Income Tax Saving – Part 1
Income Tax Return Filing is an annual exercise that any individual can and should do. In the Indian context, having a PAN (Primary Account Number) Card is essential for ITR (Income Tax Return) Filing. A large group of people does not do the ITR filing due to ignorance. Let me explain its importance:
Frequently Asked Questions
Q: What does ITR Filing mean?
A: It is the process of a taxpayer communicating the details of his taxable income/loss to the Income-tax Department in the prescribed form. It contains information about the person’s income and the taxes to be paid on it during the year.
Q: I do not have any income. Should I file an IT Return?
Q: I do have income, but it doesn’t fall under the Tax Bracket. Shall I do a return filing?
A: An individual should compulsorily file a tax return if the total income exceeds the basic exemption limit of Rs. 2,50,000 in a financial year. This also includes individuals who meet certain other criteria defined in the ITR rule. (Refer: https://incometaxindia.gov.in/Pages/i-am/huf.aspx?k=Return%20Filing)
However, it is advisable to do an ITR even if you do not meet the mandatory criteria. Those who do not have any income can do a NIL Income Return Filing.
Q: What if I miss doing the return filing before the due date?
A: If you miss doing the Return filing within the stipulated date, you can do it later as well by paying a penalty fee but only up to the period declared by the Government (December 31 for this year in India).
Q: What if I have never done the ITR? Shall I start now?
A: Yes, you can start doing ITR filing this Assessment Year onwards.
Q: I have heard that doing ITR will cause paying a lot of money as Tax to the government. Is it true?
A: It is not correct. There are various tax brackets for different income categories for paying taxes. Being responsible citizens, we must respect and follow the Tax rules just like any other law. Also, there are many categories of exemption. If you invest wisely, you can save Tax.
Q: How does ITR filing help me?
A: Doing ITR filing on time can help you to stay relaxed and stress-free from getting a notice anytime in the future from the Authorities. Proper ITR filing also enables you to get a Loan from a Financial Institution.
Understand that ITR is done not just to communicate your Income but also to claim a refund of Tax which is already deducted from your income in the form of TDS (Tax Deducted at Source). This is for those who are employed and are getting salaried income, those who are landlords receiving Rental income, or those who have a Fixed Deposit in the Bank of which interest exceeds the prescribed limit.
I will talk about the important categories of investments that can get an exemption, in the next issue of SheSight.
Sandhya Naren, MBA, CAIIB is a Branch Manager of a Public Sector Bank, a Writer, a storyteller, and a women’s coach on Personal Finance. She is the Co-founder of Manasa Learning Solutions, Life Skills Training Academy for women and children. Email: [email protected]