A lot of individuals seem to think that filing tax returns is voluntary and therefore dismiss it as unnecessary and burdensome. As we will see, this is not a very healthy perspective on tax-filing.
Filing Income tax returns is an annual activity seen as a moral and social duty of every responsible citizen of the country. It is the basis for the government to determine the amount and means of expenditure of the citizens and provides a platform for the assessee to claim refund, among other forms of relief from time to time.
1. Filing returns is a sign you are responsible: The government mandates that individuals/HUF/Corporate/ Partnership firm/Trust/Body of Individual/ Association of Persons etc who earn a specified amount of annual income must file a income tax return within a pre-determined due date. The tax as calculated must be paid by them individually. Failure to pay tax will invite penalties from the Income Tax Department.
Those who earn less than the prescribed level of income can file returns voluntarily.
Filing returns is a sign that you are responsible. Not just that, it also makes it easier for individuals and businesses to enter into subsequent transactions since their income is recorded by the tax department with applicable tax, if any, having been paid.
2. Filing returns is mandatory in some cases: Even if your income level does not qualify for mandatory filing of returns, it may still be a good idea to voluntarily file returns. In most states, registration of immovable properties requires advancing as proof the tax returns of last three years. Filing returns makes it easier to register the transaction.
3. Your loan, Insurance, Children Educational Institute or card company may want to see your return: If you plan to apply for a home loan in future it is a good idea to maintain a steady record of filing returns as the home loan company will most likely insist on it. In fact, you may even consider filing your spouse’s returns if you want to apply for a loan as a co-borrower. Likewise, even credit card companies may insist on proof of return before issuing a card.
Financial institutions may insist on seeing your returns over the past few years before transacting with you. In fact, the government may make it mandatory for them to do so, thereby indirectly nudging individuals to file returns regularly even when it’s voluntary.
4. Visa processing: Embassies of developed countries like the United States, United Kingdom, Canada, and Australia ask for ITR receipts of the past years to process your visa application. They are very particular about your tax compliance and hence, you are asked to furnish past ITR receipts. This helps them assess your income and ensure that you are able to take care of the expenses on your trip.
5. If you want to claim adjustment against past losses, a return is necessary: Filing returns on time has many advantages regardless of whether you draw the prescribed level of income necessary to file returns.
Various losses incurred by an individual or a business, both speculative as well as non-speculative, short term as well as long term capital losses and various other types of
In India we have two types of Taxes. Direct Taxes and Indirect Taxes.
Direct Taxes includes Income Tax, Minimum Alternative Tax (MAT), Fringe Benefits Tax (FBT), Dividend Distribution Tax (DDT) Securities Transaction Tax (STT) and so on.
Indirect Taxes Includes Goods and Services Tax, Custom Duty, Excise Duty, Value Added Tax (VAT), Professional Tax Etc.
When you work at a job to make money, you pay income taxes. Depending on how much money you make, a certain percentage (part) of the money you make is withheld (Tax Deducted at Source, kept out of your pay and sent to the government).
When you buy things at a store, you also usually pay Goods and Services tax, which is a percentage of the cost of the item charged by the store. If you own property, you also pay property taxes on the value of your property.
Paying your taxes is considered a civic duty, although doing so is also a requirement of the law. If you do not pay your taxes, the government agency that oversees taxes will require you to pay your taxes or else face penalties, such as fines or going to jail.
The money you pay in taxes goes to many places.
1. Paying the salaries of government workers.
2. Your tax amount help to support common resources, such as police and fire-fighters.
3. Tax money helps to ensure the roads you travel on are safe and well-maintained.
4. Taxes fund public libraries and parks.
5. Taxes are also used to fund many types of government programs that help the poor and less fortunate, as well as many schools!
6. Tax helps to provide and maintain health infrastructure in the country.
7. Tax money helps to ensure safety and security of countries boarder.
8. Tax money are utilised in Research and Development.
9. Taxes are utilised in Road, Railway, Waterways and Airways Infrastructure development.
10. Tax money provided as relief for poor and for their development.
11. Tax Money is utilised to provide justice and juridical infrastructure for every citizen.