Filing tax returns is an annual activity which must be fulfilled as a moral and social obligation by every citizen of this nation. This is a means for the government to determine the amount and means of expenditure of its citizens. The government mandates a specified amount of income which requires to be filed as a tax return within a pre-determined due date. Failure to do so would invite interest and pe-nalties from the IT department.
While most people are aware of the requirement of filing tax returns many are still unclear about the implications of not filing returns on time. The last date for filing returns is July 31 for financial year ending March 31, 2012. In case of assesses whose accounts require to be audited as per provisions of the IT Act the date is generally September 30.
Implications of filing income-tax returns
There are several allied issues which are associated with the filing of I-T returns. Filing returns provides legal sanction to your income whether or not you are liable to pay taxes for that assessment year.
The government has, in fact, made it mandatory for all citizens to file retu-rns whether or not they come under the taxable bracket. Filing income-tax returns makes it easier for individuals and firms to enter into subsequent transactions as the income they have shown is now in the knowledge of the tax department and the tax for the same has been paid as per records. This also a means by which every citizen contributes to the progress and development of the nation. The money collected through taxes is the corpus from which the government undertakes welfare activities to impr-ove the living conditions of the citizens.
Advantages of filing income-tax returns
Apart from helping the cause of the nation, filing I-T returns on time has other individual advantages.
n Processing of home, educational and other types of loans require I-T returns to be shown to the lending institutions.
* It is mandatory to have income-tax returns for the processing of visa of any country.
* Registration of immovable properties in most states req-uires one to produce tax returns for the last three years.
* Issuing financial instruments of all kinds such as credit cards mandates the production of tax returns.
* Filing returns helps pad up legally tenable income which will be useful subsequently to account for the wealth or property owned.
Consequences of missing the deadline
There are several disadvantages of not filing tax returns on time:
* You can claim set off for the losses — speculative as well as non-speculative capital losses, both short-term as well as long-term and various other types of losses reported in the income-tax returns — incurred in the current assessment year against the profit of subsequent years for the purpose of tax calculation as laid down under the Section 80 of the Income-Tax Act.
* In case the original I-T return under Section 139 (1) of the Income-Tax Act has not been filed, then the revised return under Section 139 (5) also cannot be filed subsequently when the assessee needs it.
* Under Sections 235 (A), 235 (B) and 235 (C) of the I-T Act, non-filing of returns by assessees can attract a penalty of Rs 5,000 from the income-tax department.
While filing of income tax returns may seem a voluntary activity on the face of it, there are legal provisions against those who do not do so. Even if a person is not eligible for taxes under the current provisions of the I-T Act, it is wise to file the returns for the same so as to be on the right side of the law.
Additionally, filing retu-rns on time lends you peace of mind and decla-res all your income shown as legal since they have been taxed for.
(The writer is the CEO of BankBazaar.com)