Top 10 Benefits of ITR Filing
The specifics of a taxpayer’s income, the tax owed on that income, exemptions, and deductions are declared in an income tax return for a certain fiscal year. ITR must be filed by taxpayers for a variety of reasons, but the major one is to make tax deduction claims. There are many benefits of ITR filing. To clarify the benefits of ITR filing and answer any additional questions a taxpayer may have, we give a complete overview of income tax returns in this blog.
What is an Income Tax Return (ITR)?
You utilize an Income Tax Return (ITR) form to provide information about your earnings and taxes to the income tax office. Based on the taxpayer’s income, the amount of tax that must be paid is calculated. If the return shows that an excessive amount of tax was paid throughout the year, the person will be eligible to receive an income tax refund from the Income Tax Department. A return must be filed annually by everybody or any business that gets any income during a fiscal year.
Salary, business profits, real estate rental income, dividends, capital gains, interest payments, and other types of income are all possible sources of the money. Tax returns for both individuals and businesses must be submitted by a specific deadline. If a taxpayer misses the deadline, they must pay the penalty.
Eligibility to file an ITR
Only those individuals or entities that fall under certain income brackets are mandated to pay income tax, according to the Income Tax Act. The following is a list of entities or enterprises that must completely comply and file their ITRs in India:
- This tax applies to anyone under the age of 59 with an annual income of more than 2.5 lakh. For senior persons (aged 60 to 79), the maximum increases to 3 lakh, and for super senior citizens, to 5 lakh (aged 80 and above). It is important to keep in mind that the amount of income should be calculated before any Sections 80C through 80U deductions and other Section 10 exemptions are applied.
- Along with those who want to submit an ITR and those who want a refund for any overtaxes deducted for income taxes paid, registered firms that generate revenue regardless of whether they made a profit throughout the year are also required to do so.
- It is not necessary for everyone to submit an ITR, though. If a person’s taxable income for a fiscal year exceeds the 2.5 Lakh exemption threshold, they must file an Income Tax Return (ITR). An individual does not have to file a NIL tax return if their gross income is below this exemption threshold. Even if it is below the minimum level, it is still advisable to file a tax return for a number of reasons. If you received any income during the fiscal year from any source, you should always file a tax return.
Top 10 Benefits of ITR Filing in India
Following are the Benefits of ITR Filing:
Excess TDS Claim
Even if the income is not taxable, excess TDS claim tax may still be deducted from a salary, fixed deposit, or other sources. The bank is required to deduct 10% tax from this amount if your total income is less than 2.5 lakhs but you received 1 lakh from an FD. In this case, the tax that was withheld by submitting an ITR can be reimbursed. Simply put, in order to recoup any TDS that was deducted at the source, a person must file a tax return.
Application for Visa
If ITR paperwork is submitted with the application, the chances of it being denied or marked as problematic lessen. The tax return demonstrates the individual’s sense of civic duty. Due to growing security concerns, a number of nations now need ITR for visas. For instance, when applying for a Schengen Visa, you must submit the returns from the preceding three years even if you had no income during those three years.
Even if the loss is NIL, you must still file a return if you want to carry over the loss from the stock market from the prior year. Whether or whether not you make a profit, you should file an ITR if you want to offset those capital losses. A person must also file an ITR in compliance with income tax requirements if they own overseas stocks.
A Reliable Address Verification
The Income Tax Return is acceptable as proof of address. Using it, one may even obtain an Aadhaar Card. Address proofs are necessary for all identification documents, including Aadhar Cards, licenses, passports, and similar ones. These documents frequently do not accept widely used forms of identification like ID cards. In such circumstances, your income tax return may be used.
Genuine Proof of Your Earnings
Employers frequently provide Form 16 to their staff members as verification of pay. The ITR Filing form is used by independent contractors and self-employed people to really verify their income. It contains a detailed summary of a person’s earnings and outgoings for the complete fiscal year.
With Regard To Buying High Coverage Insurance
A greater number of people are buying life insurance plans for more than 50 lakhs. Insurance providers, however, won’t take it until you provide them with your ITR documents, which demonstrate your yearly income. Your level of coverage will depend on your working income. Additionally, ITR informs the insurance provider that you are highly compensated.
An Important Loan Application Document
When you apply for a loan to buy something, such as a car or a new home for your family or business, the bank asks for specific paperwork from you. Documents like Aadhar Cards, PAN Cards, licenses, photo identification, etc., may be needed. Your income proof is another crucial document that is required. Banks usually asked for ITR for the prior three years. This is done to ascertain whether your history and present financial situation will allow you to repay the loan. ITR filing might be helpful when applying for a credit card as well as when asking bank loans. Credit card firms will also ask you for your former earnings and tax returns before providing you a credit card.
An ITR is viewed as a source of income documentation by many authorities (both government and private). To apply for specialized institute and/or university scholarships, for example, you can submit an ITR. The ITR helps determine whether a prospective student can demonstrate their potential to earn money. The insurance companies also recognize them as legitimate identification.
Finance for New Ventures
If you want to start a new business or expand an existing one, you could need money from outside investors like venture capitalists or seed money. These investors could enquire about the specifics of your ITR to assess the viability and stability of the company’s finances. They could also use your ITR forms to double-check the information in the audited report.
Benefits for Professionals & Independent Contractors
Independent contractors and self-employed people do not receive Form 16. Frequently, their ITR is the only document proving they filed income taxes. Without this proof, they might encounter funding and transactional concerns.
The Importance of ITR Filing
Many seem to think that submitting tax returns is optional and so reject it as unnecessary and onerous. This is not a very ethical way to look at tax preparation. Every year, everyone who is a responsible citizen of the country is expected to file their taxes as part of their moral and social responsibilities. It provides the assessee with a platform to occasionally request refunds in addition to other forms of relief. It acts as the foundation upon which the government computes the amount and means of citizen spending.
Effects of Failing to File An ITR
After learning the benefits of ITR filing, examine the consequences of not doing so:
- Income tax payers receive notices. If someone cannot submit Income Tax Returns for a valid reason, the accountable authority will accept a detailed letter and supporting documents. They may obtain condonation relief.
- ITRs filed late will be fined by the IT Department. If one’s income surpasses 5 lakhs, one must pay a 10,000 penalty. If income is below 1,000, the fine is 1,000.
- Tax evaders may be detained harshly.
- Some people are excluded from income tax filing. In the 2021 Union Budget, the Finance Minister exempted 75-year-olds from reporting ITRs.
Follow us on Instagram: @InvestWhat