Income Tax in India is collected by the Income Tax Department, which is a government organization. There are 2 types of taxes – direct taxes and indirect taxes.
In the case of direct taxes, corporations must pay the tax payments directly to the IT department; throughout the case of indirect taxes, the company collects the tax on account of some other company and transfers this to the IT department.
The structure of direct taxation is widespread throughout the country and applies to each and every earning entity – individuals, Hindu Undivided Family (HUF), Body of Individuals (BOI), Association of Persons (AOP), businesses, corporations.
Such organizations must apply their taxable income to the IT Department at the end within each assessment year via the Income Tax Return Process.
Even so, income tax for people, HUFs, AOPs, BOIs, companies, and business entities varies. In the same way, the tax of Indian nationals and aliens is also treated differently.
Indian people are expected to provide the entire pool of their income in India and abroad during tax filings; while foreigners are charged only their earnings from India.
Importance of filing income tax returns
The filing of tax returns is also an annual activity seen by many as a moral and social obligation of each and every responsible citizen of this country.
It is also the basis for all the government to measure the amount as well as the implications of expenditure of citizens and also provide a framework for all the assessors to assert reimbursement, among many other aspects of remedy from time – to – time.
Show That you are responsible:
The law requires persons who receive a defined amount of taxable income to file tax returns within such a pre-defined period of time. The taxes as determined shall be delivered by the person. Refusal to pay tax would then lead to penalties from the Income Tax Department.
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Many who receive less than defined income level may file rates of return on a voluntary basis. Filing your returns is an indication that you really are responsible for it.
Perhaps not that, this also makes it easier for people and business owners to approach the transaction period as their revenue is tracked, if there are any, even by the tax department with the applicable tax.
Filing returns is mandatory in some cases:
Even though your level of income is not qualified for compulsory return filing, it could still be a wise idea to file a return on a voluntary basis.
With most states, the registration of immovable property requires the compilation of the tax records of last 3 year as evidence. The filing of returns makes it much easier to record the payment.
The financial institution that issues loan or payment cards may see your return:
When you’re looking to apply for a new loan, in the long run, it’s a great idea to establish a constant history of filing returns, because the home mortgage company would most probably rely on it.
In fact, if you’d like to qualify for a mortgage as a co-borrower, you can also consider filing your spouse’s returns. Similarly, also credit card companies might well assert on the evidence of return prior to issuing a card.
If you want to claim adjustment against past losses, a return is necessary:
Filing returns has several benefits, irrespective of whether you receive the required amount of income required to file a return.
Numerous debts suffered by a person or a company, both speculative and non-speculative, short-term and long-term capital losses and various other forms of loss of income not measured throughout the tax return for the financial year, could not be shown to be excluded for tax purposes in following years.
And it’s important to file returns on a regular basis since you never realize when you might want to demand improvement against previous losses.
It might prove helpful in case of revised returns:
In the event that the assessor has still not filed the initial report, he could not file a revised return later, even though he really wants to. Under the Income Tax Act, non-returns may be subject to a fine of Rs 5,000.
Thus, while submitting returns is a volunteer practice, there are many occasions when it could have legal repercussions to those who don’t, particularly if they have to file an updated return in the future.