What are the benefits to early filing of tax returns
In India, the deadline for filing income tax returns by individuals is the 31st of July, every year. For businesses, this deadline is the 30th of September, every year. Filing income tax returns is an annual duty that citizens need to diligently fulfil for ensuring smooth governance. Early filing of income tax returns saves you the last-minute rush or any issues that might occur closer to the deadline. It is important to reap the benefits of filing a tax return before the due date. Here are a few benefits of filing income return in India ahead of the due date:
Avoid late filing troubles
- Filing a tax return is a meticulous process and one needs to pay utmost attention to the fields to be filled in the form. Filling the appropriate information takes time and last-minute filing may lead to tabulation errors while giving out relevant information. Errors would then need to be corrected and revised returns, to be filed later.
Early e-Verification and faster refund process
- The earlier you file your income tax return, the sooner it gets verified and is ready for refund processing. The income tax refund usually takes place on a first come, first-serve basis. So, early tax filers submitting returns before the due date shall receive their applicable refund sooner. If you file your returns late, the refunds too can get prolonged.
- Late filing of income tax returns beyond the due date attracts penalties under Section 234F of the Indian Income Tax Act. In the event of failure to file income tax returns before the due date, an individual is liable to pay a penalty of Rs 5,000, if the return is filed before Dec 31st. However, those individuals who file after Dec 31st shall be levied a penalty of Rs 10,000. Besides, if the annual income of an individual does not exceed Rs 5 lakh, the penalty shall not exceed Rs 1,000.
Steer clear of Defective Return Notice
- The probability of erring is higher while filing tax returns just before the due date. Tax authorities may then issue a Defective Return Notice under Section 139(9) of the Indian Income Tax Act, asking for an explanation for the mismatch. Turning a blind eye to such notices can also attract heavy penalties.
Easy Loan approval and Visa Processing
- Banks and financial institutions ask their customers to provide the income tax returns of the last three years to process different types of loan applications, from home loans to vehicle loans. Credit Card companies too emphasise on being provided tax returns before issuing a card. Filing income tax returns before the due date reflects on your credibility as a borrower and aids an easy loan approval.
- Moreover, it is mandatory to provide income tax returns at the time of Visa processing. The income tax return documents are an indication of your financial stability and credibility.
Carry forward the losses
- If you own a business, by filing tax returns before the due date, you shall be able to carry forward the losses incurred, to subsequent years and can be used to offset against the income of those subsequent years.
Immovable Property Registration
- Few states require individuals to provide income tax returns of the previous 3 years at the time of registration of immovable property. These documents also serve as a piece of evidence to justify the wealth or property owned.
Keep away from last-minute traffic
- As the deadline closes in, the income tax filing website usually experiences a huge amount of traffic leading to a temporary breakdown of the site. Such situations may force you to file your returns late. It is better to escape any last-minute breakdown and non-adherence issues, by filing the returns well ahead of the deadline.
How early can you file your taxes?
- Given the irresistible benefits of filing an income tax return in India, most taxpayers are faced with the question of how early you can file your taxes? The answer to this query depends on how early you would provide your income documents and investment proofs for the assessment year to the employer and how quickly the employer may, in turn, provide you with the Form-16. With the Form-16 in hand, you can be an early bird and file your taxes early in 2021 to avail the benefits of filing a tax return such as quicker loan processing and a faster refund.
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