Updated on: Feb 27th, 2023
8 min read
An income tax return(ITR) is a document that you file with the government. This return informs the government about your income, investments and the tax payable.
1. If your total income in the year is more than the tax-free limit-
|Below 60 years||Rs 2.5 lakh|
|60 years or more but below 80 years||Rs 3.0 lakh|
|80 years or more||Rs 5.0 lakh|
2. If you want to claim an income tax refund.
3. If you have earned from or have invested in foreign assets during the FY.
5. If the taxpayer is a company or a firm, irrespective of profit or loss.
6. If you have a loss from business/profession or under capital gains head, you will only be allowed to carry them forward to the next years if you file the return before the due date.
7. If you have deposited a total of Rs 1 crore or more in one or more current accounts with a bank. However, no such restriction has been placed on deposits made in post office current accounts
8. If you have deposited more than Rs 50 lakh in your 'savings' bank accounts
9. If you have spent more than Rs 2 lakh on foreign travel, whether for yourself or any other person
10. If the yearly electricity expenditure is more than Rs 1 lakh
11. If your tax is withheld in the form of TDS/TCS is more than Rs 25,000. For a senior citizen (above 60 years), this limit is Rs 50,000.
12. Your business turnover is more than Rs 60 lakhs
13. Income from your profession is more than Rs 10 lakhs
Claim Tax refunds: If you earn less than Rs 5 lakh a year, you can get back all the tax that was deducted from your income only by filing tax returns by the 31st July deadline.
Legal consequences: If you don't file tax returns, the income tax department may send you a notice. You may face huge penalties and taxes if you do not file ITR, despite their reminder.
Carry forward of Losses: If you have losses in your business or capital gains, you can carry them forward to reduce your future tax liability by filing tax returns on time.
Verified income statement: Freelancers and self-employed people don't have official income statements like salaried employees do, so filing tax returns is the most reliable way to verify their income.
Loan and Visa application: When applying for a loan or visa, your last 3 years ITR is required. Submitting tax returns from the last few years can help lenders or embassies verify your financial status and eligibility.
Late-filing fee: If you do not file ITR within the due date, you may have to pay a late-filing penalty of Rs 5,000. This penalty will be reduced to Rs 1,000 if your income is below Rs 5 lakh.
Interest: You may have to pay interest under Section 234A @ 1% per month or part month on the unpaid tax amount.
If you are wondering which ITR to file, take a look at this.