An Income Tax Return is a tax filling form, where a taxpayer reveals the details of his/her income, claims applicable deductions and exemptions and taxes that are payable on the taxable income.
As a responsible citizen of India, everyone who has an income should file an ITR, because in this way we are declaring all sources of income whether taxable or non-taxable.
The Income Tax Department make it essential everyone to file an income tax return if one’s gross total income exceeds Rs. 250,000 in a financial year.
An individual can also file it even their income is below the taxable limit or it is zero, in this case it is referred as NIL return. Filing Nil return will act as proof of acquired funds in your bank accounts or other investments.
What are the Benefits of Filing the Income Tax Return?
1. Easy and Helpful to Get a Bank Finance
Filing the ITR will help individuals, when they need to apply for a loan like vehicle loan, House Loan etc. All reputed and major banks can ask for a copy of income tax returns. Banks essentially require Income tax return before sanctioning a loan to assess the loan repayment capacity and worth of the borrower.
2. Claim Tax Refund
If you have a due refund from the Income Tax Department, you will need to file an Income Tax Return to claim the refund. You can understand this with an example, if your employer has deducted excess TDS from your salary or the Bank has deducted excess TDS from your interest income, then you need to file income tax return to claim and get refund.
3. Serve as Residential Proof
Income Tax Return can be served as a proof of address. When you file an Income Tax Return, then the address mentioned in this is used to serve you with any communication from the Income Tax Department. So, a copy of acknowledgement of income tax return can be act as residential proof.
4. Essential for Quick Visa Processing
For granting you a visa, there is a need to show your income evidence. Income tax returns can be used as a proof of your income.
5. Carry Forward Your Losses
If you file the income tax return within due date, you will be able to carry forward losses to subsequent years, which can be used to set off against income of consecutive years.
6. Avoid Penalty
If you are required to file your Tax returns but did not, then the tax officer deserves the right to impose a penalty of up to Rs.5,000. If you did not file the income tax return, then you may have to carry the burden of penalty and interest. Therefore, to avoid penalty and interest payments, one must file an income tax return timely.
7. Proof of Income
Income tax return can act as a proof of your income. Let us understand with an example, a person is earning some small income over the years which is below the taxable limit and over the years they accumulate good corpus.
Now it can happen that they might get tax scrutiny for few reasons after a few years. If you file, the ITR then it will be legal proof of income earned in each year. Without this it will be a lengthy and tiresome process to explain the sources of earnings over the years.
8. Buying a High Life Cover
When you buy high life insurance cover the Insurance company will ask and ask to submit a proof of income to assess the cover amount to be provided to you. For this ITR of the last 3 consecutive assessment years are required.
It might happen that you do not get a salary receipt, or your monthly income is being paid from different groups so bank statements will also not work as strong proof. So, better to have an ITR return filed. When you filing your income tax return, make sure that you know the relevant ITR forms well, make the essential disclosures, select appropriate assessment year, take advantage of 80C deductions, and verify your TDS from Form 26A. Correct form and appropriate information ensure a smooth & hassle-free tax filing process.