Why File Income Tax Returns?
Many people in India are not aware of the importance of filing ITR. It is not just about declaring, paying, and claiming taxes - there is much more to it. In this article, we discuss the importance of filing ITR - post reading the article, you will know why ITR filing is essential?
What is ITR?
Income Tax Return (ITR) is a form you need to submit to the IT department. It contains information about your income and the taxes you have paid or need to pay in a financial year. The income could be from salary, profits from business and profession, house property, capital gains, or other sources. There are different forms to file ITR. You need to select the one depending on the nature and income amount and which type of taxpayer you are.
When to file ITR?
ITR is filed for a particular financial year i.e between 1st April and 31st March of the next year (financial year). In the following year, you need to file ITR. The last date to file ITR is usually 31st July. You get all ITR filing benefits if you submit your ITR below the last date.
Why is income tax return filing important?
Below are some benefits of filing ITR:
It is mandatory for some individuals and businesses: The first reason why to file ITR is that it is mandatory in some cases. Even if your income is below the threshold, in some cases, you will have to file returns. For example, in case of registration of immovable properties requires advancing as proof the tax returns of the last three years.
It shows you are a responsible citizen: The government has made it mandatory for individuals who earn a specified amount to pay taxes and file returns before the due date. If you have to pay taxes and fail to do so, you will invite penalties from the IT Department. For those who earn less than the threshold, it is voluntary for them to file ITR. However, when you file ITR, in either case, you signal you are a responsible citizen.
Claim your refunds: In some cases, you have paid more taxes, as TDS was deducted from your income more than what you should pay. Or it could be your tax liability was NIL, but TDS was deducted for some reason. In such cases, you can claim a TDS refund. To do that, you need to file an IT return. This is one of the biggest benefits of filing income tax returns.
Visa Processing: Somes embassies require you to furnish copies of your tax returns for the past 2 to 3 years at the time of the visa application process. These are mandatory documents. Hence it is better to file ITR on time.
To get loans: If you plan to apply for loans in the future, it is a good idea to maintain a steady ITR filing returns record as the home loan banks will likely insist on it. Financial institutions may insist on seeing your IT returns for the last few years before disbursing a loan to you. In fact, it is a government mandate for them to do so. So if some bank or NBFC is not asking for it, they are breaking the law.
Carry forward your losses: If you file a return within the filing window, you can carry forward losses to subsequent years that can be used to set off against the income of subsequent years. It can deduct certain losses from the relevant income that help you reduce your tax liability of the future income. You cannot do it without filing your returns.
We are sure you won’t miss your ITR filing this year and the coming year - there are so many advantages to doing it.