Top 9 Benefits of Filing Income Tax Return (ITR) on Time

An Income Tax Return is a document that taxpayers use to declare the specifics of their income, the tax due on that income, exemptions, and deductions for a specific fiscal year.

Are you wondering whether you should file your income tax return or not? 

Or you read somewhere that if your income is below the basic exemption limit, then you might as well skip filing your income tax return. However, before you make up your mind about not filing your ITR, it's worth considering the advantages of filing your income tax return, even if it's not mandatory. 

Benefits of Filing Income Tax Return (ITR) on Time

1. Easy Loan Approval

The bank or private financers require numerous documents while processing the loan application request. The loan application may be for the purchase of vehicles (2-wheelers or 4-wheelers), home loans or personal loans for some commitments etc.,

Before they sanction, ascertaining the capability to pay-off the loan is very much necessary, it will be done based on your income earnings, income tax return acts as proof of your consistent income earning over the past periods. This is a mandatory document for loan approval.

2. Claim Tax Refund

Tax can be deducted from your interest on Fixed Deposits, Rental income, Consultancy income or Salary income. There may be instances where tax has been deducted (TDS) is more than the tax due on your total income or you have no tax liability for that year. In such cases, you must file an Income Tax Return to claim a refund of the TDS.

3. Income & Address Proof

Your Income Tax Return can serve as proof of your income and address. Aadhar Cards, licenses, passports, and other documents like those are all required to have address proofs.

4. Quick Visa Processing

When applying for a visa, most embassies and consultants require copies of your tax returns from the past couple of years. These documents are among the mandatory requirements as they illustrate the person's civic responsibility. Therefore, it is advisable to file your ITR in a timely manner.

5. Carry Forward Your Losses

One might have losses from the stock market, by doing business, loss from rental income of house property. These losses can be offset against the income of future years, thereby reducing your tax liability. Only by filing your return within the original due date, you can carry forward losses to subsequent years. Without filing an income tax return, this benefit would not be possible.

6. Obtaining Government Tenders

For contractors, these returns must be filed on time, extremely accurately, and audited (if necessary). This is especially essential when trying to obtain a government tender. The tender scrutiny committee may occasionally inspect this work, and it is a common practice to check the ITR for the last 3 to 5 years.

7. For Buying Term Insurance

To approve term insurance plans, insurance providers often require applicants to submit their Income Tax Return (ITR) records as proof of their annual income. The coverage amount is determined based on the individual's earnings, and presenting the ITR helps insurance providers assess a person's higher income level. 

8. Funding for Startup Ventures

When planning to launch a new company or grow an existing one, you might require funding from outside sources like venture capitalists or seed investors. These investors might inquire about the specifics of your ITR in order to evaluate the business's financial stability and profitability. They could cross-check the data in the audited report using your ITR forms as well.

9. Evidence of Your Financial Gains

Form 16 is generally provided by employers to their employees as evidence of earnings. For self-employed individuals or independent contractors, the ITR Filing form acts as a legitimate verification of income. It offers a comprehensive summary of an individual's income and expenditures throughout the fiscal year.

Other Generic Benefits

• Avoid Penalty: If you are required to file your tax returns according to the Income Tax Act but fail to do so, the tax officer has the right to impose a penalty of up to Rs.5,000 for non-compliance. However, there is a relief given to small taxpayers – if their total income does not exceed Rs.5,00,000, the maximum penalty levied for delay will be Rs.1,000. There can be other legal repercussions, depending on the severity and nature of the non-compliance.
• Protection against Black Money: In recent years, the government has taken several steps to combat black money and limit money outflows from India. With this goal in mind, the government made disclosing foreign assets owned by taxpayers in their annual income tax returns.
• Financial Transparency: Your ITR gives a detailed account of your financial situation, offering embassies a clear picture of your economic stability.
• Avoiding Scrutiny and Penalties: The failure to file or the late submission of an Income Tax Return (ITR) may attract the attention of the Income Tax Department, resulting in penalties and legal consequences. By filing your ITR in a timely manner, you can avoid unnecessary scrutiny from tax authorities and chances of penalties.

Conclusion

The act of filing Income Tax Returns (ITR) is not just a compliance obligation, it offers a wide array of benefits that can positively influence your financial situation. These advantages range from claiming refunds and carrying forward losses to building financial credibility and accessing various opportunities. By fulfilling your tax obligations and keeping accurate financial records, you contribute to the nation's growth while also equipping yourself with essential proof of income, eligibility for loans, and the ability to handle various financial transactions smoothly. Thus, it is crucial to develop a habit of diligently filing your ITR, seeking professional guidance when necessary, and reaping the many rewards associated with responsible tax compliance. Keep in mind that the benefits of ITR filing extend beyond immediate gains, laying the groundwork for a secure financial future.

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