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.
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.
1. Filing returns is a sign you are responsible
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.
2. 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.
3. 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.
4. 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.
5. 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.
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.