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Income Tax & Its Importance

Income tax filing – Why it is so important?

Burning Question?

  1. Are you looking to go abroad and applying for VISA then ensure?
  2. Are you planning to take a loan for the house or car in the near future then?

An individual / Salaries taxpayer without any tax audit has to file annual income tax returns without penalties before 31st July 2019.

Common Myth’s and unanswered questions with Taxpayers

1. My employer has deducted my TDS and has filed their return, then why do I need to file my individual return?

Ans: Employer has to discharge his liability to recover correct TDS from the employee, deposit timely and submit the return.  Once a certificate of deposit is issued employees have to identify other sources of income and file a return with the income tax department.

2.When tax is paid and form 16 is issued why do I need to file a return?

Ans:  Issue of Form 16 is the responsibility of the employer to confirm tax deducted and paid.  Form 16 is not evidence of an automatic return filed. A separate return has to be filed by each individual.

3. I have no tax for the year so why do I file a return?

Ans: Amount of tax paid doesn’t decide the return filed.  When a person is a registered PAN holder it is mandatory to file an income tax return to avoid the penalties.

4. This year income is low do I need to file a return?

Ans: Once a return is filed it has to be continued and any break in between can cause for a notice issued to the taxpayer for non-filing.

5. What if I get notice of non-filing of my return?

Ans:  Income tax notice is issued by the central cell of the income tax department (CPC).  This is done based on the overall tax returns filed and non-filed. Non-Filing is when assesses having a past filing history or having a PAN number and filed to file the return now. A notice is sent to such assesses for the Assessment year in which the return is not filed.  Assesse has to file the return and reply the notice suitably.

6. I am a housewife and I have only small money received from husband, part-time activities, yoga classes, tuitions, catering, so do I need to file a return?

Ans:  There is no differentiation between housewives, business women or a salaried employee, the department sees only a taxpayer.

7. Filing a return will disclose my income to the government and I don’t want to do that?

Ans: It is mandatory for all individuals to disclose the source of income to the government and pay tax on it.

8. Do I need to disclose all my assets and liabilities details to the government for filing?

Ans:  Based on the taxpayer type the information is disclosed.

9. My son has turned 18 shall I take his PAN and start filing for income tax?

Ans:  You should take a PAN of an individual when he or she starts generating income, it is irrespective of the age and file returns.  As the person turns 18 father or mother are not official guardian anymore so a separate return is filed.

10. What documents do I need for filing my annual return?

Ans:  Following documents are required to be included for income tax return filing

  1. Salary Form 16
  2. Income from other sources
  3. Tax Deduct at source information from the website
  4. Declaration of assets for large taxpayers.

11. Do I need to include all source of income in filing the return or only generated from salary?

Ans:  Yes all income earned during the financial year has to be included in the Assessment year filing. In the Income Tax Act, a clear differentiation is given on how to treat each income type and income earned.  

Salaried employees

Salaried employees are the most structured taxpayers as their tax is collected by their employers and deposited timely.  This is done based on their investment declaration and salary information stored with the company salary register. The company calculates annual deduction and split tax into monthly payments.  The amount changes if the salary structure changes during the year. After three quarters, the company insists for original documents to substantiate the investment claimed and a final declaration of other income.  A final calculation is performed by the company and recovered from the balance months from the financial year.

Once the company completes annual filing for Tax Deduct at Source (TDS) for all employees, form 16 is issued by the company which includes the salary paid, investment is done and tax calculated and paid by the employee.  Getting a form 16 from the employer is not sufficient, it is mandatory that a registered PAN holder should file his or her annual individual tax returns before 31st July of every year.

Freelancers and Independent Professional

Mostly the business model of freelancers and independent professional’s is one person.  A Freelancer faces many challenges in his business because of unstructured business model.  Some of them are:

  1. Inconsistent income received.  
  2. Money collected by freelancers and professionals is inconsistent and sometimes in cash
  3. Income is expensed without proper accounting and controls
  4. Receipts and invoices are not issued always unless dealing with organized and body corporate
  5. Proper tax is not calculated and deposited.

When a Freelancer files his annual return, it will structure the income and expenses into an accounting record, which is then used to calculate and pay the tax.  

CFO Angle advises all individual earning income even less than 5 Lacs to submit income tax returns.  We see the following advantage for filing an annual return:

  1. It creates a history of returns filed
  2. Filling a return is good when you are applying for a loan or a visa.  Banks check up to three years history of filing of returns. This is to check the paying capacity of the individual
  3. Buy insurance policy for a higher cover
  4. Claiming of refunds.  If in case excess tax is deducted by the company or otherwise a refund has to be claimed by filing a return
  5. Past losses have to be carried forward only after filing current returns
  6. Avoid penalties of Rs 5,000 if return not filed
  7. Filled returns are considered as income and tax-proof

At CFO angle we provide individuals with one on one income tax consulting by finding ways to save tax and file their income tax returns.  Our team of professionals has experience of working in the corporate world with practical knowledge of tax. You can reach out to us on 9840777207 or email us your queries sachin@cfoangle.com for income tax return filing.

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