Taxes and You: Exploring the Complicated Partnership in the Tax-Filing Month 📅

July is an important month on your tax calendar. By the 31^st, you will have to file your taxes. For some, it’s a straightforward process; for others, it’s a stressful scramble to get everything in order. Some of you might get a tax refund, while some might have to shell out something for the taxman. This month brings with it a unique love-hate relationship with taxes.

If your relationship leans more toward hatred... breathe and read this blog to understand the importance of paying taxes and filing returns on time.

The Importance Taxes 💸

So why do we pay taxes anyway? It is not just a legal obligation; but is a crucial component of the country’s economic framework. The taxes we pay contribute to the nation's development --healthcare, education, infrastructure, defense, etc.

By paying taxes, we support the growth and improvement of our country and you should be proud to be a tax-payer!

What is filing tax returns 📝

Filing tax returns and paying taxes are two distinct but related steps in the tax process.

Paying tax means transferring the owed amount to the government by the designated due date. Filing tax returns involves submitting the required paperwork to the tax authorities.

It involves submitting tax forms and documentation to the tax authorities to report your income, deductions, and credits for a specific tax year. In short, it proves that you have paid your taxes and made investments throughout the year to save taxes, and you have the documentation for it. This process also determines how much tax you owe or if you are eligible for a refund.

For example, if you are a salaried employee, your employer deducts tax at source (TDS) from your salary throughout the year (paying taxes). At the end of the financial year, you file your income tax return (filing taxes) to report all your income and claim any deductions or refunds you are entitled to.

Why is it important to file tax returns? ✅

Legal Compliance: Filing taxes on time ensures compliance with the law, helping individuals avoid penalties, interest, and potential legal issues. Non-compliance can lead to hefty fines and even prosecution in severe cases.

Financial Documentation: A filed tax return serves as an official record of your income. This documentation is essential when applying for loans, credit cards, or even visas. It demonstrates financial stability and responsibility.

Refund Claims: Filing returns allows individuals to claim refunds for any excess tax paid. This is especially relevant for those who have investments or other income sources where TDS (Tax Deducted at Source) is deducted.

Carrying Forward Losses: Filing taxes on time allows individuals to carry forward certain losses to offset against future income. This can be beneficial for those with investments or businesses.

How to File Taxes: Key Points to Remember 💼

Filing taxes might seem daunting, but it can be a smooth process with the right approach. Here are some steps and tips to help you navigate tax filing:

Gather Necessary Documents: Ensure you have all required documents, such as Form 16 (issued by employers), TDS certificates, insurance receipts, interest certificates from banks, investment proofs, home loan documents, bank statements, and any other income-related documents.  

Choose the Right Form: ITR-1 is for salaried individuals,  ITR-2 is for individuals with capital gains, and ITR-3 is for business income.

Verify Your Details: Double-check personal information, such as PAN (Permanent Account Number), bank account details, and contact information. Accuracy is crucial to avoid delays and errors.

Report All Income: Ensure you report all sources of income, including salary, interest, rental income, capital gains, and any other earnings. Concealing income can lead to penalties.

Claim Deductions and Exemptions: Utilize eligible deductions and exemptions to reduce your taxable income. Your life insurance policy premiums, for instance, can fetch you a tax rebate under Section 80C. It is a huge advantage to buy a life insurance policy! Get started now to find out how much life insurance you need.    

Other expenditures, such as children's tuition fees and investment options such as ELSS and PPF, will also save you taxes, as long as they are up to ₹1.5 lakh. Section 80D, on the other hand, will fetch you a rebate on your health insurance policy premiums.   

So keep all your receipts in place!

Want some tips on how to become a tax pro? Here are some tax-saving secrets to help you out!

Verify and E-File: Once you have filled in all the details, verify your return using Aadhaar OTP, net banking, or by sending a signed copy to the Centralized Processing Centre (CPC). After verification, e-file your return through the Income Tax Department’s e-filing portal.

Keep Records: Maintain records of your filed return, Form 16, TDS certificates, and other relevant documents for future reference and scrutiny.

Embrace the Process

While filing taxes may never be a favourite pastime, understanding its significance and approaching it methodically can transform it from a dreaded chore to a manageable responsibility.  

As July progresses, take a moment to embrace this necessary process, ensuring that you not only comply with the law but also contribute positively to the fabric of our society. After all, with the right mindset, it can lean a little more towards love becoming your partner in nation-building.

Don't forget to file your taxes on time and get an expert to help if needed... Happy filing!