7 Reasons Why You Should File Your ITR

Filing an Income Tax Return (ITR) is both mandatory and beneficial. It serves as proof of income and address, eases loan and visa approvals, enables tax refunds, and allows to carry forward losses. An ITR reports your income, deductions, and taxes paid, helping the government assess liability or refunds while protecting you from future compliance issues.

Why Should I File ITR?

1. Helps with Loan Applications 

Regular ITR filing can increase your loan eligibility. The ITR is considered by banks and other financial institutions as evidence of income, financial stability, and ability to repay the loan. It is important to submit your ITR on time and correctly because any errors or non-filing can cause the rejection of loan applications. Most lenders ask you to present ITRs for at least 3 years to process loan applications. This rule applies to both self-employed and salaried individuals.

2. Acts as Income and Address proof

ITR filings also serve as proof of income as well as addresses. For self-employed individuals who lack formal income documentation, filing an ITR can serve as valid proof of stable income. Unlike salaried employees who receive regular wages and tax withholding certificates, self-employed taxpayers can use their ITR to demonstrate both income and address when needed. Also, several banks offer loans or credit facilities to self-employed individuals only if they can show IT returns, as it is a valuable income proof. 

3. Smooth Visa Application

Applying for a Visa in most countries requires proof of your financial capability. Your filed ITRs can help prove your stability. For countries with strict Visa guidelines, applying for the same without a filed ITR can lead to the dismissal of the application. 

For instance, if you plan to visit the USA, you must submit filed ITRs for the last three years as a part of the application process. Such a document can make the visa application process smoother and increase approval chances.

4. Avoiding Penalties and Late Interest

Late filing or non-filing of ITR can result in penalties and interest. The IT department can charge you with a penalty and fines based on the severity of your offence. Additionally, interest will be added to the amount owed if you owe taxes and do not pay them by the deadline. Legal repercussions, including prosecution, jail, and asset confiscation, may result from failure to file an ITR. To avoid such situations, you must submit your ITR on time.

5. Carry Forward Losses

Regular ITR filing can enable taxpayers to carry over losses from one financial year to the following. Losses incurred in the current year can be carried forward and set-off against future incomes.. However, to carry losses forward, you must submit ITR within the deadline set by the Income Tax department. For instance, if you incur a loss of Rs.2 lakh in a financial year, that amount may be carried over to the following year and deducted from future profits only when you file the ITR within due date.

6. Claiming Refunds

The only way to get a refund of overpaid taxes is by filing an ITR. If a taxpayer's tax burden in India is less than the taxes he/she has already paid, or if they have invested in tax-saving plans like the Public Provident Fund (PPF), the National Pension Scheme (NPS), or Equity-Linked Savings Schemes (ELSS), he/she may be eligible for a refund. Once the refund amount is calculated during the process of ITR filing, it will be processed and transferred to the linked bank account. 

7. Responsibility towards the Nation

Every year, the Indian government uses the Union Budget announcement as a forum to discuss and impose requirements for everyone to file income taxes. Even if your income does not exceed the tax threshold, filing ITR demonstrates your responsibility as a citizen of the nation because your income and other personal data remain recorded. This annual activity is seen as a moral and social duty of every Indian citizen. 

What Happens If I Do Not File ITR?

If you fail to file your Income Tax Return (ITR) within the due date, you may face several consequences. A late filing fee of up to Rs. 5,000 is levied under Section 234F, and you may also be charged interest on the tax due under Sections 234A, 234B, and 234C. In addition, you lose the ability to carry forward certain losses to future years. In cases of willful non-filing, the Income Tax Department can initiate penalty proceedings or even prosecution by issuing an Income Tax Notice.

Who Should File ITR?

Any individual or entity whose income exceeds the basic exemption limit prescribed under the Income Tax Act must file an Income Tax Return (ITR). ITR filing is also mandatory if you:

• You have deposited Rs. 1 crore or more in one or more current accounts with a bank (not applicable for post office current accounts).
• Deposits in your savings bank account exceed Rs. 50 lakh in a year.
• You have spent over Rs. 2 lakh on foreign travel, either for yourself or another person.
• Your annual electricity bill exceeds Rs. 1 lakh.
• The total TDS/TCS is Rs. 25,000 or more (Rs. 50,000 for senior citizens aged 60+).
• Your business turnover exceeds Rs. 60 lakh in a financial year.
• Your professional income exceeds Rs. 10 lakh in a financial year.
• The aggregate of TDS and TCS is Rs. 25,000 or more during the year.

Last Date to File ITR FY 2024-25 (AY 2025-26)

The due date to file ITR for FY 2024-25 (AY 2025-26) is 15th September 2025 for individuals and HUF with non-audit cases. 

Final Word

Overall, there are several reasons why filing ITR can benefit you regarding proper financial planning. Filing the return timely and accurately increases your chances of getting tax benefits and establishes credible financial standing among different financial institutions and credit rating agencies. The Income Tax Department now allows you to file for ITR through an online portal, making the process easy and comfortable.