Rajesh got his first job 2 years ago after graduating from a well-known institute. He happily worked in a renowned MNC and was happy to know that his taxes were deducted from his salary and paid on his behalf by his employer. He was proud of his contribution towards his country. But today, he was struck dumb when he found a notice from ITD (Income Tax Department) lying on his desk. He was worried and confused wondering what went wrong. Many young taxpayers often find themselves in the same situation. They think that they have fulfilled their duty after paying taxes and often confuse return filing as an additional compliance levied upon them by ITD. Today we will clear the air around it.
Paying taxes honestly and timely is the responsibility of every citizen. Civic amenities that we use today are a result of taxes paid in the past because what goes around, comes around. After paying taxes, we also need to file tax returns. Do not worry; it is not an additional tax liability. It is a proof that you have paid the correct amount of taxes with the ITD and that there are no taxes due on your account. It is important that you file your taxes on time as failing to do so attracts penalty, prosecution and scrutiny from Income Tax Department. However, avoiding the penalty is not the only reason to file your tax returns. The benefits lost on non-filing of returns are more than the penal provisions imposed for non-filing. Filing returns is being made mandatory by the government for many since a tax return is a widely accepted proof of income. Filing provides that much required legal sanction to your income that can be used as a proof of income.
There are several benefits associated with filing Income Tax Return:
If you want to go abroad sometime in the future, you must file your taxes honestly. Your financial soundness is always vetted through your ITRs by financial institutions and high commissions that are responsible to allot you visa. They receive several visa requests but have limited visas to offer, so they are looking for reasons to reject your case. Your job is to plug any loopholes in your application and having a good tax filing record helps strengthen your case.
Whether you want to take a loan for buying a house, starting a business or to buy your favourite car, you need to present last three years of ITR to showcase your financial strength to banks. Banks use it to assure themselves before sanctioning your loan.
Major benefits of filing your taxes are tax refunds. Many times when taxes are deducted at source they are deducted at a higher rate and hence you may become eligible for a refund. Filing your taxes helps you in tax refunds from the government since in your tax return you can produce an account of the correct calculation of taxes and hence claim refunds.
Paying your taxes and filing your returns on time can bring you mental peace and satisfaction. You can be proud of being a meaningful contributor in the nation building efforts of the government.
Non-filing your returns can lead to a lot of problems like attracting a penalty of Rs 5000, no provision to carry forward the losses of previous years incurred in sale transactions or even business. Many times you may also face legal implications for not filing your taxes since there are legal provisions against those who do not file taxes regularly.
Filing taxes is always a plus for you since it keeps you on the right side of law and also keeps your income documentation complete. You are less likely to face any hindrances in the various important financial transactions.