An income tax return is a form, where a taxpayer disclosed details of his/her income, claims applicable deductions and exemptions and pays the taxes so calculated or claims the refunds in case excess tax have been deducted.
As per section 139(1) of Income Tax Act 1961, Every individual/HUF/AOP/BOI/artificial juridical person has to file the return of income if his total income (including income of any other person in respect of which he is assessable) without giving effect to the provisions of section 10(38), 10A, 10B or 10BA or Chapter VIA (i.e., deduction under section 80C to 80U), exceeds the maximum amount which is not chargeable to tax i.e. exceeds the exemption limit.
Most of millennial think that if their salary is below taxable limit, they do not require filing their tax return. However, the story doesn’t end here, one needs to file ITR even of their income is below tax bracket because of the benefits attached with such compliance. Being a good corporate citizen, It is always advisable to file an ITR, As a tax return is considered to be more robust proof of income than Form 16, especially when you are switching to a new company and required to give proof of income said CA. Aditya Banka, Prop. Aditya Banka & Co.
Considering various scenarios, the benefits of filing Tax returns can be summed up below,
- Mandatory requirement for applying for bank loan : if your are planning to gift you a car or getting you a new flat on loan, then the best proof of income is ITR for processing a bank loan easily. The preliminary requirement that a banker shall ask you is your ITRs of previous 2 to 3 years and then make way forward for other requirements.
- Getting Tax refunds: There is a possibility that your income is less than taxable limit and your employer or bank has deducted TDS on salary or on Interest you get from bank on investment made in FDs, then to get the refund one need to file ITR.
- Carrying forwarding loss of business or capital Loss: If you are an entrepreneur running a start-up or a frequent investor of share market or doing share trading, having incurred losses during the year, then such loss can be carried forwarded to next financial years and setoff from the profit only if you file your tax returns within due date.
- VISA application processing : If you are planning a vacation to a foreign country then you need proof of your income as there are many cases being heard where embassies like UK, US, Canada etc. ask your past tax returns to check your tax compliances in the country, which also helps in hassle free processing of your VISA application. There comes the need to ITR.
- Buying a high life cover: When you want to take a high life cover term insurance then the Insurance companies shall as your Tax returns for 3 consecutive financial years to assess the amount of risk cover to be given to you. It is not possible for one to give receipt from all the source of earning especially when you doing job and well as free lancing, the ITR proves to be a summary of all your earning from different sources.
- Having accumulated savings: During the demonetisation period, people wanted to deposit their savings which was kept at their homes into their bank account but were scared because the amount was more than the safe limit in purview of income tax laws although they had all there saving from genuine sources. In such cases, there came the need of having ITRs of past year from which the source of income can be easily proved when the notice would be served from the tax departments even if they deposit more amount in bank.
- Certificate of being self-employed: Sometimes when you need to prove your source of income but you are self-employed then ITR comes to your rescue. The source of income shown in the ITR proves that you have a sufficient amount of income to process your application further.
- Helps to avoid penalty: In case you have some TDS deducted by bank and filed a belated return then you have to pay interest at the rate of 1% on the remaining of tax payable by you. Also, if you have filed return for the previous financial year when your income was above taxable limit but for current financial year income is below limits and you are planning not to file tax returns then in that case you will get continues reminders from the department for filling returns. Instead of going for a lengthy process of proving the non-requirement, it’s easy to file tax return to enjoy a hassle-free leisure.
- Privilege from government: In coming days, the government shall make an arrangement to honour the tax return filers by giving them privilege entry or any other similar benefits to increase the higher number of tax complied citizens as in the recent past, the government has started to give appreciation certificate acknowledging taxpayer’s role in nation-building. Such certificate shall increase the beauty of your profile or resume.
It is always advisable to file your tax return within due date even if your income is below the prescribed taxable limit as it carries a lot of advantages with it. If you know someone who is not filing the tax return and requires to file, then being a true friend and responsible citizen of India, you should suggest them to file their tax return at the earliest as deadline for timely filing is July 31 for non-audit case and belated return shall carry penalty of up to Rs 10,000.