Mint

Income tax refund is not free cash

A total of 58.3 million tax returns were filed in the 2022-23 assessment year through July 31. In the assessment year 2022-23, returns on income earned during fiscal year 2021-22 must be submitted. Interestingly, 7.24 million, or about one-eighth of all proceeds, were filed on July 31, the last day for filing. In fact, a press release issued by the Ministry of Finance on August 1 noted: “The electronic filing gateway … set … criteria on July 31, 2022 including – Highest ITR Deposit Per Second Rate: 570 (at 4:29: 30 p.m.), highest hourly ITR deposit rate: 9573 (7:44 p.m.), highest hourly ITR deposit rate: 5,17,030, between 5 p.m. to 6 p.m..”

These records tell us many things.

First, after several years of trouble, it appears that the income tax filing system has finally resolved. The system has come a long way from about a decade and a half back when it was launched. In the early days, anyone could hack anyone else’s income tax account as long as they had access to some basic information like PAN and date of birth. Second, the fact that nearly eight of the filings occurred on the last day tells us that many tax filers were confident, and if not, they were at least hoping that the government would extend the last date as it has for the past few years.

It is a good thing that the government did not extend the deadline since it makes those who made their return on time look stupid. This should not be the idea. Indeed, extending the last date during the height of the Covid pandemic made sense, but there was no logic to do so this time, especially when the website was not down.

The question is why people delay filing their income tax returns. Perhaps the answer lies in the fact that many of us take our money management decisions very lightly. While we might end up spending weeks thinking about which mobile to buy, where to take a vacation, etc., decisions about money management that don’t provide the same kind of excitement tend to put off decisions about spending money.

A good example of this is the fact that many people tend to make their tax-saving investments only in March, when they have a full year to do so. In the process, they end up burning their fingers and investing in the wrong product. Likewise, from the end of the fiscal year in March to the end of July, there is more than enough time to file a tax return. In the case of an employee, Form 16 is not immediately available. But from early to mid-June, it becomes available in most cases. This still leaves at least six to eight weeks to file the replay. However, many people end up putting it off until the end. This also stems from the fact that in many cases people understand very little about how the income tax system works in their specific cases. Things can get complicated on this front, but for individuals early in their careers who earn money largely through their salaries, it’s very simple. Hence, it makes sense to have a basic understanding of taxes once one begins their career. Over the years, with the increase in income and the complexity of the system due to the different types of income obtained, things can always be learned gradually. Even after hiring a chartered accountant (CA) to file your tax return, there is no harm in understanding how the system works. For example, even CAs make mistakes.

Finally, now that your income tax returns have been filed, your income tax refund will begin to appear. And in their minds, a lot of people treat this as free money and love to blow it up. But the fact of the matter is that it is essentially a late income. For an employee it is a deferred salary payment. Or to put it simply, it’s your hard-earned money for you. Hence, treat it as if you were dealing with your salary or business income and not like free money.

Vivek Kaul is the author of Bad Money.

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