It is a common misperception that filing an income tax return is entirely voluntary. This erroneous belief can get people in trouble because submitting income tax is not only a moral and social obligation, but also a legal one for anyone earning more than a certain amount. Under section 234A of the Income Tax Act, failure to file an income tax return can result in a penalty for concealment of income ranging from 100 percent to 300 percent.
There’s a lower possibility of making a mistake when it comes to filing.
Income tax return filing necessitates thorough attention, as taxpayers must carefully examine their tax statements, interest income certificates, and other papers, declare all sources of income, and verify that all Tax Saving investments are declared in the year. Income tax return filing necessitates thorough attention, as taxpayers must carefully examine their tax statements, interest income certificates, and other papers, declare all sources of income, and verify that all Tax Saving investments are declared in the year.
It’s time to revise.
Even though the Taxpayer prepares the Income Tax Return with great care, there may be a need for a revision in order to include a missed Tax Saving exemption or to include income from a previously unknown source. When you file your income tax return early, you have the opportunity to go over it again and make any necessary changes.
E-verification was done earlier.
Before the ITR form is completely processed, the Income Tax Department conducts an e-verification of critical input data. Income tax returns filed early have a better possibility of being e-verified sooner, giving the taxpayer peace of mind.
Tax refunds are processed more quickly.
Tax refunds are distributed according to a ‘First-Come, First-Served’ system. A faster tax refund would follow from filing your income tax return early.
Avoid paying a late filing fee.
Section 234F imposes a late filing fee on taxpayers who do not file their income tax returns on time. The late filing cost is Rs. 5,000 if the return is filed after the due date but before December 31st. The late filing cost is Rs. 10,000 if the taxpayer files the return after December 31st. However, if the total income does not exceed Rs. 5 lakhs, the late filing cost is restricted to Rs. 1000. Taxpayers can avoid this fee by filing their income tax returns far ahead of the deadline.
Interest should be saved.
Taxpayers with a tax liability of more than Rs. 1 lakh should file their Income Tax Return as soon as possible, as they would be liable to an enhanced interest payment of 1% per month or portion thereof if they do not.
Take advantage of losses that can be carried forward.
The IT Department allows losses to be carried forward from one financial year to the next. However, it is only available to taxpayers who file their income tax returns before the deadline.
Avoid a rush at the final minute.
Every year, towards the conclusion of the Income Tax Filing deadline, there is a tremendous spike in traffic on the Income Tax Portal as a large number of people seek to file their Income Tax Returns at the same time. As a result, the portal is exceedingly slow, causing the submission of the tax return to take an excessive amount of time, or even becoming impossible in some situations. This extra complication and commotion can be avoided by filing your income tax returns ahead of time.
Suggested Read: Income Tax Planning