One of the taxes that is placed directly on your own earnings or income is income tax. Income tax is a tax on your wages that you must pay. One of the most well-known and little-understood parts of personal finance is income tax.
Also Read: Income Tax Advisory Services
Why is it necessary for an individual to pay income tax?
Income tax is a major source of revenue for the government, which it utilizes to pay its operations and provide services to the public.
What is the purpose of an income tax return?
Every taxpayer is required to report his or her earnings to the Income Tax Department at the end of each fiscal year on a form mandated by the government. ITR is the name of the prescribed form. It’s a list of all the money you made in a given fiscal year.
These earnings may include:
- Earnings from a job or a pension
- Earnings from a job or a business
- Other kinds of income, such as interest income,
- Gains on Capital Assets
- Income from rental properties, etc.
You can fill out one of the CBDT’s seven forms to file your tax return. ITR -1, ITR2A, ITR 2, ITR 3, ITR 4S, ITR 4, ITR 5, ITR 6, and ITR 7 are the names of these forms.
The ITR serves as a standard evidence of income and aids in the establishment of a tax record with the IRS. When you file your ITR, you are proving that you have earned money and paid taxes on it.
Is it necessary for me to file an income tax return in India?
In the following circumstances, you are obliged or advised to file an income tax return:
- Total Gross Income: You must file a tax return if your gross total income exceeds Rs 2.5 lakh. Senior elderly and very senior citizens have cut-off limitations of Rs 3 lakh and Rs 5 lakh, respectively. Please keep in mind that the gross income is before any tax deductions under different sections such as 80c, 80D, 80G, and 80E.
- NRI : An NRI is subject to the same income brackets as a resident of the United States. In India, income earned or accrued is taxable. Foreign income is defined as income that is neither received nor accrued in India. In India, you can disregard such income when filing your income tax returns.
- Losses are carried forward: You must file your ITR if you have any losses under any Head of Income that you want to carry forward to the next Financial Year, such as capital losses or business losses.
- Refund: If you want to get a refund, you must e-file your ITR.
- Foreign Investments: If you are a resident Indian with a stake in a company based outside of India, you must file an ITR.
- TDS: Even if you have no tax dues, it is advisable to file an ITR if TDS has been taken from your salary and/or income from other sources such as interest income from FDs/RDs, etc.
- Financial Transactions with a High Value: It is recommended that you file your tax return if you have made any high-value transactions. For example, if you deposit cash in one or more bank accounts of a person totaling Rs 10 lakh or more in a financial year, the bank(s) will report to the IT department.
- Notice of Compliance: If you’ve been filing ITRs for a few years, it’s a good idea to keep doing so even if you don’t have any taxable income in a given fiscal year. Otherwise, you risk receiving a ‘compliance warning’ from the IT department for failing to file your income tax return.
- Income that is tax-free: If you have received any money that is not subject to income tax, you can include it in your tax return as proof of your earnings.
Is it necessary for me to file a tax return even if I have no taxable income?
Filing tax returns has its own set of advantages. A proof of income tax return filing may be necessary if you wish to take out a loan or apply for a visa. You can file a tax return even if you have no taxable income. You can demonstrate your financial/income status.
Another situation is that your income is below the taxable limit, but your employer has reduced TDS (tax deducted at source) or that you have made some money through part-time consulting work, and the company has deducted TDS at a rate of 10%. As a result, because your income is less than the taxable limit, you are entitled to a TDS “refund.” You must file your tax return in order to receive this refund.