Yes, it is mandatory for individuals and businesses in India to file an Income Tax Return (ITR) if their income exceeds the prescribed limit. The government of India uses the income tax system to collect revenue to fund public services and welfare schemes.
In this blog, we will discuss why it is compulsory to file ITR in India, who is required to file an ITR, and the consequences of not filing an ITR.
Why is it Compulsory to File ITR in India?
Filing ITR in India is not only a legal obligation but also helps taxpayers establish their credibility as law-abiding citizens. It also helps the government to track the flow of income, identify tax evaders, and curb black money generation.
Filing ITR also helps individuals and businesses to obtain various financial benefits such as loans, credit cards, and visas. It also provides a record of the taxpayer's income, which can be used to claim refunds or carry forward losses.
Who is Required to File ITR?
In India, the requirement to file ITR varies depending on the age and income level of the taxpayer. Here are the categories of taxpayers required to file ITR:
- Individuals with Income Above the Prescribed Limit
Individuals with a total income exceeding Rs. 2.5 lakhs per year (for individuals below 60 years of age), Rs. 3 lakhs (for senior citizens between 60 to 80 years), and Rs. 5 lakhs (for super senior citizens above 80 years) are required to file an ITR.
All types of businesses including sole proprietorship, partnership firms, LLPs, and companies are required to file an ITR, irrespective of their income.
Non-Resident Indians (NRIs) are required to file ITR if they earn any income in India or have any taxable income in India.
- Income from Capital Gains or Foreign Assets
Individuals who have earned income from capital gains or foreign assets or have any foreign income, irrespective of the income threshold, are required to file an ITR.
Consequences of Not Filing ITR
Not filing ITR or delaying the filing of ITR can lead to various consequences such as:
If an individual fails to file ITR within the due date, they may be liable to pay a penalty of up to Rs. 10,000.
If the individual fails to pay the taxes due within the due date, they may be liable to pay interest on the late payment.
- Disqualification from Certain Financial Benefits
Failing to file ITR can lead to disqualification from obtaining loans, credit cards, or visas.
If an individual fails to file ITR despite repeated reminders from the Income Tax Department, they may face prosecution and legal action.
Conclusion
Filing an ITR is a legal obligation in India and is necessary to establish the credibility of an individual or business as law-abiding citizens. It is essential to file ITR within the due date to avoid penalties and legal consequences. Therefore, taxpayers should ensure that they file their ITR correctly and within the stipulated time to avoid any adverse consequences.
