Four facts you SHOULD know about filing IT returns

If you have just begun your financial life as an income tax payer you must know these facts about filing your returns

Now that the financial year is coming to a close, we immediately need to think about filing of the income tax returns for the year about to end.

One of the questions which many individual tax payers ask: Do I need to file returns as my employer has already deducted tax at source?

1. So who is required to file the returns?

In this article I will touch upon this topic and my discussion is restricted to individual persons only and is not intended to cover other income tax payers.

We see that many a salaried employees are under the impression that since income tax is deducted at source by their employer, they are not required to file income tax returns. But this is not the correct position according to income tax laws.

Let us discuss the correct position of the law as to who is liable to file his return of income.

Credit line: The author is CFO, Apnapaisa.com

As per the present provisions of Income Tax law, an individual whose total income exceeds the exemption limit has to file his return of income though s/he might have paid all the taxes or taxes have already been deducted from her/his income.

This exemption limit presently is Rs 1.6 lakh for ordinary individual, Rs 1.9 lakh for women taxpayers and Rs 2.4 lakh for senior citizens.

While calculating the above amount of basic exemption limit for your liability to file the tax return, the deductions available to you in respect of various deductions available under Section 80C, 80 CCF, 80D, 80 DD and 80 DDB etc. will not be considered.

Let us understand this with the help of an example: Suppose your taxable salary as per Form no. 16 issued by your employer is Rs 2.4 lakh and you have other income of Rs 10,000.

Since you have invested an amount of Rs 1 lakh in items eligible for deduction under Section 80 C, your taxable income comes down to Rs 1.5 lakh, and therefore your employer has not deducted the tax on the same.

You may be under the impression that since your net income is below the exemption limit and since no income tax has been deducted from your salary, you need not file your income tax return. This is not the right impression to be in, but generally people are under the same impression.

However the legal provision is different.

You have to compare your income before deduction for various deductions like life insurance premium, mediclaim insurance, housing loan repayment and school fee for your child etc.

In case your aggregate income before deduction for these expenses exceeds the basic exemption limit as mentioned above, you are required to file your return of income. As pointed out in the above example you may neither have any tax liability to discharge nor any tax ducted at source (TDS) to claim refund, yet you are required to file your income tax return.

2. By when should I file my return?
In case you are required to file your income tax return as discussed as above, the due date for filing the same is July 31, 2011.

3. What if I miss the above date of July 31, 2011?

In case you fail to file your return by the due date as prescribed by law, you can still file your return of income by March 31, 2012 for the year ended March 31, 2011 but you will not be able to revise your return of income in case you notice any mistakes or errors in the return of income filed belatedly.

Therefore it is advisable to file your return of income by the due date. Moreover in case you have incurred any loss in respect of business, or any speculative business or capital gains and want the same to be carried forward for set off in subsequent year, you will have to file the return by July 31, 2011 or your claim for carry forward and set off of such loss shall be lost for ever.

4. Is there any penalty if I miss the due date?

There is no penalty if you file the return of income for the year ended March 31, 2011 by March 31, 2012. However if your income is taxable and you fail to file the return of Income by March 31, 2012, the income tax officer can levy a penalty of Rs 5,000 after giving you a notice to explain the reasons.