As soon as your income exceeds a certain level, taxes are imposed. Taxes must be paid through an income tax return.
You enter information regarding the income earned during the past fiscal year (1st April-31st March) on the ITR. It is important for everyone, regardless of whether they are salaried, a partnership, or a HUF, to file an ITR.
In most cases, people consider filing income tax returns to be a burdensome process. Many people ignore filing their taxes for that reason.
Every year, as a responsible citizen, you should file your tax return. All Indians who work have a moral obligation to do so.
Filing an ITR may benefit you as well. In this article, I will explain in detail how filing an Income Tax Return can benefit you in several ways.
1. Legal document
The Income Tax Return has great legal significance. Governmental records are kept of it. Besides serving as legal proof, it also acts as a witness,
a. Evidence of identity
Your returns can be used as identity proof in various scenarios, such as to obtain an AADHAR card. Also, it serves as a proof of address to the government.
b. The proof of income
ITR forms contain detailed information on your income and expenses. Calculate the tax you owe based on this.
ITRs can be used to prove income in transactions such as the purchase of the real estate.
This can come in handy for the ones who are self-employed and don’t receive Form 16.
2. Provides assistance in claiming deductions
The government allows taxpayers to deduct certain expenses to reduce the burden on them and encourage more people to pay their taxes.
You may be able to take advantage of these deductions and exemptions in some investments and thus reduce your tax burden.
There are also ways to claim back TDS and rebates.
It is, however, necessary to file an income tax return in order to take advantage of these tax benefits. Similarly, if you have not filed your ITR, you cannot claim deductions.
3. Loan Applications – Important Documents
A bank is required to collect some documents when you apply for a loan to purchase something like a car or a new home for your family or business
The Aadhar card
The PAN card
License to drive
As well as photo IDs, etc.
You are asked to provide proof of your income as one of the documents. It is generally expected that banks will require ITRs for the last three years. It is conducted to determine whether you will be able to repay the loan based on your past and current financial situation.
Not only can ITR be beneficial when you apply for a bank loan, but it can also qualify you for a credit card as well. Before issuing a credit card, companies require you to provide current and past salary and tax returns.
4. Plan your trip abroad with this guide
When traveling abroad, there are certain procedures to follow. If you do not file your ITR, then you may have to cancel your plan to travel abroad. A copy of the ITR form is included on the list of documents you’ll need to enter certain countries.
Because of the following reasons:
As an example. History of filing income tax returns supports your case and improves your chances of obtaining a visa.
- In it, you give the embassy information about your financial situation.
5. Beware of penalties and punishments
Your taxes are governed by the Income Tax Act 1961. If you don’t fall into the exempt category, then you need to pay taxes.
In this situation, if you are eligible to pay taxes on your income but fail to file your income tax returns, you will be penalized.
Up to Rs 5000 can be levied as a penalty by the income tax officer. Filing your taxes on time could also result in other serious punishments.
It is therefore imperative that you file an ITR in order to avoid such penalties and penalties.
6. Taking losses forward is possible
Losses of a given year may be carried forward to the next year under sections 70 and 71 of the Income-tax Act 1961. As a result, you are able to move the loss to the next assessment year.
Examples include:
- The losses from house properties can be carried forward and offset against house property income in the following 8 assessment years.
- Business losses can be carried forward and paid with future revenue.
You cannot carry forward or offset losses if you do not file an Income Tax Return.
By filing your income-tax return, you help the nation as well. Using tax revenue, the government builds infrastructure and improves other facilities such as medical centers, defense forces, etc.
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