What Is An Income Tax Return?

A tax return is a form or set of forms used to file income taxes. It is used to report taxable income, if any or any kind of capital gain.

Many people just wonder what tax return is. A tax return is a form or set of forms used to file income taxes. It is used to report taxable income, if any or any kind of capital gain. The income figures are filled in the form to calculate the tax liability.

Section 139 of Income Tax Act, 1961 says that if the total income of a company or a person other than a company during the previous year exceeded the maximum amount which is not chargeable to tax, shall furnish a return of his income on or before the due date. Precisely, the same section declares that a person must file his taxation assessments in the event that all his earnings are more than the absolute maximum exempted sum prior to any kind of deductions should be utilized under several sections.

To understand it better, let us consider some statistics. In the financial year 2010-2011, the absolute maximum income was Rs. 1,60,000 for men and Rs. 1,90,000 for women. No tax can be charged on this income.

Considering an example, if a person’s total earning before applying any kind of discounts is Rs1,60,000, he is not legally liable to log a tax return. On the other hand, if the total income of a person exceeds Rs. 1,60,000 and he tries for a deduction like saving some amount in PPF , he is still legally liable to log an income tax return.

It is also specified in the same section 139 that a person will have to log an income tax return under some specific conditions, even if the total income is not greater that the exemption limit.

These conditions are as below:

• If someone has incurred an expenditure of more than fifty thousand towards the use of electricity during the previous year.

• If someone is in an occupation of immovable property exceeding the specified floor area.

• If someone is an owner of an automobile other than a two-wheeler.

• If someone has spent money on himself or any other person for travel to a foreign country.

• If someone holds a credit card other than any kind of add-on card issued by a bank.

• If someone is a member of a club with a membership fees of more than twenty-five thousand.

Anyone who fits into the above mentioned criteria is legally liable to file a return. In case, a person does not file his income tax return he is accountable for penalties or criminal prosecution under the Income Tax Act.

Benefits of Filing Income Tax Return

• You are a contributor to the National Income.

• It is easy to get home loan, vehicle loan etc.

• It shows your financial worth.

• It is easy to get immovable properties registered.