Income Tax for beginners
Income Tax for beginners
As the deadline to file tax returns looms large, here is a quick guide to ease the process.
The deadline for filing your Income Tax Returns this year is August 31, which is less than a month away. Now, for a lot of people, filing tax returns is an exercise that is about as pleasant as multiple root canals, and with good reason — the system isn’t friendly to anyone who doesn’t possess an intermediate knowledge of tax, and even having a Chartered Accountant file your returns isn’t entirely hassle-free. In order to be more organised and better equipped, an understanding of the process is necessary.
People with employers who deduct tax for them are fine with not filing their returns — at least until they decide to travel to a first world country whose visa regulations, apart from requiring one to furnish details about everything, from medical history to underwear size, also requires three years of filed tax returns.
There are also other reasons, including job and loan applications, but for me, the most important reason is that there is a chance that the tax, which is lying to your credit with the department is more than what you’re actually liable to pay and hence, you’re eligible for a refund. It is when you file your returns that you get your refund, and there really is no greater joy than receiving money from the Revenue.
It is important that you make the effort to get your returns done on time because the department only has two deadlines: one regular deadline that is four months from the end of the year, and one ‘delayed’ deadline (which attracts interest) that is 24 months from the end of the year. Once you miss both, it becomes impossible to file your returns for that year.
Financial Year and Assessment Year
TDS, Advance Tax, and Self Assessment Tax
Advance Tax, on the other hand, is a scheme where you pay the bulk of the taxes you owe during the financial year itself, instead of waiting till when your return is due. It came into existence to ensure a steady income for the government, and taxpayers who don’t scrupulously adhere to it face additional interest. It’s a cruel world.
In conclusion, yes, filing your income tax return is not the most pleasant task, and it is tempting to shelve it until an actual need arises. However, filing your returns is vital to your financial growth and it also stands as proof that you’re a citizen who isn’t just aware of the law, but also abides by it.