Why Waiting to File ITR Could Be Beneficial: A Complete Guide

In India, the deadline for filing income tax returns for individuals is typically July 31st of the assessment year. However, there is no official restriction on filing income tax returns before the deadline. It is generally advisable to file tax returns as early as possible. It helps to avoid any last-minute rush. However, some situations may arise where waiting to file tax returns could be advantageous. Plus, it gives one more time to correct any errors or omissions. Hence, you shouldn’t file income tax returns earlier than June 1st. Here are the reasons why. 

Tax Deductions

One reason Why You Shouldn’t File Income Tax Returns Earlier Than June 1st is that any investment might be eligible for tax deductions. One needs to receive the necessary documentation to claim the deduction. For example, suppose a person has contributed to a Public Provident Fund (PPF) or a National Pension System (NPS) account. In that case, one must have the relevant statements or receipts before claiming the deduction. These statements may not be available until after June 1st, so waiting for all the relevant information may be beneficial before filing tax returns.

Role of Investments

Similarly, for someone with capital gains from investments in the stock market or other assets, waiting until closer to the deadline may be beneficial. This is because capital gains can be offset by capital losses. 

One can strategically plan investments to minimize tax liability. For example, suppose a person has some capital gains and some capital losses. In that case, one can offset the profits with the losses to reduce the tax liability. However, one might file tax returns too early. In that case, the person may have a partial picture of their capital gains and losses. This could result in a higher tax liability.

Importance of Form 16s

Another reason one should wait to file tax returns is if they have not yet received all Form 16s or other tax-related documents. Form 16 is a certificate. Issued by an employer, it contains the salary paid and the taxes deducted from an employee’s salary. 

One may also have other tax-related documents, such as interest certificates from banks or Form 26AS, which show details of the tax deducted and deposited on their behalf. Suppose person A files their tax returns before receiving all these documents. In that case, the person may make mistakes or omissions, resulting in penalties or other legal consequences.

Receiving Refunds

Additionally, waiting to file tax returns could mean receiving that refund later if one is owed a refund. This may be inconvenient if they need the funds immediately. However, if the refund is not needed urgently, then waiting until closer to the deadline to file tax returns may be beneficial. The Income Tax Department may take some time to process a refund. By waiting to file tax returns, the person might receive refunds quickly.

Form 26AS

Form 26AS is a consolidated statement that reflects all tax-related information about an individual or entity. This includes taxes deducted at source (TDS) on income earned, tax payments made, and refunds received. The form is essential for filing income tax returns as it helps reconcile the amount of tax paid with the tax liability for a financial year.

TDS deductions made from a job or business relationship won’t be reflected on Form 26AS by the end of May, the tax deadline in India. This is because the deadline for companies to file their TDS returns is typically May 31st. 

For salaried persons, this means that they may have to wait until after June to get the updated Form 26AS, which reflects TDS deductions made by their employer. Similarly, self-employed individuals or small businesses may have to wait until after June to get an updated Form 26AS, even if they have already claimed deductions on their income tax return in Q4 of the fiscal year.

It’s important to note that not having an updated Form 26AS could lead to discrepancies in tax liability, which may result in interest or penalty charges. Therefore, it is advisable to wait until after June to file income tax returns to ensure all relevant information is available on Form 26AS.

Conclusion

In India, the deadline for filing income tax returns for individuals is July 31st, but there is no official restriction on filing returns before the deadline. Filing tax returns early can help avoid a last-minute rush and provide time to correct errors or omissions. 

However, waiting could also mean receiving a refund later or offsetting capital gains with losses to reduce tax liability. It’s important to wait until after June to file returns to ensure all relevant information is available on Form 26AS. 

These are some reasons why you Shouldn’t File Income Tax Returns Earlier Than June 1st. Understand your tax situation and make an informed decision.