ITR Filing: Failure to pay advance tax can result in penalties and interest charges.
ITR or Income Tax Return is a form you submit to the Income Tax Department that details your income earned and taxes applicable for a specific financial year (April 1st to March 31st of the following year).
Filing your ITR is important for a couple of reasons;
- Tracks your tax liability: It helps the government determine the income tax you owe based on your income sources and deductions claimed.
- Claim tax refunds: If you’ve paid more tax than you owe, filing an ITR allows you to claim a refund from the Income Tax Department.
While several taxpayers understand the relevance of paying taxes on time, some still get confused about whether they need to file ITR when they have paid the advance tax.
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ITR and advance tax are integral components of the taxation system in India, each serving distinct roles. ITR is a formal declaration submitted by individuals and entities to the Income Tax Department, detailing their income earned during a financial year.
ITR filing is obligatory for those whose total income exceeds the specified threshold, ensuring compliance with tax laws and facilitating accurate reporting of financial affairs.
On the other hand, Advance Tax is a system whereby taxpayers settle their income tax obligations in instalments throughout the financial year, rather than in a lump sum at year-end.
Do you need to file an ITR even when you have paid all the taxes in advance?
According to the IT department, filing of income tax returns for individuals is mandatory for every person whose income (before considering certain exemptions and deductions) exceeds the maximum exemption limit. With effect from Assessment Year 2020-21, it is mandatory for every person, who is not required to furnish a return of income under any other provision of section 139(1), to file a return of income if during the previous year he/she:
- Has deposited an amount (or aggregate of amount) over Rs. 1 crore in one or more current accounts maintained with a bank or a cooperative bank.
- Has incurred aggregate expenditure over Rs. 2 lakh for himself or any other person for travel to a foreign country.
- Has incurred aggregate expenditure over Rs. 1 lakh towards payment of electricity bill.
- Fulfils such other conditions as may be prescribed.
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The CBDT vide notification No. 37/2022, dated 21-04-2022, has notified additional conditions under the seventh proviso to section 139(1) whereby return filing is made mandatory. These additional conditions are as follows:
- If total sales, turnover or gross receipt of the business exceeds Rs. 60 lakh during the previous year; or
- If the total gross receipt of the profession exceeds Rs. 10 lakh during the previous year; or
- If the total of tax deducted and collected in the case of a person during the previous year is Rs. 25,000 or more. The threshold limit shall be Rs. 50,000 in case of a resident individual of the age of 60 years or more; or
- If the aggregate deposit in one or more savings bank accounts of the person is Rs. 50 lakhs or more during the previous year.
- Even when the advance taxes have been paid, the same needs to be reported to the IT department through the income-tax return filing procedure.
- This completes the self-assessment of income and taxes are computed on the same.
- Failure to file the income tax return will attract a levy of penalty.
- Form 26AS reflects the taxes that have been reported by the third party to whom the taxes have been deposited or by whom the taxes have been deducted.
- Income-tax return helps in reconciling the records as submitted by the assessee and as per Income-tax department records.
- The assessee claims a refund.
Is it necessary to file an ITR?
There are a few categories of taxpayers exempted from filing ITR even if their income exceeds the basic exemption limit.
Senior Citizens with Pension Income:
- If you’re a resident senior citizen above 75 years old with only pension and interest income from the same bank where you receive your pension.
- The bank must be a specified bank authorised by the Central Board of Direct Taxes (CBDT).
- In this case, you can submit a declaration to the bank, and they’ll deduct TDS (Tax Deducted at Source) after considering deductions and rebates.
Individuals with income below the exemption limit:
If your total income during the financial year falls below the basic exemption limit set by the government (usually Rs. 3 lakh under the new tax regime).
Read More: CBDT issues FY’25 interim action plan for tax officers
However, filing an ITR can still be beneficial even if you fall under these exemptions. Here’s why:
- Claim Tax Refunds: Even with an advance tax or deducted TDS, you might be eligible for a tax refund if you have deductions or tax credits that weren’t factored in beforehand.
- Loan Applications: Some banks and institutions may require ITR documents when applying for loans or credit cards. Filing can help demonstrate your financial history.
- Visa Applications: While not always mandatory, ITRs can be helpful documentation when applying for visas to certain countries.
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