Comprehending Income Tax:
- An Income tax return is fundamentally a predetermined form in which an individual’s estimation of income and its corresponding attributes are provided. An IT return form is used to compute the total tax liability of a taxpayer living and earning in India.
- When a financial year ends, it means that it is time for a taxpayer to file his/her tax returns. In a scenario where you have paid tax in excess, you will be required to claim refund on the same. Basically, income from all sources are computed and henceforth the total liability is calculated.
- There exists multiple classifications of income, and hence multiple ITR forms exist as well. ITR 1 to ITR 7 are the forms which incomes from different heads fall under.
Now that we are clear with the basics of income tax, it is time to understand the grave consequences that follow non-filing of income tax returns in India.
As much as filing income tax returns might seem like a tedious job, it is also important to bear in mind its importance in the realm of taxation, claiming refunds, and filing. More often than not, people forget to file their due income tax returns and as a result miss out on the due date. There are also times when people just do not want to invest that kind of energy into income saving and documentation that is hefty in nature.
- Interest in huge quantum and subsequent penalty: In case the Income tax department deems it fit, they will issue a notice to any individual who has failed to file his/her income tax return. This notice is issued under Section 142(1) of the Income Tax Act, 1961. Furthermore, even after the issual of the notice if there is a non compliance from the taxpayer’s end, a penalty is thereafter sanctioned against them. If the taxpayer owes any taxes to the Department of Income Tax, penal interest conforming to Section 234A at the rate of 1% on a monthly basis will be levied till all dues are cleared. Depending upon the gravity of the situation, the penalty is issued, which may vary from person to person.
- Materialisation of Legal Prosecution: In a recent statement issued by the Supreme Court, it was declared that non-compliance to provisions of IT returns in any form will be prosecuted inordinately. It is the liability of the taxpayer to ensure that he/she is filing his/her income tax return on time, while maintaining accuracy. This statement must be taken very seriously by every single taxpayer of the country as during the course of the prosecution, the said taxpayer can be asked to provide the exact reasons for not being able to file their returns on time.
- Concealment Penalty will be Issued: If you have assessable income yet have not filed returns, you will be served with a penalty because you have concealed your income. This penalty will vary between 100% to 300%.
- Tax Refund will be Delayed: Even after tax refunds have been paid off, there remains a certain amount of money that the Indian Government can withhold. Therefore, if you have failed to file your income tax return on time, you will miss out on the previous year’s refund as well.
- Application for Loans will Become a Hassle: When you are applying for any kind of loan (personal, education, car, and so on), there is a requirement to declare your income. This is done because banks usually gauge an individual’s financial capacities before sanctioning any loan. Therefore, it is of utmost importance that one stays in compliance with the guidelines of the Income Tax Department.
File your income tax returns on time for a hassle-free financial year!