Income tax returns
Particulars of income earned (such as salaries, business profits) by a person in a financial year, taxes paid on such income and tax savings to reduce taxable income are communicated to the income tax department in a prescribed form.
If your total income without allowing deductions (such as fixed deposits, life insurance premium under section 80C etc.) exceeds the basic exemption limit then you are required by law to file your Income Tax Returns. For Assessment Year 2021-22, the basic exemption limits are the following
• Individual (both men and women) resident aged below 60 years- Rs 2,50,000
• Individual (both men and women) resident who is of the age of 60 years or more but below the age of 80 years- Rs 3,00,000
• Individual (both men and women) resident who is of the age of 80 years or more- Rs 5,00,000
Benefits of filing income tax returns:
- Proof of income and net worth: Many organizations, such as banks to lend money or government departments to issue licenses, need to see your financial history and solvency. For this purpose they will require you to submit copy of tax returns that you have filed with the income tax department. For instance banks may want to see your income tax returns filed for last three years, before sanctioning any housing loan, business loan, or bank guarantee. Foreign embassies will require you to submit copy of income tax returns, if they have to issue you entry visa.
- To receive refund of TDS deducted: Many organizations from which you need to receive payment for your services are required to deduct, say 10% as TDS and deposit with income tax department. If you want to claim the TDS back as refund, you must file a income tax return. For instance TDS is deducted on salaries paid to employees, payments to contractors, commissions paid to agents, rent paid to land lords etc.
- Avoiding the tagline of black money: In its simplest form, ‘black money’ is money on which tax is not paid to the government. If a person files income tax returns every year, then his accumulated wealth is free from the danger of being identified as black money.
Documents required for filing income tax returns
- A copy of bank statement (for all savings/current/loan accounts) for the financial year starting from April 1 st of last year upto 31 st March of this year
- A copy of Life insurance premium paid between April 1 st of last year – 31 st March of this year
- A copy of children’s school/college fees paid between April 1 st of last year – 31 st March of this year
- A copy of fixed deposit (5 years term) in any bank or post office mae between April 1 st of last year – 31 st March of this year
- Any other tax savings made between April 1 st of last year – 31 st March of this year (refer to ‘tax savings tips’ in resources)
- In the case of salaried employees – Form 16 given by the employer
- In the case of business persons –
a) an account of expenses and receipts (refer to ‘financial tools’ in resources)
b) a list of properties and liabilities (refer to ‘financial tools’ in resources)
c) description of nature of business
- In the case of persons who have sold properties such as vacant plot or house
a) Registration document with sales details
b) Registration document with purchase details
- In the case of persons receiving rental income
a) Address details of rental house
b) Number of portions, floors, rent received etc
c) A copy of property/house tax paid receipt
d) If housing loan is availed, a copy of bank loan statement
Note: New clients should provide a copy of PAN and aadhar cards, in addition to the above