It’s income tax filing season. If you’re planning to give it a miss, here are 5 benefits of filing income tax returns that should help you change your mind.
Gone are the days when you had to spend hours going through complicated forms and complex financial jargon to file your Income Tax returns. The Income Tax department has been constantly modifying forms to make them as comprehensive and simplistic as possible for laymen to file their Income tax returns without any hiccups. Now you can even ditch the paperwork and file your Income Tax returns online from start to finish.
In spite of these improvements, there are still some who skip this exercise year after year under the pretext of “What’s the point of filing Income Tax returns?” Well, to start with, filing income tax returns makes you tax-compliant. Individuals whose annual income is in excess of the basic exemption limit of Rs. 2.5 lakh must mandatorily file their Income Tax returns. Even when there is no tax liability, you should file Income Tax Return (ITR) if your total income exceeds the above-mentioned threshold. But in case you’re still not convinced, here are five benefits of filing income tax returns that you should be aware of:
Filing ITR Avoids Penalties:
To start with, as a law-abiding citizen, it’s your duty to file Income Tax returns. Effective from FY 2017-18, the Income Tax department will levy a penalty of Rs. 10,000 under Section 234F on individuals who do not file their Income Tax return.
Help With Your Loan Application:
Filing ITR will help you with your loan application – all major banks ask for a copy of Income Tax returns when they’re reviewing your application for a Car Loan, Personal Loan or Home Loan. For instance, the State Bank of India asks two-wheeler or four-wheeler loan applicants for documents like the latest salary slip that reflects all deductions, TDS certificate/Form 16, and copy of ITR for the last two financial years. Keeping a copy of your ITR receipt handy is a good idea if your loan application is rejected or if you’re getting a loan amount much lesser than what you had applied for. If you have a refund due from the Income Tax department, you will have to file returns in order to claim the refund.
Additional Reading: Do All NRIs Need To File Tax Before July 31?
Foreign embassies, especially those of the US, UK, Canada or Europe, ask for your ITR receipts of the last couple of years at the time of the visa interview. Some may even ask for receipts of the last three years, while some others may ask for the most recent one. ITR receipts help them assess your income and indicate that you will be able to take care of the expenses on the trip. They also indicate that you’re someone who is not leaving the country for good but will return. Experts suggest that while travelling to foreign countries, you always carry income-related proofs-salary slip, Form 16, and ITR receipts. Before undertaking travel to a certain country, check with the respective embassies on documents that you should carry on your foreign travel to that country-salary slip, Form 16, and ITR receipts. These requirements may vary from one consulate to another.
Buying A High Life Cover:
If you’re buying a Term Life Insurance with a sum assured of Rs. 50 lakh or Rs. 1 Crore, you may have to furnish your ITR receipts as proof of income. Most Life Insurance companies including LIC ask for ITR receipts if you buy a term policy with a sum insured of Rs. 50 lakh or more. The sum insured of a term cover depends on a whole lot of things, one of which is the income of the insured. If the insured doesn’t have a high salary, he doesn’t need a high term cover.
Additional Reading: 5 Tax-Saving Investment Options That You’ll Love
Compensate Losses In The Next Financial Year:
Unless you file an ITR, you won’t be able to carry forward your losses from the previous financial year to the next one. As per the Income Tax law, individuals are not allowed to carry forward losses and set them off against future years’ income if the ITR is not filed within the due date. So if you want to claim the losses in future years, you should file your Income Tax returns in time.
For Self-Employed Individuals:
Businessmen, consultants and partners of firms do not get Form 16. That’s why it’s even more important for them to file their ITR as the ITR receipts act as the only proof of income and tax payment for them.
Additional Reading: Everything You Need To Know About Income Tax Return For Freelancers
Planning to save taxes? You could invest in Fixed Deposits where interest rates go as high as 8.65%.