After every financial year ends, it is a good process to reflect upon the past year and make future outlook better. Also, it is a time to set right all your financial details and file your income tax return (without waiting for the due date to reach close).
Many people procrastinate on this process, waiting until close to the July 31stdeadline to get going (and many people fail to do it even ater that, until and unless prompted by external factors like IT notice on non-filing, visa requirement etc).
There are many reasons why it’s a bad idea to wait to file your income tax returns.The intelligent and smart ones get going as soon as possible, and they reap the rewards of early filing.
If you are stuck in thought on whether you should take the steps to go ahead and file your income tax return or think of doing it later (cos you are busy busy busy), here are some negatives of procrastinating and a few reasons why it helps to file it soon…
- Mistakes often happen if you rush at the end moment
Think of the times that you have had to rush in doing some work and you have either messed it or not done your best with it. When you wait until the last minute, you will be working under pressure. You’ll be rushing to finish things, and you won’t have the time to go back and recheck or review the things that you need to recheck or review.
This leads to an increase in probability that you may make a mistake on your taxes. You may forget to enter some important details, fail to disclose income, avail deduction etc.
If you start earlier, you will have a chance to go back, reflect and look at your Income Tax Computation workings with a fresh mind again. You will ensure that it is all done properly & filed.
- Your Tax refund is your right – Why delay?
The Income Tax Returns can be filed by you as soon as the ITR Forms are available (mostly May starting). The earlier the IT Filing is done, the earlier the returns can be processed by the IT Department.
People who wait to file till the deadline can have to wait for the refund as the processing may take longer (due to bulk inflow of IT returns). Why delay filing when you can get your tax refund at the earliest?
- Opportunity loss as your money (refund) is not with you
In continuation of the last point, when you file your returns early, you get your tax refund sooner and you can use the same to make more wealth. Whether you putthat money in stock markets (risk and returns, both higher) or even keep it in the bank (where it grows a measly 4% to 7%), you have a chance to put that money to work for you.
The longer you wait, the longer you are lending your money to the Government of India without receiving any return. While impact may look smaller to you, this is a bad move in the long term, depriving you of the benefits of compound interest. Even if you’re not a stock market investor, it is useful to have the refund amount in your bank, as you can spend it on something you want or just keep it for safety and security.
- Professional help may be limited if filing returns closer to deadlines
A professional may give you more time when you approach him/her to file your returns. Depending upon how complex your tax filing happens to be, you may benefit from more time with a professional who knows precisely what he/she is doing. If you wait until the last minute, you will have a difficultyin getting time with your accountant or tax expert.
If you start earlier, the professional can go through your data in order to ensure that you’ve availed all the possible deductions, exemptions, etc. This time can save you big money (and your time as well) over the long run.
- Waiting longer increases your chances of being noted in default lists
The IT department, with its increased technological push, is now starting to send default notices to people/ corporates/ PAN holders who have not filed their return of income. The IT department can get hold of your transactions made (as PAN is now increasingly being used in various domains) and therefore, if IT return has not been filed, you may get a notice seeking explanation.
It is always wise to get a jump start on your tax filing. There is no reason to follow the crowd and waiting until the end of July 31 to file. The earlier you file, the better your chances of avoiding mistakes that could potentially cost you a lot of money in interest and penalties down the line. On top of that, you’ll have one less worry as you can concentrate to increase your wealth in current financial year.