What is ITR, why should you file your tax returns
- All banks and NBFCs demand ITR receipts for loan approval
- ITR is authentic proof of an individual's income
- ITR filing is madatory to claim TDS refund
Income tax return is a form used by taxpayers to declare their gross taxable income for a given financial year. This includes details of income sources and determining their income tax slab. It helps to claim deductions or exemptions and determine the annual tax liability.
For an individual whose annual income is above the basic exemption limit of Rs 2.5 lakh, it is mandatory to file their income tax returns. Even when there is no tax liability, an income tax return (ITR) must be filed if the total income exceeds the above-mentioned threshold. If your income is below the threshold then also you can file the returns voluntarily.
Even if you are not mandatorily required to file an ITR here are the benefits of filing the income tax return you should know:
Easy Loan Approval
When you apply for home and car loans all banks and NBFCs will demand ITR receipts of the last three years. ITR is authentic proof of an individual's income. It is a mandatory document for loan approval.
Claim Tax Refund
When TDS (Tax deducted from source) is deducted from your income even when your total taxable income is less than the basic exemption limit and you have zero tax liability for that financial year. In such a case, you will have to claim a TDS refund for which it is mandatory to file an Income Tax Return.
Faster Visa Processing
Most embassies & consultants ask for copies of your income tax returns for the past couple of years at the time of the visa application. It is one of the mandatory documents and hence it is always recommended to file your ITR regularly.
Compensate Your Losses
If you file the return within the due date, you will be able to carry forward losses to subsequent years, which can be used to set off against the income of subsequent years. This means you can deduct certain losses from the relevant income which will help you reduce your tax liability of the future income. You cannot carry forward your losses from the current financial year to the next financial year without the filing of the ITR.
The Income Tax department levies a penalty under section 234F if you do not file your income tax return. Filing ITR on time avoids unnecessary penalties.