Benefits of filing Income Tax Returns

What is Income Tax?

Income tax is a key source of funds that the government uses to fund its activities and serve the public. An income tax is a tax that governments impose on financial income generated by all entities within their jurisdiction. By law, businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund.

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What will happen if you do not pay Income Tax?

You will receive a notice from Income Tax department for not filing return for how many years. They want you have to file it immediately and give a proper reason why you have not filed.

What will happen if you pay Income Tax?

Under Income Tax Law if your total income exceeds the basic exemption limit: You have to file the Income Tax Return within the prescribed time, i.e. by the due date.

This is applicable for the Assessment Year 2012-13.

As an Individual you are required by law to file your Income Tax Returns, if your total income without allowing deductions (such as Section 80C etc) exceeds the basic exemption limit.

For Assessment Year 2012-13, the basic exemption limits are the following:

•   For Men below the age of 60, the exemption limit is Rs. 1,80,000.

•   For Women, below the age of 60, the exemption limit is Rs. 1,90,000.

•   For Senior Citizens, whose age is between 60 years to 80 years, the exemption limit is Rs. 2,50,000. This is identical for men and women.

•   For Super Senior Citizens, of the age of 80 years or more, the exemption limit is Rs. 5,00,000.

What does Total Income without allowing deductions (such as Section 80C etc) actually mean?

Let’s say, your gross total Income is Rs. 2,00,000. You have paid Rs. 50,000 in LIC premium for claiming deduction under Section 80C. Your Taxable Income is Rs. 1,50,000 (Rs. 2,00,000 – Rs. 50,000). The tax payable on Rs. 1,50,000 is Zero.

However, even in this situation, you are required to file your Income Tax Return as your gross total Income exceeds the basic exemption limit of Rs. 1,80,000. (Assuming you are not a senior citizen).

Exemption for filing Income Tax Return for Salaried Employees

The Exemption range is changes during the budget time. So it is varying each year.

For the Assessment Year 2012-13, there is an exemption from filing the Income Tax Return for Salaried employees, subject to the following conditions. 

•   Your Total Income after deductions (such as Section 80C etc) is upto Rs. 5,00,000.

•   Income other than Salary should be only from Saving Bank Interest, upto Rs. 10,000. If you have any other source of Income like House Property, Capital Gain, or even interest from fixed deposits, you will have to file your Income Tax Return.

•   You must declare this Interest Income from the Saving Bank to the Employer. The employer then has to deduct the TDS taking into account your Interest Income.

•   If you have a refund due, you need to your file your Income Tax Return to claim this refund.