Individuals with annual earnings over the basic exemption level of Rs 2.5 lakh are required to file income tax return filings. Even though there is no tax liability, if total income exceeds the above-mentioned threshold, an income tax return (ITR) must be filed.
The ‘Income Tax Return’ is a form on which taxpayers submit their taxable income, deductions, exemptions, and taxes due. It is necessary to file an income tax return in order to claim tax deductions under Section 80C, 80D, and other qualified exemptions such as long-term capital gains exemptions, which may reduce your taxable income to zero.
Filing an ITR not only ensures that you are tax-compliant, but it also provides the following advantages:
Penalties are avoided by filing an ITR.
Individuals who do not file their income tax return face a penalty of Rs 10,000 starting in FY 2017-18, according to section 234F of the Income Tax Act. When you file your ITR on time, you avoid paying unnecessary penalties. Even though the penalty has been reduced to Rs 1,000 if your annual income is less than Rs 5 lakh, it is your responsibility as a law-abiding citizen to file your tax reports.
The ITR receipt is a crucial document.
ITR receipts should be kept in a safe place because they are crucial documentation of your income and tax payment. It’s a lot more in-depth than Form 16. It comprises information about your total income as well as information about your various sources of revenue.
The ITR receipt is a useful document for smooth bank loan processing.
When applying for high-value loans such as home and vehicle loans, most banks and NBFCs want ITR receipts from the previous three years. Lenders regard the ITR as the most reliable source of information about a person’s earnings. If you plan to take out a home or vehicle loan in the future, you should complete your income tax return on a regular basis.
Processing of visas
Developed-country embassies, such as those in the United States, the United Kingdom, Canada, and Australia, require ITR receipts from previous years in order to process your visa application. They are particularly concerned about your tax compliance, thus you will be required to provide previous ITR receipts. This allows them to examine your income and verify that you will be able to cover your trip’s expenses.
Make up for losses in the following fiscal year.
Individuals cannot carry losses from the current fiscal year forward to the following fiscal year until an ITR is filed. Individuals are not allowed to carry forward losses and offset them against future years’ income under income tax rules if the ITR is not filed on time. As a result, timely filing of your income tax return is critical in order to recoup losses in future years.
Filing your ITR on time is useful in many ways, in addition to keeping you tax-compliant. The e-filing season for the Financial Year 2018-19 has begun, and the deadline is July 31, 2019. Be a responsible citizen and file your taxes early to avoid last-minute difficulties.
Suggested Read: Income Tax Advisory Services