Income Tax means the tax paid by an individual directly to the government depending upon his profit or income, determined by your tax bracket. The government collects the direct tax and uses it to develop our country’s infrastructure. It is also used to pay the salaries of state government and central government employees.
The two types of taxes which the government levies on its citizens are Indirect taxes and Direct taxes. The government levies direct taxes on income or profits. Tax deducted every month in form of TDS from salary is an example of direct tax. Tax filing online is one of the best ways to initiate tax payment.
The tax which is levied on services and goods is called Indirect tax. Tax paid whenever you purchase goods or commodities and also avail the services is Indirect tax. For example when you buy packaged food items, footwear, medicines etc. and also when you avail services of transport or restaurant, services of tour operators, translator, and interpreter, you pay indirect tax in the form of VAT, GST.
Income Tax Collection
Income Tax is collected basically in three ways by the Government:
- TDS – Tax is deducted at the source
- TCS – Tax is collected at the source
- Taxpayers make payments into designated Banks voluntarily
Categories of Income Tax
Below are listed taxable categories according to the source of income as per IT Law:
- Income in form of salaries
- Income received from capital gains
- Income received from house property
- Income or profit earned from business
- Income received from other sources
Every individual has to file ITR (Income Tax Return), whether he has a regular or irregular income source. You should file IT RETURN even if you do not come under the bracket of tax. By filling the prescribed forms you inform the IT Authority regarding your income earned and tax you paid. Various forms prescribed for various classes of people who pay tax is shown in the table below.
|Form 1 of ITR||For people earning their money from property consisting of a single house, pension, salary, other income earned not by gambling or lottery and their complete income is up to Rs. 50 lakh.|
|Form 2 of ITR||For persons as well as Undivided Hindu Families, which are not doing any commercial activity in form of owners.|
|Form 3 of ITR||For persons as well as HUFs earning from commercial activity in form of owners.|
|Form 4 of ITR||For HUFs as well as Professional persons who are proprietors.|
|Form 5 of ITR||For persons who are not individuals, HUFs and company as well as for persons filing ITR- Form 7|
|Form 6 of ITR||For companies that do not claim any exemption according to section 11.|
|Form 7 of ITR||For persons as well as companies, which have to file Return according to sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F).|
IT Return filing deadline extended
The deadline has been extended by Central Board of Direct Taxes (CBDT) for filing Income Tax Return (ITR) from 30th September to 15th October.
For those taxpayers who did not file their ITR, it is a big relief. The taxpayers think that this extension is a big relief. But on the other hand, they are missing certain sections that show the importance of ITR filing before the date due. First and foremost it is required to know that, this extension of the deadline is useful for companies.
Final date for filing IT Return as well as audit report of the financial year 2017-18 is extended by the CBDT. The regulatory body extended the deadline after consultation with all investors.
Pay any Income tax which you have to pay before 30th September in order to avoid the interest under 234A. If you make a delay to file ITR, then interest is levied according to section 234A. In other words, if you file IT return after the specified date due, then according to section 234A you are liable to give interest.
That is, even though to file IT return due date has been extended to 15th October, still you have to pay the unpaid tax that can attract interest according to section 234B as per IT Act by 30th September; otherwise you are liable to give the interest of 30 days.
You should give interest on pending tax which is due according to section 234A if you file IT return after 30th September. The rate of interest levied is one percent every month or the time delayed for filing ITR. Interest levied is in form of simple interest.
With help of an example, we will be able to understand this better. Suppose you have an outstanding tax of about 4 lakhs but IT return is filed by you on 15th October instead of 30th September of a year of assessment. It means that you are delayed by 15 days in filing of ITR. This fifteen days time is considered as a month.
Hence, 4,00,000 x1% x1 (month) = Rs. 4000. You will be paying Rs. 4000 more than the tax money that you have to pay according to section 234B. If you make more delay then you will have to pay more interest money.
The following two cases are the reasons for interest levied according to section 234B:
- The advance tax has to be paid you but you fail to pay your advance tax;
- Advance tax paid by you is below ninety percent of your assessed tax.
Advantages as well as Uses of Filing ITR
Following are advantages as well as uses regarding IT Return Filing
- Easy Loan Processing
It is easy for the economic institutions to check your economical credibility if you file ITR. That is, if you, as a taxpayer applies for a loan then it is easy to process bank loans.
- Foreign Travel
Filed IT return proofs are necessary to process your foreign trips’ visa procurement.
- Carry Forwarding the Losses
You can carry forward the losses such as the business deficit, speculation deficit, capital loss etc. only when you file IT return before the due date.
- Tax Refund
Any tax paid by you additionally can also be claimed by filing your ITR.
- Passport Application
If you are applying for a passport, then it becomes easy if beforehand you have filed IT return as it is proof for ECNR (Emigration Check Not Required). A photocopy of your filed IT return assessment needs to be submitted along with actual payment receipt of latest IT return filed. On the contrary, one can give IT statement attested by the authority.
- Insurance Claim
If there is an accidental death, a company which gave insurance will need an income proof to process this claim. It may lower amount of claim significantly if IT Return filed is missing because IT Return filed is one and only document which the court accepts for such cases.
- Government Tenders
If you file ITR, it helps you to apply to government tenders, panel enrolment, etc. Tender scrutiny committee checks last 5 years filed ITRs which are submitted by you. This is to check your financial status and if you have worked on a tender of a particular scale or not.
- High Life Risk Cover
If one wants to buy a high life cover of Rs. 50 lakh or 1 crore, then one can buy only if one has filed IT Return. Insurance providers verify an individual’s annual profit or income with help of his or her IT Return.
The process of IT Return filing
One can choose to file IT return with the IT department as per the methods are given below:
- You can furnish it on a form.
- One can furnish using electronic mediums ones return using signature digitally.
- You can transmit the data using electronic mediums under electronic verifying code in the return.
- You can transmit the data using electronic mediums in the return and then submit verified return by Return Form ITR-V.
Filing IT Return electronically
The process of IT collection, as well as filing return, has become digital due to the IT department. Portals of the IT department help persons as well as businesses for paying their taxes online, filing their ITRs as well as track the history of their payments without much difficulty.
Benefits of E-filing IT Return
The following are the benefits of E-filing Income Tax Return:
- You can E-file IT return from any place, at any time.
- Electronic filing of IT return saves ones time and efforts.
- Electronic filing of IT return is simple, not difficult and also fast.
- The processing of e-filed ITRs is generally faster than the returns filed manually.
The Government uses IT money which people pay for activities which help in building our nation. Our country’s infrastructure has improved by the IT paid by you. Money which a person pays as IT is utilized to improve governance. This money is also utilized for running various public services smoothly. So, paying IT people contributes towards the bright future of India.