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10 Reasons Why You Should File Your Income Tax Return On Time - Outside View by PersonalFN
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10 Reasons Why You Should File Your Income Tax Return On Time
May 26, 2017

Taxing times are here again. Yes, it's that time of the year again when you have to file your income tax. For some, filing tax returns can be a tedious process. However, the Government through the years has simplified the tax filing process making it much easier and less cumbersome for taxpayers to file returns.

So don't state "it's a complex process" as an excuse to postpone filing your returns.

The Income tax form has turned simpler. The government notified a simpler one-page form for filing your tax returns. Along with this, quoting your Aadhaar number is now mandatory. But, linking your Aadhaar can now be completed in a few simple steps. (Read here - 3 Easy Steps To Link Your Aadhaar With PAN Card). By linking your Aadhaar, you can e-verify your returns, without having to send the physical return form for processing, thus, adding to the convenience.

Income Tax Deadlines
July 31, 2017 Due date for filing annual return of income for the assessment year 2017-18 for all assessee other than -
(a) corporate-assessee; or
(b) non-corporate assesse, whose books of account are required to be audited;or
(c) working partner of a firm whose accounts are required to be audited; or
(d) an assessee who is required to furnish a report under section 92E
September 30, 2017 Due date for filing annual of income for the assessment year 2017-18 if the
assessee is -
(a) corporate-assessee; or
(b) non-corporate assessee (whose books of account are required to be audited); or
(c) working partner of a firm whose accounts are required to be audited).

So don't delay. PersonalFN has outlined the top 10 major reasons to file your income tax return early-

  1. Faster processing of returns

    Avoid the deadline rush and file your taxes early. Filing your returns closer to the due date may lead to a delay in processing. When e-filing your returns, the servers may slow down due to numerous requests closer to the tax return deadline. Avoid the rush and possible delays by filing your tax returns early.
  2. Quicker refunds

    If you have a tax refund, your return may get processed faster if you file your claim in advance. Refund processing usually takes more time than processing forms with a tax due. If you file later, it may get delayed due to the rush. Plus, don't ignore the opportunity cost. If your tax refund is a sizable amount, you can put it to productive use early and reap earnings. The longer you delay, means missing out on higher interest that could be earned on the amount. Plus, if your refund amount is greater than 10% of the tax payable, you are paid an interest @6% p.a. calculated from the date of filing the return. You lose this benefit if you file the returns after due date.
  3. Enough time to get all your documents in order

    Though the tax filing process has been simplified, don't underestimate the time required to file your returns. Once you start the process, you may realise that additional documentation is required. Documents such as interest certificates, loan repayment statements, TDS certificates, Form 26AS etc., need to be in order. By starting your income tax preparation early, you will have enough time to request for these documents from the bank or from the appropriate sources.
  4. Time to eliminate errors

    If you file your returns early, you will get enough time to root out errors. In a haste to meet the deadline, you may forget to include certain sources of income or miss claiming a deduction. You can file a revised return before the end of the next assessment year, which is March 31, 2019 for AY2017-18. Please note, the deadline for filing revised returns has been reduced. From next year, i.e. AY2018-19, the deadline for filing revised returns is March 31, 2019. Start early to avoid unnecessary errors and delays in processing.
  5. Avoid late payment and penal interest

    A belated return (tax returns filed after the due date) attracts a penalty and interest. Under Section 234F of the Income Tax Act) there will be two set of penalties, first, a Rs 5,000 penalty for belated returns filed on or before December 31 for that assessment year and Rs 10,000 for any other case. For small taxpayers whose total income does not exceed Rs 5 lakh, the penalty amount is reduced to Rs 1,000. Apart from this, under Section 234A, interest would be levied @1% per month, calculated from the due date.
  6. Eliminate the need of professional services

    For salaried employees, e-filing of returns can be a breeze. If you are salaried, once you have your Form 16, you can file your returns without much hassle. Salaried individuals with income up to Rs 50 lakh and owning one house or property can use the one-page ITR Form-1 (Sahaj). This simplified form is convenient and easy to understand. Hence, starting early will give you the time to understand the tax filing process on your own and avoid the need of expensive professional services. But, if you have multiple sources of income or if you have any doubt when filing your returns, it will be wise to take help of a qualified tax return preparer or a chartered accountant.
  7. Your tax return preparer will pay more attention to details

    If you find preparing your taxes confusing and time consuming, seek the assistance of a certified tax return preparer (TRP). You can locate a TRP in your area here. Don't delay and avail of the services of a TRP early on. Nearer to the due date, chartered accountants and TRPs will be flooded with work, hence, they may not give sufficient time to resolve any query. By submitting your documents earlier, will give them enough time to examine your documents and eradicate errors and/ or be able to save you more tax. You may also save on fees and can negotiate a better rate if you avail of their services early on. The moment they get flooded with clients, they may not even entertain you.
  8. Faster processing of loans, visa, credit cards

    Your income tax return acts is proof of the income you earn. It becomes a mandatory document for processing of loans, visas and credit cards. With interest rates falling, home loans are now becoming viable. Therefore, if you are applying for a home loan, it is pertinent to have all your income proofs ready. In addition, paying your tax on time adds to your credentials as a trustworthy and law-abiding citizen.
  9. Inputs on how to plan your taxes for the current financial year

    We all learn from our mistakes. You may have missed availing certain deductions last year. When you file returns early, you may get inputs on how to save tax in the current financial year. Every year the tax rules changes; thus, filing returns early, may give you ideas on how to save on tax for the current financial year. You will be able to better optimise tax deductions available. In addition, you can inform your employer if you wish to alter and optimise your salary structure to save more tax.
  10. Eliminate stress

    Filing your taxes itself can be stressful. You can avoid the additional stress of missing the due date or being charged a late fee and penal interest. Stress has been known to adversely affect our health. By submitting your tax returns before the deadline, you will be happier with a host of benefits.

PersonalFN is of the view that you must always file your tax returns on time and make ensure your taxes are paid before the due date. This will not only provide you with several benefits, but also defer additional costs in the form of penalties that can arise later.

On the subject of income tax, it is equally crucial to set up a tax plan well in advance. Tax planning as an exercise is not just limited to filing returns and paying taxes. It is a process where your larger financial plan should be taken into consideration after accounting for your age, financial goals, ability to take risk, and investment horizon (including nearness to financial goals).

You can appoint a financial planner to suggest the best tax-saving products that not only helps save tax, but that can be aligned to achieve your financial goals as well. It would therefore be worthy to reach out to a Certified Financial Guardian - a mark of trust and respect, who can counsel and handhold you to streamline your personal finances prudently.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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