This year, July 31st is a pretty important day – it is after all the last day for filing Income Tax Returns (ITR). Moreover, filing ITR has been made much easier for salaried individuals this year through the Sahaj (ITR-1) form. However, more often than not, many of us tend to wait till the very last moment before e-filing Income Tax Returns on incometaxindiaefiling.gov.in.
The following is a short list of 5 reasons why everyone should consider filing their income tax return online not just before the due date but actually well in advance.
- Avoiding Penalties and Fines
Just as late payment of your credit card or phone bill leads to penalties being levied, so does filing your taxes after the due the date. This is especially true if you are liable to pay additional taxes at the time of filing. In such a case, the penal interest rate is 1% per month starting from the last date of filing your returns to the date the returns were actually filed. Furthermore, in case this unpaid amount exceeds Rs. 3,000, the IT Department can actually initiate criminal prosecution against you. Isn’t it better to just get your ITR filed on time in order to avoid such unpleasant and potentially expensive issues?
- Getting a Chance to Revise Your Returns
The ITR filing process might have been simplified but still mistakes can happen in the form of overlooked income, missed tax benefits, etc. In case you have filed your ITR in a timely manner, you do get opportunities to revise your returns even after the due date has passed. Common mistakes, such as missed income and extra tax paid, can cost you in the long term whether through fines imposed by the IT Department or through loss of tax refunds. Best of all, as long as the initial ITR was filed before the due date, you can file the revised returns any time before the end of the current financial year. Thus as long as the ITR is filed by 31st July 2017, the revised returns may be filed any time before the 31st of March 2018.
- Preventing Interest Loss on Refunds
Tax payers are entitled to a 6% annual rate of interest on the extra tax paid if the refund amount exceeds 10% of the total tax payable. Such refunds are most commonly available to individuals who have ended up paying extra tax through advance tax or TDS. In case the ITR is filed within due date, the interest accrued on the refund is calculated from the 1st of April of the Assessment Year to the date on which the refund amount is actually processed. However, in case of late filing by the tax payer, the interest is computed from the date of actual filing till the date on which the refund was processed so at least 4 months’ worth of interest from April to July will be lost in case the ITR is filed after the due date. This loss of interest can be quite substantial if you have a large tax refund due to you.
- Carrying Forward Losses
In case you incurs losses in business income, capital gains, income from other sources, etc., these can be carried forward to the next financial year and provide tax relief in the subsequent year. Unfortunately, such losses cannot be carried forward in case the ITR is filed after the due date. The carrying forward of losses is also not allowed even if all taxes that were due had been paid in a timely fashion even though the ITR was filed after due date. The only exception to this rule is the loss incurred on income through property.
- Eliminating Last Moment Stress
Even though filing Income Tax Returns has definitely become a lot easier through the years, in case you wait till the last minute to file your taxes, there is a good chance you might miss out one or more tax savings that were due to you. This can happen because you might not have sufficient time to collect relevant documents such as TDS certificates, loan repayment statements, interest certificates, Form 26AS, etc. which are necessary to complete the process accurately. Additionally, if you wait till the last moment like a majority of tax payers, you might find that the e-filing income tax website is overloaded with requests leading to all manners of technical failures, which might end up delaying the ITR filing process. This sort of stress is definitely avoidable if you proactively file ITR online well before the due date.
The above reasons might be the main ones but they are definitely not the only reasons why an individual should consider filing their Income Tax Returns before the due date. In recent years, submission of ITR is sometimes demanded by banks as an income proof when granting a loan as well as by foreign visa granting authorities as proof of financial stability. In case your ITR shows that it was filed after the due date, it might just result in a poor impression of your credit worthiness/financial discipline and that’s easy enough to avoid just by filing your tax returns in a timely manner.
Also read: How to e-File Your Tax Return