Benefits of Filing your Income Tax Return on time

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Under Income Tax Law if your total income exceeds the basic exemption limit: You have to file the Income Tax Return within the prescribed time, i.e. by the due date.

This is applicable for the Assessment Year 2012-13.

As an Individual you are required by law to file your Income Tax Returns, if your total income without allowing deductions (such as Section 80C etc) exceeds the basic exemption limit.

For Assessment Year 2012-13, the basic exemption limits are the following:

•   For Men below the age of 60, the exemption limit is Rs. 1,80,000.

•   For Women, below the age of 60, the exemption limit is Rs. 1,90,000.

•   For Senior Citizens, whose age is between 60 years to 80 years, the exemption limit is Rs. 2,50,000. This is identical for men and women.

•   For Super Senior Citizens, of the age of 80 years or more, the exemption limit is Rs. 5,00,000.

What does Total Income without allowing deductions (such as Section 80C etc) actually mean?

Let’s say, your gross total Income is Rs. 2,00,000. You have paid Rs. 50,000 in LIC premium for claiming deduction under Section 80C. Your Taxable Income is Rs. 1,50,000 (Rs. 2,00,000 – Rs. 50,000). The tax payable on Rs. 1,50,000 is Zero.

However, even in this situation, you are required to file your Income Tax Return as your gross total Income exceeds the basic exemption limit of Rs. 1,80,000. (assuming you are not a senior citizen).

Exemption for filing Income Tax Return for Salaried Employees

For the Assessment Year 2012-13, there is an exemption from filing the Income Tax Return for Salaried employees, subject to the following conditions. 

•   Your Total Income after deductions (such as Section 80C etc) is upto Rs. 5,00,000.

•   Income other than Salary should be only from Saving Bank Interest, upto Rs. 10,000. If you have any other source of Income like House Property, Capital Gain, or even interest from fixed deposits, you will have to file your Income Tax Return.

•   You must declare this Interest Income from the Saving Bank to the Employer. The employer then has to deduct the TDS taking into account your Interest Income.

•   If you have a refund due, you need to your file your Income Tax Return to claim this refund.

This exemption is difficult to get in actual practice. You will most likely have to file your Income Tax Return.

This is because, you must declare your Interest Income to your employer before 31st March of the Financial Year. But in most cases, the Bank issues the Interest statement after 31st March. So it is virtually impossible to report the Bank Interest to the employer in time.

Compulsory filing of Income Tax Returns if you have foreign assets.

For the Assessment 2012-13, it is mandatory to file your Income Tax Return if you have any foreign assets. Even though you may not have any taxable Income.

When is e-filing your Income Tax Return compulsory?

For the Assessment year 2012-13, e-filing of the Income Tax Return has become compulsory for the following cases:

•   If your Total Income exceeds Rs. 10 Lakhs, then you must e-file your Income Tax Return.

•   If you own foreign assets, you must e-file.

I have paid all my taxes, do I still need to file my Income Tax Return?

As explained above, the law has placed an obligation on you to file the Income Tax Return even if you have no tax due.

The due dates of filing returns for Assessment Year 2012-13 are the following:

Category	Due Date
(a)   Most people fall in this category – Salaried employees, pensioners and other persons whose accounts are not required to be audited	31st July 2012
(b)   Companies and other persons whose accounts are to be audited	30th September 2012

What happens if a person does not file the Income Tax Return by the due date

You have to Pay Interest on Income Tax Due if you don’t file on time

If you do not file the Income Tax Return by the due date:

You are liable to pay interest at the rate of one percent for every month after the due date till the date of filing the return.

If No Tax is due: Interest is calculated on the amount of tax payable after adjustment of pre-paid taxes like advance tax, TDS etc. So, if there is no tax payable on the basis of the Income declared in the Tax Return, there is no liability for the payment of interest.

You don’t get the benefit of Carry Forward of Losses if you don’t file on time

Under income tax law, if you have sustained a Business loss or loss under the head “Capital Gains”, you can carry forward the loss ONLY if you file the Income Tax Return by the due date.

Therefore, if you have sustained a loss, you must file your Income Tax Return in time if you want to carry forward the loss for future adjustment with your Income.

Possibility of Penalty or Prosecution by the Income Tax Department

Say you could not file the Income Tax Return by the due date: To avoid any penalty by the Income Tax Department, you must file your Income Tax Return before the end of the relevant assessment year that is 31st March 2013.

Possibility of Penalty and Prosecution: If you do not file your Income Tax Return by 31st March 2013, the Income Tax Department may impose a penalty of Rs. 5000, even though the tax payable by you may be Zero.

Further, if a person has failed to file the Income Tax Return by 31st March 2013 and the tax payable after adjustment of advance tax and TDS exceeds Rs. 3000, he may be prosecuted for imprisonment also. However, this law is used in practice very rarely.

Other reasons for filing the returns of income within time

·         If a refund is due after adjustment of prepaid taxes, it is necessary to file the Income Tax Return to get the refund from the Income Tax Department.

·         Bank Loans: Further, the return is a declaration of your income and it will be extremely helpful when you are applying for a loan from bank. Before granting the loan, banks want to know your financial capacity and your income details as shown by you in income tax returns. 

·         Visas of foreign countries: Many countries want to know if you are financially sound before they issue you a visa and for this purpose they will rely on your income tax returns.