Tax Returns

A very confusing question regarding tax returns is that what is the eligibility criteria for filing returns ? Some people are under a misconception that only those who pay Income Tax are liable for tax returns.

Well, that's not quite true. You need to file returns if your taxable income in a financial year exceeds the maximum amount that is exempt from tax. This means that you'll have to file returns if you earn more than Rs 50,000 in a financial year (1st April to 31st March next). This is so even if you do not have to pay any tax or have paid excess tax. You also need to file returns if your income is less than Rs 50,000, or even nil for that matter, but you qualify under any one of the six criteria specified for compulsorily filing your return of income.

This brings us to another important question: what is taxable income? "Isn’t taxable income the same as total income?"

No. " Your income may have certain components that are not taxable at all, like agricultural income and dividend income." Thus, taxable income is the income you have before the deductions you are allowed under the income tax laws.

You need to file returns if

 Your taxable income in a given financial year is exceeds the maximum exemption limit (which for an individual is Rs 50,000).

 You run a partnership firm (in which case, the maximum exemption limit is Rs NIL).

 You run a co-operative society, company or local authority (again, in which case, the maximum exemption limit is Rs NIL).

 You have paid some tax (by way of TDS or advance tax) during the course of the year, and then find that you have made     enough investments by the end of the year to either reduce your tax liability or make it nil. In this case, you need to file returns     to claim a refund. However, it’s up to you whether you want a refund or not; it will not be a statutory offence if you do not file     returns.

 You have suffered a business, professional, speculative business or capital loss (whether short term or long term). However, if     you don’t file returns in the year you incur the loss, you will not be allowed to set it off against gains in subsequent yeas. In     this case too, there is no penalty for not filing returns, but you might want to do it in your own interest. For details of how to     use such losses to lower your tax liability, click here.

 You do not fall into any of the above categories but meet one of the six criteria.

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(Source :: indiainfoline)