Do I need to file my IT returns when I have loss or no Profit?

In the last quarter of fiscal when we approach the month of March, questions related to taxation hit my inbox quite often and one of the very common question is – Do I need to file my IT returns when I am in loss for my trading/investing portfolio?

Let me try to answer this question but please note that the answer is based on my personal experience and should not be considered as a taxation advice.

Image Credit: Tax Credits

The answer is yes you should always file your IT returns on time for couple of reasons.

1. You may be assuming you are in loss

This is more often the case. We assume we are in loss in trading but if you look at the trading and investment along with mutual funds redemption clubbed together you may not be always in a loss. Yes your long-term investment may not be taxable but then your overall portfolio may not be in loss either that you were assuming and so it makes sense to be filing IT returns as early as possible.

2. If you are late, your losses may not be carried forward

Even if you are in loss then also you should be filing your IT returns on time just to make sure you can carry your losses forward. It helps in saving tax from gains in the coming years. Let me explain this with a simple example.

Let’s say in the fiscal year 2011-2012 you made an overall loss of 100,000 in your equity portfolio. Despite the losses you submitted your returns on time and carry forwarded the losses.

In 2012-2013, you made a profit of 150,000. The profit is on delivery based trading in cash segment and so you needed to pay tax of 10% i.e. 15,000 but because you have your losses carried forward from previous years, your actual profit is reduced by the amount of loss carried forwarded and so your actual profit in 2012-13 is only 50,000.

You need to pay 10% as tax on gains of 50,000 i.e. 5,000

Final Thoughts

Always file your Income Tax returns on time. Note that last date for filling IT return is not March 31st but it is July 31st but it is always preferred to be ahead of time. Once I was late by a day because July 31st was when my CA met with an accident. From that day I always try to get taxation stuff cleared well before July.

Share your views and questions in comments below.