Filing Income Tax Return in India - Should You Or Shouldn't You?

Do you file your income tax returns every year? If not,specifies few other conditions under which any person
are you aware whether you should file your yearlyshall have to furnish return of income even if the total
return of income or not? There are manyincome does not exceed the maximum exemption limit.
misconceptions due to which people do not bother toThe applicable conditions are:
file return of income. Some people believe that their
employers deduct the tax from their salary and1. Person has incurred an expenditure of Rs. 50,000 or
deposit it with the Income Tax Department, whereasmore towards consumption of electricity
some people feel that their total income does not2. Person is in occupation of an immovable property,
exceed the maximum exemption limit, and, somewhether by way of ownership, tenancy or otherwise,
people are under the impression that their tax liability isexceeding a specified floor area. The specified floor
zero.areas vary with the urban areas, the details of which
Besides, there are hundreds of thousands of peopleare published by Income Tax Department. For
who have no clue whatsoever about their tax liabilityexample, for Mumbai and Delhi, the specified floor area
and returns. Here is a brief guide that explains whois 600 square feet for residential property and 100
should file tax returns and why they should file returnsquare feet for commercial property. However, senior
of income.citizens who are not engaged in any business or
Who should file return of income?profession are exempt from this condition.
As per Section 139 (1) of Income Tax Act, 1961, any3. Person is owner or lessee of a motor vehicle other
person shall furnish return of income on or before duethan a two-wheeler
date if the total income in a year exceeds the4. Person has incurred expenditure on foreign travel
maximum amount, which is not chargeable to tax.either for self or any other person
Section 139 further clarifies that when the total income5. Person is the holder of any credit card, not being an
of any person exceeds the maximum exemptedadd-on card, issued by any bank or institution
amount before applying any deductions under various6. Person is member of a club where the entrance fee
sections, the person is liable to file income tax return.is Rs.25,000 or moreWhy should you file income tax
Let's understand the realities for ordinary taxpayers. Inreturns?
the FY (financial year) 2009-2010, the maximumIf any of the above conditions apply to you, you should
income not chargeable to tax - the exemption limit - isfile your return of income on or before due date
160,000 for men, 190,000 for women and 240,000 forotherwise you may be liable for penalties and
senior citizens (resident individuals of 65 years orprosecution under Income Tax Act. Besides fulfilling the
above).requirements of Tax department, there are many
Say for instance, your total income is 160,000 beforeindirect benefits of filing returns of income. If you are
applying any deductions under various sections. In thisplanning to visit abroad, you need a visa, where you
case, you are not liable to file tax returns. Now, say formight have to submit tax returns of past three years.
instance, your total income is 160,001 but you want toWhen you approach any financial institutions for any
claim a deduction of 10,000 under section 80C forloans, you need to submit copies of tax returns of the
saving in PPF. In this particular case, even though thepast 2-3 years. At many places, including passport
total income works out to 150,001 (less than 160,000),offices, income tax returns are accepted as valid
you are liable to file return of income.proof of residence.
In addition to the above condition, Section 139 also