Benefits of filing tax returns early
Written on Monday, June 20, 2016
By Tax Solutions Group
Most individual taxpayers are in possession of their Form 16s by end of May or beginning of June. But when do they file their returns? Only on July 31, the deadline for filing returns, braving all the trouble caused due to slow servers and last minute rush.
Everyone earning above the basic exemption limit of Rs. 2.50 lakh has to file tax returns.
It is not just the last minute trouble that you avoid by filing your tax return early. Having filed returns before the deadline also gives you peace of mind. You get time to consult a tax expert to claim all the deductions that you might have missed out declaring to your employer or your employer might have missed out while computing your tax. Being early gives you time to prepare accurate tax return and check it before submitting in order to avoid any mistakes. You are able to ensure that you claim all the tax deductions correctly. There are many other benefits to being an early filer.
To claim refund early
Now, with the dawn of the electronic processing era the tax department has made a lot of progress in the processing of the tax return and the release of consequent refund. Taxpayers are now getting their refund as early as within 10 days of filing taxes. Hence sooner you file the returns, refunds will be processed and paid faster.
To claim interest on refund
If you have paid excess taxes, you are eligible for a refund. If the refundable amount is more than 10% of the total taxes payable, you are entitled for a simple interest of 0.5% per month on that amount.
If you delay filing your returns beyond the due date then you may have to forgo this interest portion on your refund.
To save interest on taxes due
If you woe some amount of taxes to the government, you would be liable to pay an interest @ 1% per month till the due date of filing the return i.e. 31st of July. If you further delay filing your returns beyond 31st July then an additional interest of 1% per month will be payable under section 234A on the taxes due.
Hence filing taxes early can save you a substantial amount of interest payable to the government.
To revise your returns
Filing early helps you file an error free return. However if at all you miss out on certain things and file an erroneous return you still get a chance to revise this return. However you have to make sure to file within the due date i.e.31st July. Those filing belated returns cannot revise their returns in case of any error.
To carry forward losses
If you do not file returns within due date i.e 31st July you will not be able to carry forward capital losses (short-term or long-term), if any, in a financial year to be adjusted against capital gains made in the subsequent years; so earlier the better.
In general unadjusted losses in one year can be carried forward for eight consecutive years immediately succeeding the year in which the loss is incurred.
(Author is tax consultant at H&R Block (India) world leader in tax filing.)