Once you start working for a living, life seems to revolve around a new simple mantra – “earn & invest!”. But, in reality, things don’t end at “invest,” do they? The internet is packed to the brim with veteran financial experts’ advice on personal finance and the importance of declaring your income and investments.
However, it seems that those under a low-income bracket freely ignore matters like Income Tax Filing (ITR). They absolve themselves of such responsibilities, but is that the case? On the other hand, people falling under the taxable income range scramble for documents and receipts to fill the ITR forms.
Are you surprised by the latter? Don’t be! Thoroughly contemplate any decisions to postpone this activity to a later date or a few months. Read on to learn everything associated with ITR eligibilities and their penalties.
The Income Tax (IT) Department announced the last date (July 31, 2022) for filing ITRs for the fiscal year 2021-22 (FY22). At present, all taxpayers whose accounts don’t require further auditing have less than a handful of days to file their ITRs. Regarding potential extensions, Tarun Bajaj, Revenue Secretary, said that the government doesn’t intend to extend the deadline. They confidently expect most returns to be filed by the mandated due date.
Through July ’22, the IT Department has been raising awareness campaigns on the topic. They repeatedly issued several taxpayer reminders via SMS, emails, social media, etc. They urged people not to delay filing their ITRs beyond the prescribed date. As per data shared by the IT Department, over 3 Crore ITRs have already been filed for the Assessment Year (AY) 2022-23.
The government has clarified that there will be no exceptions or extensions this year. If anyone misses the deadline, a late fee of up to ₹5,000 will be levied by the end of December ’22.
Under Section 234F of the Income Tax Act, 1961, ITR filings made past the due date will attract a late fee of ₹5,000. It applies to those with an annual income of over ₹5 Lakhs if their ITR is submitted by December 31, 2022. Though this penalty is subject to increase up to ₹10,00 if the ITR is filed post-December, before March 31, 2023.
Section 234F states that individuals with an annual income below ₹5 Lakhs will be liable for a late submission penalty of ₹1,000. Those who fail to file ITR within the specified period and have an outstanding unpaid tax will have an interest charged on the amount. As per Section 234A of the IT Act, an interest of 1% will be charged monthly post the due date.
For the fiscal year 2021-22, individual taxpayers whose accounts don’t require audits have until July 31, 2022, to file their ITR. However, apart from corporate or non-corporate assesses, whose accounting records must be audited, they must file ITR by the specified date. It includes partners of a firm and spouses of such individuals (Section 5A) or an assessee who must file ITR reports under Section 92E.
Any person whose gross annual income exceeds ₹2.5 Lakhs under the new tax regime in a financial year must submit a tax return. This amount consists of total earnings through sources like salaries, real estate, capital gains, etc. Previously, the exemption cap off under the old regime was ₹2.5 Lakhs for people under 60 years. Furthermore, it was ₹3 Lakhs for senior citizens above 60 years but below 80. Lastly, those above 80 years received an exemption on earnings of ₹5 Lakhs p.a.
That said, those who spend over ₹1 Lakh in electricity bills or deposit more than ₹1 Crore in current accounts must mandatorily file ITRs. Residents must declare earnings received from foreign countries in the total income since these income sources are taxable in India. As per the Indian Income Tax Act, 1961 (NRI Taxes), this category includes earnings generated from countries outside one’s resident country.
Those who seek tax deductions on capital gains must have a total gross income that doesn’t exceed the basic exemption limit. Or else, tax filing is mandatory for such individuals. If they’re eligible for such deductions, they can avail it under Sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB.
Individuals above the age of 75 are exempted from ITR filings if they fulfil specific criteria mentioned under the IT Act. This exemption is in force as of FY 2021-22. According to the Finance Act of 2021, the government added new guidelines that define the standards for ITR exceptions for older citizens. Moreover, Indian residents over the age of 75 years or more, in FY 2021-22, are fully exempted from ITR filing.
Additionally, there are a few more steps for older individuals who earn interest via their pension accounts. They must file a declaration to their respective bank, which will be part of their current ITR filing exemption.
Lastly, here’s another interesting bit of information for you. If taxes deducted during the financial year exceed the individual’s actual tax liability, then the ITR will help them claim an income tax refund. Remember that filling out the ITR form is mandatory even for those whose total gross income is below the basic exemption limit. Though, this depends on the income tax regime chosen.
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