ITR and What Is the Importance of Income Tax Return Filing
Taxation is the key source of revenue for all Indian states, and this speaks of the importance of income tax. India's perfectly structured tax system uses both proportional and progressive taxation based on income and associated factors. The state and central governments determine income tax in India, and the money thus received is called tax revenue. The importance of tax received from individuals also lies in the fact that the money thus received is used for varied purposes, like public education and healthcare; infrastructure development like bridges, dams, roads and railways; civil services and defence. The main importance of taxation in India is assisting the government in satisfying all its development objectives.
Mandatory Filing of Income Tax Return
ITR, or Income Tax Return, is a form issued by the government for individuals to declare their annual income, expenditures, exemptions, deductions and taxes paid. Mandatory filing of income tax returns is important for deductions under Sections 80C, 80D and others for individuals who make more than Rs. 2, 50, 000 as income. The deductions together can help bring down the taxable income of a person. Filing income tax returns is not mandatory for individuals with income less than Rs. 2, 50, 000.
The majority of individuals are not aware of the importance of tax returns and consider them to be a time-consuming procedure. Hence, they do not file tax returns. Nevertheless, as a responsible citizen, you must understand tax and its importance and file your returns on time yearly. As a working Indian, follow the tax return filing procedure and reap its benefits. For income tax advisory and filing services, contact professionals at https://adca.in/income-tax-advisory-and-filing.php.
But before understanding the importance of taxation in India and its benefits, let's get into the features of taxes levied on an individual's income.
Main Features of Income Tax in India
Some of the main features of income tax in India are:
Income tax in India is levied as per entry No 82 of a list I or Union List of the Seventh Schedule to the Article 246 of the Constitution of India.
Income tax is chargeable by the Central Government of India on all forms of income except agricultural income. The state government charges income tax on agricultural income.
Since the liability to pay income tax and its burden are on the same person, the kit is a direct tax.
Also, it is an annual tax as it is an individual's income of a specific year that is tax chargeable.
Income tax is the tax on the income earned by an individual. This "individual" can be any person, firm, local authority, company, the body of the individual, association of person, Hindu Undivided Family or any other artificial juridical individual. Individuals covered under income tax are known as assessees.
Income tax is a tax on house property income, salary income, capital gains, business or professional income and other earning sources. On that note, a few incomes are specifically exempted from income tax.
Income made during a specific financial year is duly assessed to tax in the following immediate financial year.
There is a prescribed rate at which income tax is charged. Tax rates prescribed under Income Tax Act include 20% for taxes on long-term capital gains, 15% for taxes on short-term capital gains on shared covered under STT and 30% taxes on income made from lotteries.
The Central Government (Ministry of Finance) administers income tax in India in coordination with the income tax department with branches nationwide.
Income tax applies throughout India, including Jammu and Kashmir.
Advantages of Taxation
Here are a few benefits of taxation that you must know about:
Regular filing of tax returns makes it easier for individuals to process loans from different banks.
It also helps individuals to claim their carried forward losses.
Any form of tax paid by an individual helps build a nation. The money generated through tax contributes to the government's cash flow, and the government further uses this amount to build infrastructure.
Regular tax payment also helps people with their credit card and visa applications. It improves their eligibility for such documents.
Filing regular taxes is one of the major prerequisites for obtaining a tax clearance certificate, especially when selling or transferring assets.
ITRs make an individual eligible to undertake all kinds of government assignments.
Purpose of Taxation
The most basic purpose of taxation is to fund all government expenses. While earlier taxes from individuals with taxable income were used to raise armies, build defences and support the ruling classes, they are now used to encourage the development of a more equitable society. On the other hand, higher taxes on certain products and services, like gasoline and tobacco, have been put in place to avoid further consumption.
Important Sections in Income Tax
The Income Tax Act features a total of 23 chapters and 298 sections. Considering this huge amount of information in place, it is extremely difficult to go through all the chapters and sections. However, there are five income tax important sections that every individual with taxable income should know about. Clear knowledge of these five sections can be useful when deciding to invest their corpus in any of the investment tools. Also, if you do not understand income tax sections very well and require help with income tax audits in Bangalore, get straight to https://adca.in/income-tax-audit.php, where you can find the best assistance possible. The main sections of income tax are:
Section 80C allows for deductions on an individual's investments in specific instruments. The two most well-known options in this category include Tax Saving Fixed Deposits and Tax Saving Mutual Funds.
Section 80CCC provides income tax deduction to pension funds under Chapter VI- A from the total gross income of the taxpayer for that specific financial year. This section enables taxpayers to invest in pension funds.
Section 80CCD offers income tax deductions for all NPS or National Pension Scheme contributions. The maximum deduction individuals can claim from this section is 10% for salaried individuals and 20% of total gross income from the self-employed.
Section 80TTA of the Income Tax Act (Chapter VI-A) allows individuals to claim deductions of up to Rs. 10, 000 annually from the interest earned through savings accounts deposits held in cooperative societies, post offices and banks.
Section 80TTB of the Income Tax Act gives senior citizens above 60 years of age the flexibility to claim tax breaks in the interest income made from deposits they hold.
Taxpayers can considerably bring down their taxable income by using the different income tax exemptions and deductions allowed under the Income Tax Act.
How many types of tax returns are there?
There are 7 forms of tax returns for individuals. These are ITR 1, ITR 2, ITR 3, ITR 4, ITE 5, ITR 6 and ITR 7. Companies and firms can file their income tax returns using ITR-5, 6 and 7.
Who is eligible for ITR?
According to the Income Tax Law in India, individuals with an annual income exceeding Rs. 2, 50, 000/ 3, 00, 000/5, 00, 000 are mandated to file income tax returns. This will be their way of informing the government to operate the country's financial sectors smoothly.
What's a simple tax return?
A simple tax return is the income tax filed using IRS form 1040 without attaching any schedules or forms.
Who is not required to file an income tax return?
Individuals with income less than Rs. 2, 50, 000 and people above 80 years of age not making professional income or income from regular business are not required to file income tax returns.
Who is exempted from filing ITR?
As per section 194P of the Income Tax Act, senior citizens above 75 years of age, senior citizens with "resident" status in the previous year and those with interest and pension income only are exempted from filing ITR.
Which tax savings is best?
Life insurance, pension plans, mediclaim or health insurance, tax saving mutual funds and NPS are the best tax savings offering maximum benefits.
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