It is that time of the year
My friend Rahul is always frantic in the month of July. I have known him for over twelve years but if there is one thing that does not change is how he appears in the month of July. Every year, year after year. I think you know why that is the case. July is the month of filing taxes.
Rahul knows this. Of course he has to – he has been working for over fourteen years. He knows that each year, at this time, you need to get together various financial forms, records and put your energy into getting this crucial activity closed, but still, every year at the last minute he scampers around with missing documents, details and gets highly stressed. He ends up filing taxes through an expensive Chartered Accountant at the last minute, mostly paying a penalty too since he has crossed the IT department mandated deadline. In fact there was a year when he missed filing his IT returns altogether!
So this time, when I met him in June, I had an idea. I decided to take some time and tell him why he needs to treat filing Tax Returns as a very important activity. I spoke to him about the reasons why it actually helps him to file his taxes, and not just for the larger reasons like government earnings being plowed towards the development of our country, because I felt that sometimes when people see how doing something helps them personally, they take it much more seriously for the rest of their lives. Here are the points I told him:
- This is a basic Income Proof that can be used for any reason: ITR is considered a customary income proof not only in India but also globally. Whether you are looking for higher education in the US or a job in Australia, for any such opportunity abroad, ITR is the largely accepted income proof. This is what you would need to furnish at the time of your VISA interviews and other requirements.
- Need a loan? This is the fast-track method! Apart from a good credit history (or past repayment track), the fact that you are filing your ITR regularly assures banks of your reliability. Regular records of IT returns filed gives you speedier access to credit and at better terms – maybe not essentially a larger line of credit, but surely a better rate.
- The underlying document? It is your PAN card: Permanent Account Number or PAN issued by the IT authority is not only a prerequisite for filing ITR but now it is mandatory for all financial transactions – starting from opening a bank account, to purchasing mutual funds to even buying real estate for investment. Filing IT returns mandates you to have a PAN number and hence as default you are safe when it comes to financial transactions.
- For obtaining government tenders, registration on panels: did you that the value of business profiles of various corporate agencies, contractors, professional service providers or individuals is dependent on the yearly income tax returns? Contractors need to ensure that IT returns are not only be filed on time , but also in an accurate manner, audited (if required) and signed with necessary documents. In tender approval meetings or for finalizing professional panels, the selection body gives weightage to past IT records, at times tender scrutiny committees validate ITRs for five to seven years to see whether the applicant has done work for that amount earlier.
- Securing LIC/GIC agency: if you were looking at augmenting your income by opening an LIC / GIC agency, go file your IT returns. Insurance corporations, before allotting an agency, check the financial health and habits of the agents. Previous three years’ returns are called for before allotting any agency.
- For funding your Startup: Rahul wants to start something on his own in the future. Yeah, yeah, I know this is the new fad! But well, if he wants to do that, or any of you for that matter, ITRs have to be timely and accurate. Many angel or VC investors include income tax returns filed till date in their statistical analysis. From returns they not only want to know your profitability but also your scalability, various cost parameters, and validity of the data produced from the auditor’s report.
- Appointments in Judicial & Class one Jobs: Yes, you heard it right! No client data or record of similar work done previously shall matter to the selection body; it is only the last five to seven years’ income tax returns (in judicial interview, seven years’ ITR records are checked) that show the candidate’s credibility to get these jobs. So, what are you thinking? Tell everybody about this lesser known point.
- Last but not the least, you can claim your Tax refund! Here’s a secret! Filing ITR is not always about paying tax. It can be used as a means to reduce your tax liability! If you are a salaried employee for whom TDS has been cut during the financial year, you can claim refund if the tax outgo has been more than the actual tax payable. So this does not mean that your company can get away with chopping your salary, you need to pay just what you are supposed – the rest of it comes right back to you.
And with many convenient portals and experts helping you with it, it is more of a cakewalk than it ever was! Here's an example of how filing your IT returns has become easy with one such platform called H&R block. Plus, you can see the perils of not filing taxes in this video too :)
So go right ahead and file your IT returns on time and accurately - avoid the tax man knocking at your door! ;)