Top 10 Benefits of filing Income Tax Return – Avoid Penalty, Claim Refund, Easy Loan Approval: Many times people want to know that even if tax is not made on them, should income tax returns be filed? Actually no one wants to get into all these rounds. But there are many advantages of filing income tax returns. Here we are telling 10 big benefits of filling Income Tax Return.
Top 10 Benefits of filing Income Tax Return
Claim Tax Refund
Many people understood the real benefit of filing income tax returns when tax refunds reached their accounts. This mostly happens with the Salaried Class. Because their employer already deducts TDS from their salary. But later if your investment etc. is calculated, then your tax liability decreases. Extra TDS comes back as refund after filing income tax return.
If you are not a salaried person and you have to pay tax in the form of Advance Tax on having taxable income. Often it also accumulates more. Its refund is also available only on filing the return.
Apart from this, TDS can be deducted on interest of saving more than 10 thousand rupees on your bank deposits (Saving/FD/RD). Or there are rules for deducting TDS on the payment of some Professional Services. If there is more tax deducted than your actual tax liability then with the help of Income Tax Return you can get it back.
Easy Loan Approval
If you are employed and want to take a loan from the bank to buy a vehicle (two wheeler or four wheeler) or to build a house, then you are asked for a Salary Slip. If you are not employed, then you are asked for a receipt of Income Tax Return.
If you want to take a loan from Pradhan Mantri Mudra Yojana to do business, if you want to take a Mudra loan of more than 2 lakh rupees, then you have to submit a copy of Income Tax Return. Even in cases where loans do not require Income Tax Return, by issuing a copy of Income Tax Return, the loan issuing institution settles the loan process more easily and faster.
Carry Forwarding your Losses
Capital Gain is an advantage on the sale of various types of properties such as land, house, shop, jewelry, shares etc. This benefit is also included in your income for that year and according to the prescribed rules, tax has to be deposited on it.
However, you may have suffered capital loss on such deals in a year. So you can adjust or carry forward this Capital Loss (short-term or long-term) with Capital Gains in the coming years. You can do this only if you have filed Income Tax Return for the year with Capital Loss.
Keep in mind –
- The long-term capital loss during a financial year can be carried forward for the next 8 financial years.
- Long-term capital loss can be adjusted only with long-term capital gain.
- Short-term capital loss can be adjusted with both short-term capital gain and long-term capital gain.
Buying a High Life Cover Policy
Nowadays, the trend of taking a life insurance policy (such as 50 lakhs, 1 crore) with a large amount is increasing. However, to take such large insurance policies, you also have to show the receipt of Income Tax Return. Such is the case with life insurance companies, especially LIC. In LIC, if you take a term policy of 50 lakhs or more, then you have to provide Income Tax Return. Because it is an authentic document of your income. On the basis of which it is decided that you are also eligible to insure such a huge amount or not.
Quick Visa Processing
If you are going on a foreign trip, then in the process of making Visa, Income Tax Return may also be required. Now, during the visa interview, the foreign consulates of developed countries ask you to give the Income Tax Return Receipt (ITR receipt) of the last two years. Some embassies ask for ITR receipt for the last three years, while some only ask for ITR receipt for the last nearest year. Especially if you want to go to USA, UK, Canada or Europe, then this may be more needed. However, it is not so desperately needed to travel to South East Asian countries and Middle East countries.
The submission of the ITR receipts proves that the person does not intend to leave the country for tax evasion or any other such purpose, and will return after the completion of his current objective. Apart from this, during travel abroad, whether it is for business purpose or for traveling or leisure trip, proof related to your income, such as salary slip, Form 16 and ITR receipts etc. It is okay to keep it with you. In cases of any doubt, foreign consulates can ask to show them.
Easy to get Credit Card
If you apply for a credit card in the bank, then Salary Slip is demanded from the salary holders. If you are not salaried person, then a copy of Income Tax Return is sought to check your financial eligibility for getting a credit card. The limit of your credit card is also decided on the basis of your income tax return.
Taking Government Contracts
If a person wants to take a government contract, then he is asked to submit a receipt for Income Tax Return as proof of his income. Often it can be asked for a receipt for the first 3 to 5 years. Here also the Income Tax Return shows that the level of contract you want to take, your financial status is worth fulfilling or not. However, it is not required in the small work of some departments or in certain types of work.
Avoiding penalty, interest, prosecution and scrutiny
If you earn taxable income, then it is not only important for you to pay Income Tax, but it is equally important to file Income Tax Return. If you have not filed Income Tax Return, then even if you have paid your tax liabilities, then you may face difficulties in the following ways.
- In case of non-filing of Income Tax Return, the Income Tax Department can send you a notice and impose a penalty. This penalty is in addition to your outstanding tax liability.
- The lesser amount you have paid as Income Tax from your actual tax liability. Interest is paid at the rate of 1 percent per month on that amount.
- You can also be prosecuted for the offence of having Non Declared Income. The Income Tax Department can scrutinize your earnings and assets at any time in this regard.
- Filling up Income Tax Return on time and in the right manner keeps you away from all these troubles.
Funding for Start-Ups
Nowadays fast and large numbers of start-ups are being started. Even if you have set up a start-up and want funds for it from domestic and foreign investors, regularly filled Income Tax Returns are helpful in this. Investors not only see the profitability in your start up, but also make an investment strategy keeping in mind its financial history. Here your Income Tax Return plays an important role.
For Accidental Claim in Third Party Insurance
If someone dies in a road accident, then the insurance of the vehicle involved in the accident is useful. Through the third party insurance of that vehicle, the family of the deceased person is compensated. The amount of this compensation is determined according to the income of the deceased person.
Now, income tax return is the best way to prove income. That is, on the basis of this return, compensation for the family of the deceased person is determined. If the Income Tax Return is not filled in the years before the accident, then the insurance amount may be comparatively low or nothing. In terms of law, the income tax return (ITR) is more important than that of a person about his financial status than wealth records, bank deposits or business, etc.
Note – In the case of your income and tax paid, the receipt of Income Tax Return instead of Form 16 is considered a more robust document. In Form 16, there are only the details of the salary you are getting from one company and the TDS deducted on it. Whereas, Income Tax Return contains details regarding all your types of income (such as business income, income from house property, capital gains, interest etc.) and payment of taxes.
In this article, we learned why filing Income Tax Return is useful for every person. Whether its income is taxable or not. So don’t delay, do e-filing your income tax return online without any charge. We hope you are going to get benefits of filing income tax return. Share this article with your friends, coworkers so that they can also get benefits.