About Income Tax
An
income tax is a direct tax that government impose on income generated by
businesses and individuals. It is a progressive taxation system in which the amount of tax
is determined by the way of slabs and other provisions due to which the tax
payable is as per the earning levels and capacity of individuals and
businesses. The Indian Direct taxation system is governed by the provisions of
Income Tax Act, 1961.
Taxpayers must file an income tax return
annually to determine their tax obligations. Income Tax Return (ITR) filing is
the process of providing a declaration in the form of a Statement about the
Income and Expenditure of the taxpayer to the Income Tax Department. This
declaration is used to determine the tax liability of the taxpayer and payment
thereof.
Filling of Income Tax
Return.
It is advisable for everyone to file their
Income Tax Return to Department, since the non-compliance of any of the
provisions of Income Tax Act and non-disclosure of the Incomes, assets and
other relevant facts leads to various complications, fancy penalties and may
also cause punishments like imprisonments. Hence it is advisable to be on a
safer side by filling ITR and disclosing facts in order to save time, costs and
avoiding other complications.
It is mandatory for the following persons to file their Income
Tax Return with the Income tax department.
1) Every person who has a total income that
exceeds the exemption limit ( The Current exemption limit is Rs. 2,50,000/-) is
liable to furnish Income Tax Return within the due date.
2) Any private company or public company whether
domestic or foreign company located in India or doing business in India.
3) Any firm including LLP (Limited Liability
Partnership) or Unlimited Liability Partnership.
4) Every HUF (Hindu Undivided Family), AOP
(Association of Persons) and BOI (Body of Individuals) – if the total income of
these bodies or entities exceeds the prescribed exception limit, is liable to
furnish Income Tax Return within the due date.
5) Any resident who has an asset located outside
of India (might include financial interest in some entity as well) OR any
resident who retains signing authority for an account based outside India – for
all these cases Tax return needs to be filed mandatorily in the prescribed form
irrespective of the amount of tax liability on those incomes.
Note: In certain
situations individuals or entities are not under compulsory requirement to file
the return. In such cases their tax filings are considered as Voluntary
returns, which are seen as valid tax returns.
Filling of Return in
case of Losses.
It is an incomplete statement that the filling
of ITR is required only in case of Profits and Income arising due to the
various sources. If any loss was incurred in the previous financial year then
filing of Income Tax Return tax is required by the taxpayer. The advantage of
filing the loss returns is that it allows one to carry the loss forward which
reduces the tax liability for the future years. Hence, it is highly advisable
to file the return for loss to avail the benefits arising out of such. In case of an
Individual Tax payer, if any loss was incurred in the previous financial year
then filing a tax return is not mandatory.
Tax return for loss is compulsory for companies
and firms and the provisions are as follows:
1) If the loss arises under the head “Profits and
Gains of Business and Profession” or under the head ‘Capital Gains’. Tax return
filing is mandatory in case the firm wants to carry forward this loss and
offset with the future income. Availability of this option is only possible if
the tax return indicating the loss is filed within the due date.
2) In case the loss arises under the head “House
or residential Property”, the loss could be carried forward even though the tax
return is filed after the due date.
3) In case the loss is to be offset against some
income in other category for the same year, it is permitted to offset even
though return is filed after the due date.
4) Loss of the earlier years could be carried
forward if the return of losses for those years were filed with due dates and
those losses were assessed.
5) If the loss is filed for return under Section
142(1), except for the loss under “House property”, other losses could not be
carried forward. However, the unabsorbed depreciation could be carried forward
for such cases.
Late Income Tax Return
As per the provisions the taxpayer have to
furnish the tax return before the due date as specified under the Section
139(1), or within the allowable time by a notice that is issued under the
section 142(1), otherwise the prescribed penalty is levied. But the flexibility
is provided for filling of ITR after the due date, the taxpayer may still file
the belated return for any prior years any time until the expiry of one year
that started from the end of the applicable year of assessment or before
conclusion of the assessment, whichever happens earlier. However, the taxpayer
might be charged with a penalty of ₹5,000, under Section 271F of IT Act 1961,
in case the return is submitted after the pertinent assessment year.
Revised Return
In case the Income Tax Return was filed within
due date but later the assesse has appropriate reasons to believe that that
there was some mistake or omission in the filing of the return, to correct
these mistakes there is provision for revised return of Income Tax and the
original return that was submitted be considered as withdrawn and the revised
return will be validated. But the revised return cannot be filled in case a
belated return is filled with the department and a late or belated return is
beyond the scope of revision. But it is to be remembered that for any
intentional mistakes or omissions and for any fraudulent filing, penalty will
be imposed on the tax payer.