What is Income Tax?

When people hear what income tax is, they get the obvious answer: Any income tax is called income tax. However, this is more complex than many people think. There are hundreds of clauses that define various aspects of income tax, making it complicated for all. However, don’t worry. In this blog, we’ll cover the basics of income tax and the related aspects everyone should know. 

A Brief on Income Tax

The charge against the annual income of every individual or business earned in a financial year is known as income tax. The Income Tax system in India is based on the Income Tax Act of 1961, which provides governing principles for the computation, assessment, and collection of income tax. 

Every taxpayer is required to file an income tax return on or before the respective due dates annually, which is compulsory under the law. For example, the last date of income tax return filing for assessment year 2023-24 is 31st July. ITR is filed to report one’s income and claim a tax refund. 

Income tax returns can be filed online or offline on the official website of the Income Tax Department. The Indian Income Tax system consists of several deductions and exemptions that contribute to reducing tax liability for any financial year.

Who Should Pay Income Tax?

Any person whose income exceeds ₹ 2.5 lakh annually in a financial year has to pay tax to the income tax department. For senior citizens, that limit goes up to 3 lakhs per annum. Moreover, for super senior citizens (above 80 years) the limit is 5 lakhs per annum. 

Besides that Companies, Bodies of Individuals (BOI), Corporate Firms, local authorities, associations of persons (AOPs), and Hindu Undivided Families (HUFs) also need to pay income tax.  Due to complexities in the tax system and their broad working area, they hire tax consultants for filing returns and other related work. 

Why Should Anyone Pay Income Tax?

The benefits of income tax, if sought, can be categorized into two: Personal and Public benefits.

Personal Benefits 

Visa applications

If you are going to visit the USA, UK, or Canada, you must show an Income Tax Return for at least 2-3 years to get your Visa approved.

Loan approval

More often than not, most high-value loans, such as Home Loans, also ask for copies of your ITRs. 

Income Proof

The ITR receipt also serves as proof of income for self-employed professionals, such as consultants, firm partners, or freelancers.

Public Benefits 

Public infrastructure

Infrastructure Projects are only possible because of the taxes paid by the taxpayer; the Government infuses funds for such projects.

Welfare Schemes

In health, education, housing, unemployment, or even food programs, Income tax is one of the primary sources of funds for such schemes.

Scientific Research and Defence

The tax money also helps the government provide adequate funds for maintaining and improving our country’s defense capabilities. 

Other ways the Government utilizes the taxation money include:

• Provide essential utilities like energy, water, waste management, etc.
• Government operation
• Government employees and state employee salaries
• Pensions
• And more

How to File an Income Tax Return?

The ITR is the document that every taxpayer has to file with the Income Tax Department of India, including the details of income received during a financial year and the amount of tax due to the government. 

According to Section 139 of the Income Tax Act of 1961, filing the return is mandatory every year. In case of failure to file the return on time, late fees are imposed under Section 234F of the Income Tax Act, 1961.

Here are the steps:

1: Go to the Income Tax e-filing website

2: Register or Log in to the website

3: Fill in the required details

4: Choose the mode of Filing

5: Choose the status

6: Choose the appropriate ITR form

7: Fill out the form with the required details

9: Submit the form after rechecking the entered details

10: Proceed to validation

11- Validate your return through various online and offline means

Who Should File Income Tax Return?

Following are the entities or businesses that compulsorily need to file ITRs in India:

• All persons, up to 60, whose total income during a financial year exceeds Rs 2.5 lakh. For senior citizens, it is Rs. 3 lakhs, whereas for super senior citizens aged 80 and above, it is Rs. 5 lakhs. 

However, The income amount must be computed before giving deduction allowed under Sections 80C to 80U and other exemptions under section 10.

• All registered companies have an income, whether or not they have made a profit through the year.
• Whoever desires a refund on the excess tax deducted/income tax paid by him.
• Charlie has assets or financial interest entities located outside India.

To know more about this, talk to a tax consultant in Pune. 

When is it  Mandatory to Submit an Income Tax Return File?

If gross total income is more than the basic exemption limit, everyone should file an income tax return. 

You are still obliged to file your tax return in the following cases if your income is less than the basic exemption limit:

• Deposited more than Rs 1 crore in a ‘current’ bank account: If you deposit a cumulative sum of Rs. 1 crore in one or more current accounts with a bank, you will be required to furnish a return of income compulsorily. No such requirement, however, has been laid for deposits made in the post office’s current account or;

• Deposit more than 50 lakh rupees into the savings account: If you have deposited Rs 50 lakh and above in one or more of your savings bank accounts, filing your income tax return is mandatory.

• TDS or TCS is more than Rs 25,000: If the tax deducted at source (TDS)/ tax collected at source (TCS) is more than Rs 25,000 during the previous year, excluding the current year. For a senior citizen (above 60 years), this limit is Rs 50,000.

• Professional earnings of over 10 lakh INR: If you are a professional and your gross receipts were over 10 lakh INR during the previous year, you must file a return mandatorily.

What are the Benefits of Filing an Income Tax Return?

1. Easy Loan Approval

2. Proof of Income

3. Quick Visa Processing

4. Claim Tax Refund

5. Compensate for Losses

6. Presumptive Taxation Scheme

7. Avoid Penalties

8. Medical Insurance

Conclusion 

Income tax is essential for generating revenues for any government that runs public services. By paying income tax on time, and as per the rules and regulations, we help our country grow faster. Income tax returns filing is an intrinsic part of income tax, and for that, you can talk to the best tax consultants in Pune from Tax Workers. They can help you with the complex web of income tax. 

FAQs 

Can Income Tax Returns be filed after the due date?

Yes. You can file your Income Tax Return after the due date. However, it will be considered a belated tax filing, and you will have to pay an additional penalty ranging between Rs 1,000 and Rs 10,000.

Is filing of ITR Mandatory?

Yes. Filing the ITR is mandatory if your income profile falls under any taxable income slab, as per the provisions of the Income Tax Act of 1961.

 Can anyone file IT returns without Form 16?

Yes. IT Returns can be filed without Form 16, and then you have to use alternative documents such as– Form 26AS, payslips, and investment records.