Gearing up to file your income tax returns (ITR)? It’s that time of the year again when people are scrambling to collect relevant documents to complete the tax filing process on time.
While the online route has made the filing of tax returns a breeze, many taxpayers still find it a herculean task.
In fact, some individuals believe tax-filing is voluntary and not even necessary.
Tax-filing is infact, a legal obligation that must be fulfilled by every assessee who earns income above the basic exemption slab within a given financial year.
Filing Returns Is a Sign You Are Responsible
What’s more, you stand to benefit in numerous ways by contributing to the national income. Let us take a look at some of the reasons why the filing of tax returns is important.
As a responsible citizen of the country, you must understand your tax obligations and comply with set rules in a timely and lawful manner. Filing returns add to your credibility and trustworthiness. In contrast, the consequences of not filing your return on time can be unfavourable.
Tax evaders can come under scrutiny, receive notices and bear the brunt of hefty penalties. In the event of extreme cases, the IT department can also initiate criminal action.
Filing Returns Are Mandatory In Some Cases
Even if your gross income for the current year falls below the lowest tax bracket, filing returns voluntarily can be a big plus for speedy registration of immovable properties. Some states require submission of income tax return of the past three years even if it is a NIL. This enables smooth processing of the transaction.
Your loan or Card Company May Want To See Your Return
Regular tax filing is recorded with the IT department and is standard proof of your income. This comes handy when applying for a credit card or loan (a housing, education or vehicle loan). Banks and other lending institutions need to ascertain your financial situation and ITR is a sound document to establish your creditworthiness.
Hence, filing taxes leads to the easier procurement of funds and processing of credit card applications.
Also Read: Top 5 Strategies To Save Tax At The Last Minute
If You Want To Claim Adjustment Against Past Losses
By paying taxes within the prescribed period you can recompense losses (whether speculative/non-speculative, short term/long term) incurred in the previous year with future capital gains. However, if your ITR is not filed on time, you cannot carry forward unadjusted losses to the subsequent year or avail the set-off benefits provided by the tax authorities.
Important for Visa Processing
Want to travel abroad? Don’t forget to file your tax returns on a regular basis. Financial stability is known to be a prerequisite for visa approval for certain countries.
The consulates of countries like US, UK, Canada among others require copies of your tax returns for the past few years for processing your visa application.
Apply For Business Loan Online
Now that you understand the importance of filing income tax returns, get your act together as soon as possible. However, if you find the ITR filing process confusing and difficult to tackle, hire a professional to help you with it.
Who is Obligated To File Income Tax Returns?
In accordance with income tax regulations, any taxpayer whose gross total income (GTI) surpasses the minimum income tax threshold applicable to their age is required to file an Income Tax Return (ITR). The basic exemption limits are ₹2.5 lakh, ₹3 lakh, and ₹5 lakh for individuals below 60 years, those between 60 and 80 years, and individuals aged 80 years and above, respectively.
There are specific scenarios where individuals must file an income tax return, even if their GTI falls below the basic exemption limit. If you fall into any of the categories outlined below, it is mandatory for you to file an ITR.
- If your electricity bill exceeds ₹1 lakh for a single bill or accumulates to ₹1 lakh or more during the financial year.
- If you have deposited ₹1 crore in your current accounts maintained with a bank or cooperative bank.
- If you are an ordinarily resident individual with income from foreign countries and/or possess assets in foreign countries and/or have signing authority for any account outside the country.
- If you have incurred expenses of ₹2 lakh or more for yourself or others for travel to a foreign country.
- If your GTI exceeds the basic exemption limit before claiming a deduction on capital gains incurred under any of the following sections – 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB.
FAQs
1. Why is filing Income Tax Return (ITR) important in India?
- Filing ITR is mandatory as per Indian tax laws if your income exceeds the prescribed limits. It helps the government track and assess the income and tax liabilities of individuals and entities.
2. What are the consequences of not filing ITR in India?
- Failure to file ITR may result in penalties and legal consequences. It can affect your financial credibility, limit access to financial services, and lead to legal actions by the Income Tax Department.
3. Can ITR filing impact my credit score in India?
- While ITR filing itself does not directly impact your credit score, a consistent record of timely filings can positively influence your creditworthiness. Financial institutions often consider tax returns while assessing loan eligibility.
4. How does filing ITR contribute to financial transparency?
- ITR filing provides a transparent record of your financial transactions, income, and tax payments. This transparency helps in establishing financial credibility and can be beneficial for various financial transactions and applications.
5. Are there any benefits to filing ITR even if my income is below the taxable limit?
- Yes, filing ITR is advisable even if your income is below the taxable limit. It serves as proof of your income, which can be required for various financial transactions, visa applications, and loan approvals. It also helps in claiming refunds, if applicable.
6. Can filing ITR help in obtaining loans and credit cards in India?
- Yes, many financial institutions require ITR documents as proof of income while processing loan or credit card applications. A consistent record of ITR filing can enhance your chances of approval.
7. How does filing ITR contribute to availing tax benefits and exemptions?
- ITR filing is crucial for claiming tax benefits, deductions, and exemptions. Filing enables you to report your eligible investments, expenses, and income details, allowing you to avail of the benefits provided under the Income Tax Act.
8. Is it necessary to file ITR if taxes have already been deducted at source (TDS)?
- Yes, even if TDS has been deducted from your income, filing ITR is still mandatory. It allows you to reconcile and claim any additional deductions, report other sources of income, and ensure accurate computation of your total tax liability.
9. How can ITR filing be beneficial for self-employed individuals and business owners?
- For self-employed individuals and business owners, ITR filing is essential for documenting their business income, expenses, and profits. It plays a crucial role in securing loans, establishing financial stability, and complying with tax regulations.
10. Can ITR filing be done online, and what are the key steps involved?
- Yes, ITR filing can be done online through the Income Tax Department’s e-filing portal. The process involves registering on the portal, selecting the appropriate ITR form, filling in the required details, and submitting the return electronically.