Income Tax Return (business)
Income tax has to be paid by every individual person, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI), corporate firms, companies, local authorities and all other artificial juridical persons that generate income.
Taxes are calculated on the annual income of a person, and an annual cycle (year) in the eyes of the Income Tax law starts on the 1st of April and ends on the 31st of March of the next calendar year.
The law recognizes and classifies the year as “Previous Year” and “Assessment Year”.
The year in which income is earned is called the previous year and the year in which it is charged to tax is called the assessment year.
For example: Income earned between April 1st 2014 and March 31st 2015 is called the income of the previous year and will be charged to tax in the next year, or the assessment year that starts on April 1st 2015.
Taxes are collected by the government in three primary ways:
- Voluntary payment by taxpayers into designated banks, like advance tax and self-assessment tax.
- Taxes Deducted at Source (TDS) which is deducted from your monthly salary, before you receive it.
- Taxes Collected (TCS).
COMPULSORY FILING OF INCOME TAX RETURN
It is mandatory for one to file income tax returns in India if the following conditions are applicable -
- If the gross total annual income (before deductions under 80C to 80U) is Rs. 2,50,000 (for ages less than 60 years), Rs. 3,00,000 (for ages 60 years but less than 80 years) and Rs. 5,00,000 (for ages 80 years and above)
- If it’s a company or firm, irrespective of the profit or loss made in a financial year
- If a tax refund needs to be claimed
- If a loss under a head of income needs to be carried forward
- If being a resident of India, one has an asset or financial interest in any entity located outside India
- If being a resident of India, one is a signing authority in a foreign account
- If one receives income derived from property held under a trust for charitable or religious purposes or a political party or a research association, news agency, educational or medical institution, trade union, a not for profit university or educational institution, a hospital, infrastructure debt fund, any authority, body or trust
- If one is applying for a loan or a visa
- If an NRI derives any or all of his/her income through sources in India, that income is liable to be taxable in India, and income tax returns for the same will be necessary.
In the following cases will require an e-filing of Income Tax:
- In case a refund is required
- In case the gross total annual income exceeds Rs. 5,00,000
- In case an income tax refund is required
- Creating a favourable financial history - Online filing of the income tax returns actually creates a history of your financial records with the tax department in a much faster and easier way. This history is favoured by a lot of organisations, be it financial or otherwise, whom you might have a business relationship with in the future.
- Proof of financial record - Having an ITR-V form is always handy, since one can readily furnish the same as a proof for any kind of financial liability or opening a line of credit.
- In case one has missed filing tax returns for the previous year, every additional day till July 31 increases the penal interest. Thus, filing a tax return in advance is very advisable.