provides legal sanction to your income whether or not you are liable to pay taxes for that assessment year. The government has now in fact made it mandatory for all citizens to file returns whether or not they come under the taxable bracket. Filing returns makes it easier for individuals and firms to enter into subsequent transactions as the income they have shown is now in the knowledge of the tax department and the tax for the same has been paid as per records. This also a means by which every right thinking citizen of the nation contributes to the progress and development of the nation. The money collected through taxes is the corpus from which the government undertakes welfare activities to improve the living conditions of the citizens.
Advantages of Filing Tax Returns
Apart from helping the cause of the nation, filing income tax returns on time has many other individual advantages associated with it.
- Processing of home, educational and other types of loans require income tax returns to be shown to the lending institutions. Thus filing returns makes loans easier to process.
- It is mandatory to have income tax returns for the processing of any VISA.
- Registration of immovable properties in most states requires production of the tax returns of the last three years. Filing returns makes such registration procedures easier.
- Issuing of financial instruments of all kinds such as credit cards mandates the production of tax returns.
- Filing returns whether eligible for taxes or not helps pad up legally tenable income which will be useful subsequently to account for the wealth or property owned.
Consequences of Not Filing IT Returns on Time
There are several disadvantages of not filing the tax returns on time under the various provisions of the income tax department.
- The various losses incurred by an individual or a firm in terms of business losses both speculative as well as non speculative, capital losses both short term as well as long term and various other types of losses which have not been reflected through proper tax returns in a financial year cannot be shown for exemption the subsequent years for the purpose of tax calculation as laid down under the Section 80 of the IT Act.
- In case the original IT return under Section 139(1) of the IT Act has not been filed then the revised return under Section 139(5) also cannot be filed subsequently when the assessee needs it.
- Under the Sections 235(A), 235(B) and 235(C) of the IT Act, non filing of returns by assesses can attract a penalty of Rs. 5000 from the IT department.
While filing of income tax returns may seem a voluntary activity on the face of it, there are legal provisions against those who do not do so. Even if a person is not eligible for taxes under the current provisions of the IT Act, it is wise to file the returns for the same so as to be on the right side of IT laws. Additionally filing of proper returns on time lends you a peace of mind and declares all your income shown as legal since they have been taxed for. Individuals, companies, partnership firms, LLP, AOI, BLP and HUF are all liable to file the tax returns before the deadline.