Time, as an entity is constant in nature. Sometimes, its value is unappreciated and that has the propensity to result in chaos. Similarly, in the world of taxation, time plays a crucial role in payoffs for individuals, companies, and institutions when the time for filing income tax returns (the ever-so-feared ITRs) comes to the fore.
As the date to file ITRs for individuals with a salary, house property, and income from other sources draws close (31st August 2018), we’ll be explaining certain intricacies about the different types of ITR forms, summarizing as to which ones are necessary for people/companies to file and co-relating it with some of our personal experiences to see why ‘time’ is a mutually important factor in both the scenarios.
So, first things first: An ITR procedure comprises of filling a form where an assessee files information about his income (and tax) from one or various sources to the Income Tax Department. It needs to be filed at the end of each financial year and has different metrics of tax evaluation for people with different types of income in our country. Here, the term “assessee” can essentially refer to not just an individual but a company or an enterprise, as well and income can be specified as direct income (say salary or pension) or indirect income (say legal betting and legal gambling).
These forms have been put under such an order to establish clarity among individuals, ranging from the ones who:
- work on salary/pension;
- have indirect sources of income (say lottery or gambling); or
- are registered as partners in a firm, with further extensions of their firm(s) such as Limited Liability Partnerships (LLPs), Association of Persons (AOP) or Body of Individuals (BOIs).
The difference in ITR forms and their structure is also reflected in factors such as the date of filing the form, with the dates ranging from July to September for different categories.
Here’s a simple layout of the different types of ITR forms available, with respect to factors such as applicability and types of income covered:
ITR Forms are primarily used to differentiate based on the division criteria mentioned above and can be put under a chronological order, primarily ranging from ITR-1 to ITR-4, with ITR-5 to ITR-7 serving as further extensions.
Now, the reasons we referred to time as a crucial aspect in terms of personal/professional experiences, as well as ITRs, are latency and penalization. Time, in a given professional environment, needs to be adhered to, much like your budget and needs to be taken care of, much like your taxes.
Mismanagement of time in a given firm can result in a penalty (monetary or non-monetary). This can escalate to an extent that you may just make yourself liable to a penalty while filing your taxes, which is monetary in nature.
In addition to the penalty stated above, certain interest burden shall arise specifically under Section 234A. This is an interest calculated at a rate of 1% per month (simple interest) on the outstanding tax amount and is calculated following the due date of filing the ITR till the date on which the ITR is filed.
Additional information on Advance Tax payments and its related guidelines and timelines have been addressed in more detail in another article.
Written By Shakti Bhati