The due date for filing income tax return for individuals-July 31 - is fast approaching but several people think that if one has paid all one's taxes there is no adverse consequence even if one misses the tax return filing deadline. However, this is not correct. Even if all your taxes have been paid you would still lose out on certain benefits if you do not file your income tax return by the due date.
What is Income Tax Return Filing?
Income tax return is a prescribed form through which the particulars of income earned by a person (individual, company, HUF etc.) in a financial year and taxes paid on such income is communicated to the Income tax department after the end of the Financial year.
What Reasons people give for not filing returns?
When it comes to filing of income tax return, some of common views that
My employer has already deducted tax on my salary income hence I don’t need to file my income tax returns!
I work hard & hardly find time. Why waste time on filing income tax returns.
The deadline for filing tax returns is far away, why bother now!
I have anyway missed the deadline for filing tax returns (July 31), so now it does not matter whether I file the returns or not!
What happens if you don’t file your ITR?
If you don’t file your returns you might be fined and penalised. This takes the form of interest if the return is not filed before the end of the assessment year. If the return is not filed even after the end of the assessment year, penalty may also be levied.
Paying taxes does not relieve you from filing obligations. Every country that has Individual taxation has 2 set of responsibilities for every citizen of that country. Firs if you earned certain amount of income say In India 2 lakh then you are suppose to pay any taxes (depends on what kind of deductions you have ) due as well as you have to report your income and taxes paid by way of submitting a form (tax return) to local tax authorities. Who then asses the amount you claimed as income and taxes payable or refundable on it.
If you have paid all your taxes correctly, then there is no major issue even in you do not / delay in filing your returns. However, in case the income tax department selects your account for scrutiny they can find you for up to Rs 5000.There are other associated problems you may face such as
1. ITR returns of past three years are usually considered by banks for granting loans. So you might face issues there
2. Losses in the current years cannot be carried forward to the next year for offsetting against losses in future years
3. The scrutiny of income tax authorities are said to be higher on accounts for which returns have not been filed, so you might have a higher chance of coming in the scrutiny net of the department, which is always a pain as you might not be filling your proofs etc and might forget the relevant details by the time they start their scrutiny. Up to 5 years remember.
4. Also ITR filling is an excellent time on understanding how much income tax you are paying and what are the opportunities to save tax. I would suggest you use it as such by filling it up in an informed manner. (That means a lot of Google and other searches in addition to just filing your returns)