Income Tax Simplified
Many of us are unsure whether or not we should pay taxes on our hard-earned money. Why would one pay a portion of their income to the government?
Yes, the question is legit however, many of us are unaware of the significance of paying taxes.
The most straightforward answer is Taxes help the government raise funds that indirectly help us live better lives.
Yes, there would be an obvious question.
How taking money from me help to live better!!!
Basically, the government uses this money to invest in economic infrastructure, military spending, and scientific research, among other things.
Individuals and institutions pay taxes to the government in lieu of the revenue generated each year. The government then spends the collected funds for public-interest services, infrastructure, social welfare, and other things.
Hence, taxation is compulsory for all citizens of the country.
So does it mean I have to pay taxes on whatever I earn?
Yes, and In fact, you pay taxes on whatever you spend as well. Be it having dinner in your favorite restaurant or buying a house.
Let me explain it in brief…
So since we are discussing the tax on your income, it is a type of direct tax that you must pay based on your earnings. Every taxpayer falls under a tax slab based on their total taxable income for the fiscal year. The taxpayer's income tax rate is determined by the tax bracket in which he or she falls. Income tax is one of the most important sources of revenue for the government.
So What is the Direct Tax and is there any other Type of Tax too?
Yes, so broadly taxes are divided into 2 segments:
As the name suggests it’s paid directly to the government by an individual or institution. Direct Tax can be on the Income you earned through salary, business, profits on selling or paying of assets, etc.
The amount of direct tax varies depending on the individual. Direct tax is unique to each person because it is based on their per capita income.
An indirect tax is collected and paid to the government by a producer or retailer of a product or service, but it is passed on to the end consumer as part of the purchase price of a good or service. The tax is eventually paid by the consumer, who pays a higher price for the product.
Sales tax, service tax, customs duty, and octroi (on products) are examples of indirect taxes that are paid to the government indirectly. All of these categories, however, are now combined together under the GST (Goods and Services Tax). Indirect taxes are equal for all citizens, regardless of their Income because it is levied on services given to individuals.
Hope you got a fair understanding of what is a tax and why we have to pay them?
Now moving on to What is Tax Filing and its importance?
Every Indian is required to file taxes. For the taxpayer, there are various advantages to filing taxes. To begin with, filing taxes on a yearly basis implies that the source of income is legal and not derived from illegal means.
Because reporting taxes requires disclosing your source of income, when the money is illegal, the individual or institution tends to avoid paying taxes. And if the source turns out to be illegal, the taxpayer suffers the penalties. If a person fails to file taxes, the government will take legal action against them, which may include a raid.
In addition, the government may demand that the citizen pay the tax plus interest. Your tax return also reveals how much money a single person made over the course of a year.
There are numerous personal and governmental income tax advantages.
In order to receive various sorts of loans, your income statements are evaluated. These documents evaluate your financial obligations. Filing your taxes can help you qualify for a larger loan. Banks are less likely to trust someone with a poor tax history since it casts a negative light on their financial records. All major banks require income tax returns before approving a loan application. Most large-ticket loans, such as mortgages, require you to produce copies of your tax returns. Because your income is one of the most essential factors in loan acceptance, lenders use your ITR to confirm it.
When applying for a visa, you must submit copies of your tax returns. It is mandatory in some nations. This is to prove that you are not attempting to avoid paying your taxes. If you have a spotless tax record, your visa will be processed faster. The vast majority of embassies issue visas based on income tax returns. If you want to visit the United States, the United Kingdom, or Canada, you must present an Income Tax Return (ITR) for the previous two years in order to get your visa granted. This is attributed to the reason that the ITR assists other nations in ensuring that you are not fleeing India to avoid paying taxes.
Proof of Income:
For self-employed professionals such as consultants, company partners, or freelancers, the ITR receipt also acts as proof of income. In their business and financial operations, ITR is especially valuable for such professionals who are not on the payroll of any organization.
Losses Carry Forward:
If you file your return on time, you can carry forward any losses you have had in your business in a financial year. These losses can be set off in future years.
You pay taxes, so government infrastructure is built. Taxes are used for a variety of purposes, including the upkeep of roads, bridges, hospitals, and educational systems. In most regions of the country, work on transportation infrastructure, government institutions, public spaces, smart cities, and other projects is well underway. The government funds infrastructure with the help of taxes paid by taxpayers.
Income statements and tax returns may be asked when applying for government positions so that the government can assess your ability to satisfy financial commitments.
Defense & Scientific research:
Regular financing is required for space missions and scientific breakthroughs. Similarly, tax funds assist the government in allocating appropriate funding to maintain and strengthen our country's defense capabilities. As a means of protecting your safety while the defense troops work on the boundaries. Military and security systems are expensive and can be funded through your taxes.
Government Welfare Policies:
To accomplish various welfare policies, the government requires funding. These revenues are raised through the imposition of a tax on us. We are the exclusive beneficiaries of such policies. Ayushman Bharat, the Sukanya Samriddhi Scheme, and other policies exist entirely for our benefit. The government runs and often develops new public welfare initiatives to help people from all sections of the country, including health, education, housing, unemployment, and food programs. One of the key sources of funding for such schemes is the income tax.
Other prime benefits such as tax refunds, deductions, nation-building, and so on can continue.
Other avenues in which the government spends taxpayer money include: Law enforcement, Pension schemes, Government and state employee salaries, Providing vital services such as energy, water, and trash management, among others.
Paying taxes helps to improve the country's level of living for both the individual and the general public.
Rather than seeing taxation as a burden, residents should view it as a moral obligation that can assist them and other citizens enhance the quality of their lives.
"The more taxes are collected by the nationals, the more developed the country would be."
Now Tax Filing for Salaried Employees is extremely simple.
Just upload your form 16 to our portal www.equiseedwealth.com along with few additional documents and our Tax expert shall connect with you ensuring you get the maximum refund without any hassle.
It is simple. File your taxes here