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Income Tax

As financial year is about to end and approaching toward new financial year and new tax season, the frenzy begins. Some taxpayers are stressed and feared about how much taxes they need to pay to the government and in other side some are eagerly anticipate a tax refund from government.

 A lot of individuals seem to think that filing tax returns is voluntary and therefore dismiss it as unnecessary and burdensome. As we will see, this is not a very healthy perspective on tax-filing. Taxes must be paid—it’s the law. Filing tax returns is an annual activity seen as a moral and social duty of every responsible citizen of the country.

 In India there are some misconceptions about Income tax return filling. Where salaried people think that they need not to file income tax return as their tax already deducted. But taxation always doesn’t mean that you need to pay taxes from your pocket; most of the time you are eligible for refund. But what is a tax refund and why do we receive these in the first place?

 A tax refund is money owed to a taxpayer when total tax payments or credits are greater than the total tax liability. While tax refunds can be a result of a variety of situations, most people experience tax refunds because of paying more in taxes than they should. Most of the times, the government withholds money from employee salary in the form of TDS and if this amount surpasses what someone should owe, that money is reimbursed via tax returns.

Many people use this money to pay off loans, save for a vacation, or even go on a long-awaited shopping spree.

Why do we pay taxes?

1)   To Provide Basic Facilities for Every Citizen of the Country: Whatever money is received by the government in terms of direct tax and indirect tax is spent by it for the welfare of the citizens of the countrySome of the services provided by the government are: health care, electricity, roads, education system, free houses for poor, water supply, police, firefighters, judiciary system, disaster relief, taking care of bridges and other things of public welfare.

2)   Filing returns is mandatory in some cases: Even if your income level does not qualify for mandatory filing of returns, it may still be a good idea to voluntarily file returns. In most states, registration of immovable properties requires advancing as proof the tax returns of last three years. Filing returns makes it easier to register the transaction.

3)   To apply loan or credit card, company may want to see your return: If you plan to apply for a home loan in future it is a good idea to maintain a steady record of filing returns as the home loan company will most likely insist on it. Financial institutions may insist on seeing your returns over the past few years before transacting with you

4)   To Finance Government initiatives: All the local government of the state like village panchayats, block panchayats and municipal corporations receive fund from the state finance commission.

5)   To claim adjustment against past losses, a return is necessary: Various losses incurred by an individual or a business, both speculative as well as non-speculative, short term as well as long term capital losses and various other types of losses not recorded in the tax return in a financial year, cannot be shown for exemption in subsequent years for the purpose of tax calculation. So, it’s best to file returns regularly, because you never know when you may want to claim an adjustment against past losses.

6)   To avoid penalty and may prove useful in case of revised returns: In case the assesse hasn’t filed the original return, he cannot subsequently file a revised return, even when he really needs to. Under the Income Tax Act, non-filing of returns can attract a penalty of Rs 5,000. So, while filing returns is a voluntary activity, there are times when it could hold legal implications for those who do not do so, especially if they must file a revised return in future.

Making the calculations and completing the forms necessary for determining taxable income can be confusing and complex! But not filing tax returns can not be a solution rather it will create problems.  www.tachotax.com in providing services for making tax simple. So, lets file file Income tax return in time and be a compliant citizen.

Post Author: Tachotax

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