Why Should I file Income Tax Returns?

Dhruv is of the opinion that he does not need to get into income tax 'hassles' as his employer has already deducted tax before paying him his salary. Shweta does not file income tax returns citing that her salary is less than Rs. 2,50,000 per year. Vishaka works abroad and therefore has assumed that she does not have to file tax returns. Are they correct in their assumptions?

Filing of tax returns is important. You will know exactly how much you have earned, how much losses you have made and whether you have to pay taxes or not. The government also comes to know the income earned by people and the tax that is due to them. The government needs this for tax planning and financial planning. Here are 6 reasons as to why you should file your tax returns -

1) Your Total Income is greater than Rs.2,50,000 per year – If your total income (salary and other income like interest on bank account, rent received etc. comes up to more than Rs. 2,50,000, then you have to file your tax returns even if on computation, the tax comes to nil. If you do not file your returns, it is an offence and you will be liable for penalty.

2) You want to file a revised return – If you  made a mistake in calculating taxes and later on realise that you are liable to pay tax for that financial year and want to rectify your mistake, you will need to file a revised return for that financial year. This is possible only if you had filed returns in the first place.

3) Tax is Deducted At Source – Your employer has deducted tax at source. The bank deducts 10% tax  at source while giving you your interest income. But that is not enough. You have to document the fact that you have paid your taxes. This is done through filing income tax returns.

4) You have a refund claim – Suppose you paid taxes more than payable by you for one financial year. You realise that you have paid more than necessary. How do you get your money back? When you file tax returns and it is verified, the income tax department assesses the total amount payable by you and credits your account to the extent you paid more. This is possible only if you file your returns.

5) You need to offset capital losses – You have made losses while trading in shares or made other capital losses. Make use of those losses. When you file your returns, you can set them off against capital gains. The total tax payable by you is reduced. The losses can be carried forward and set off against next year's gains too if you have filed returns in both the years.

You are an NRI but you earn income in India – If you are an NRI and and your income in India exceeds Rs. 2,50,000 through one of the following sources, then you are liable to file tax returns-

Interest earned in NRO accounts

Income earned while being a resident for part of the financial year

Capital Gains on property in India

Income Tax Returns are also required for visa processing, loan processing etc.

The last date to file returns for the current financial year – April 2017-March 2018 is July 31, 2018. Remember to check if you are liable to file returns and do so on time.