Tax season: Ensure honest income and financial details

It's that time of the year again when we have the opportunity to showcase our financial responsibility and integrity! It's a time for transparency and accountability, ensuring that we contribute to the growth and development of our nation through responsible tax compliance.

This article is a refresher course on what ITR is and why you should file it.

What is ITR

ITR refers to Income Tax Returns which are filed by taxpayers in order to furnish information related to their income and the income tax liable to the government.

Who has to file ITR

In India, filing an Income Tax Return (ITR) is mandatory under certain conditions. Here are the key scenarios in which individuals are required to file their ITR:

Income Threshold: If an individual's gross total income exceeds the basic exemption limit before claiming deductions under sections 80C to 80U or exemptions under section 10. For the financial year 2023-24, these limits are ₹2.5 lakh for individuals below 60 years, ₹3 lakh for senior citizens (60-80 years), and ₹5 lakh for super senior citizens (above 80 years).

Business and Professional Receipts:

• If the total sales, turnover, or gross receipts in a business exceed ₹60 lakh in a financial year.
• If the total gross receipts in a profession exceed ₹10 lakh in a financial year.

High-Value Transactions:

• Deposits exceeding ₹1 crore in one or more current accounts during the financial year.
• Expenditure exceeding ₹2 lakh on foreign travel for self or any other person.
• Expenditure exceeding ₹1 lakh on electricity consumption during the financial year.
• Deposits exceeding ₹50 lakh in one or more savings bank accounts during the financial year.

TDS and TCS: If the aggregate of tax deducted at source (TDS) and tax collected at source (TCS) is ₹25,000 or more during the financial year (₹50,000 for senior citizens).

Foreign Assets: Resident individuals who hold any asset (including any financial interest in any entity) located outside India, have signing authority in any account located outside India, or are beneficiaries of any asset located outside India must file an ITR.

Losses: If you wish to carry forward and set off losses incurred under Income from House Property, Profits and Gains from Business or Profession, or Capital Gains against future income.

Even if your income is below the taxable limit, you may still need to file an ITR if you meet any of these criteria. But a question arises, Afterall–

Why should you file ITR?

Here are the reasons and benefits of filing an income tax return.

• Essential Documentation for Loans: Your Income Tax Return (ITR) is crucial for loan approval, serving as proof of your consistent income and repayment capability. Whether it's for vehicles, homes, or personal commitments, timely filing ensures smooth processing.

• Tax Refund Claims: Filing your ITR allows you to claim refunds when Tax Deducted at Source (TDS) exceeds your actual tax liability, providing a mechanism to reclaim excess payments.

• Address & Income Validation: ITR doubles as official proof of address and income, simplifying documentation needs for various purposes, from official procedures to financial transactions.

• Smooth Visa Processing: Embassies often require past tax returns to assess financial responsibility, making timely ITR filing imperative for hassle-free visa applications.

• Carry Forward Losses: Timely ITR filing enables you to carry forward losses from stocks, businesses, or rental income to offset future income, reducing tax liabilities effectively.

• Contracting & Government Tenders: For contractors, accurate and timely ITR filings are essential to qualify for government tenders, ensuring compliance and reliability during tender reviews.

• Term Insurance Approval: Insurance providers rely on ITR records to verify annual income when approving term insurance plans, determining coverage amounts based on earnings.

• Startup Funding Evaluation: Investors scrutinize ITRs to evaluate business financial stability and profitability, crucial for securing funding for startup ventures.

Important Documents

These are the documents necessary to file an ITR. Keep them handy!

1. PAN Card and Aadhaar Card
2. Form 16/16A/16B/16C/26AS and AIS/TIS
3. Bank Account Details- statements and passbook
4. Home Loan Statement
5. Tax Saving Instruments under section 80 of IT act
6. Capital Gains Details
7. Rental/Foreign/Dividend Income
8. Interest Certificate

Conclusion

In conclusion, filing your Income Tax Return (ITR) is essential for demonstrating financial responsibility and ensuring compliance with legal requirements. It facilitates loan approvals, visa processing, and insurance coverage while enabling tax refunds and loss carry-forwards. Keep all necessary documents handy to streamline the process. By filing your ITR on time, you contribute to the nation's development and maintain a clear financial record. As always,

Happy Investing!!!