Before you set out to file income tax returns, here is a list of questions warm you up to the process.
In the previous article of the series, we explored five new rules to file income tax this year.
However, before you set out to file your taxes, here are a few frequently asked questions (FAQs) about income tax returns.
Q) I have a permanent account number (PAN). Do I need to file IT Return?
A) Having a PAN card does not mandate you to file tax returns. This depends on your annual income. According to the Income Tax Act, you're required to file a “Return of Income”, if your taxable income exceeds Rs 2 lakh in a financial year – the said limit has been increased to Rs 2.50 lakh in the FY16 budget, only for the current financial year – the tax bracket is still Rs 2 lakh for previous year returns.
You do need a PAN card to file tax returns. It’s like having a driving license – having one does not mean that it is mandatory for you to drive, but, in the event that you need to, you must have a driving license.
Q) Who needs to file income tax returns?
A) As mentioned above, anyone earning more than the basic exemption limit, needs to file income tax returns. Those who earn up to Rs 5 lakh annually, can file their returns in paper form, everyone else needs to file returns online.
Q What are the benefits of filling income tax returns (ITR)?
A) Filing returns or not has never been a choice – it’s a legal obligation and must be fulfilled by everyone who falls under the prescribed category. Apart from legal obligation, filing tax returns is helpful in the following situations:
- To get a home or personal loan
- For visa and immigration processing
- As a proof of income/ net worth certificate
- To claiming excess tax paid via refund
- Apply for a higher insurance cover
- And last and most important is, peace of mind
Q) Why do I need to file tax return if my company deducts tax at source (TDS) and pays it to the government?
A) Although tax is deducted at source (TDS), and you're not liable to any more tax to the government, it is compulsory to file returns if your income exceedds the basic exemption limit. Tax returns act as a declaration to the government that you have derived income only from the source revealed by you, and no other. It's like getting a No Objection Certificate (NOC) from the library when you leave college, even if you never stepped into the library, to reveal to the authorities that you have no pending books to return.
Q) I have not been able to submit investment proof like insurance premium, PPF, and so on, to my employer. Can I still declare and claim refund benefit?
A) Yes, you can claim these benefits while filing Income Tax returns and can submit your refund claim.
“Rishabh Parakh is a Chartered Accountant and the Chief Gardener & Founder Director of Money Plant Consulting, a leading Tax & Investment Planning Advisory Service Provider. He also runs a personal finance blog called “Mango Investor” aka AAM Niveshak at www.mangoinvestor.com. Readers are invited to send their feedback to rishabhparakh@moneyplantconsulting.net.”
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