As per Section 139 of the Income Tax Act, 1956 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, an income tax return (ITR) must be filed if the total income exceeds the above-mentioned threshold.
‘Income tax return’ is a form in which taxpayers declare details of income, deductions, exemptions, and taxes payable on their taxable income. Filing income tax return is mandatory to claim tax deductions under Section 80C, 80D, etc. and other eligible exemptions like long-term capital gains exemptions, which may eventually bring your taxable income to zero.
Filing ITR offers the following benefits: –
1. Filing ITR avoids penalties
Effective from FY 2017-18, the Income Tax Department levies a penalty of Rs 10,000 under section 234F on individuals who do not file their income tax return. Filing ITR on time avoids unnecessary penalties. The penalty has been kept at Rs 1,000 if your annual income is not more than Rs 5 lakh, as a law-abiding citizen, it is your duty to file your tax returns.
2. ITR receipt is a very important document
You need to preserve ITR receipts carefully as they are very important proof of your income and of payment of your taxes. It is much more detailed than Form 16. It contains your total income details and has details of your income from other sources.
3. ITR receipt is a useful document for hassle-free processing of bank loans
Most banks and NBFCs ask for ITR receipts of the latest three years when you apply for high-value loans like home and car loans. Lenders consider ITR as the most authentic document supporting an individual’s income. Hence, you should regularly file income tax return if you are planning to avail home or car loans in the future.
4. Visa processing
Embassies of developed countries like the United States, United Kingdom, Canada, and Australia ask for ITR receipts of the past years to process your visa application. They are very particular about your tax compliance and hence, you are asked to furnish past ITR receipts. This helps them assess your income and ensure that you are able to take care of the expenses on your trip.
5. Compensate losses in the next financial year
Individuals cannot carry forward losses of the current financial year to the next financial year until an ITR is filed. 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. Hence, it is important to file your income tax return on time in order to claim the losses in future years.
Filing ITR on time is beneficial in many ways while keeping you tax-compliant. The e-filing season has begun for the Financial Year 2022-23 and the due date is 31st July 2023. Be a responsible citizen and file your taxes early to avoid last-minute issues.
