The Benefit of Filing Income Tax Return.

Filing an income tax return offers several benefits, both for individuals and the overall functioning of the economy. Here are some key advantages:

Compliance with the Law:

Filing income tax returns is a legal obligation in many countries. It ensures that individuals and businesses comply with tax laws and regulations.

Avoidance of Penalties:

Filing tax returns on time helps individuals and businesses avoid penalties and interest charges imposed by tax authorities for late or non-compliance.

Claiming Refunds:

If you've overpaid taxes through deductions or tax credits, filing a return allows you to claim a refund. This money can be significant and may contribute to your financial well-being.

Building a Financial Record:

Income tax returns serve as a crucial financial record. Lenders, financial institutions, or even potential employers may request tax returns to assess your financial stability and creditworthiness.

Access to Financial Benefits:

Some financial benefits, such as government assistance programs, subsidies, or loans, may require proof of income through filed tax returns. Having up-to-date tax records can facilitate access to these benefits.

Creditworthiness:

Lenders often use tax returns to evaluate an individual's or business's creditworthiness. A consistent and accurate filing history can positively impact your credit score.

Facilitating Loan Approvals:

When applying for loans or mortgages, banks and financial institutions may require tax returns as part of the documentation. It provides a comprehensive overview of your financial situation.

Supporting Business Operations:

For businesses, filing tax returns is crucial for understanding their financial health, making informed business decisions, and planning for future growth. It also helps in demonstrating transparency to stakeholders.

Contributing to Public Services:

Taxes collected through the filing of returns are used to fund public services, infrastructure, education, healthcare, and other essential government functions. Filing taxes ensures that citizens contribute their fair share to support these services.

Legal Protection:

Filing tax returns provides a legal safeguard in case of any disputes or audits. It demonstrates transparency in financial dealings, reducing the likelihood of legal issues with tax authorities.

Planning for the Future:

• Regularly filing tax returns allows individuals and businesses to assess their financial situation, plan for future expenses, and make strategic decisions based on their tax liabilities.

Income Tax Return (ITR) filing due date for Assessment Year 2022-2023 is July 31st, 2022. As per the Income Tax rules, any individual having an annual income above Rs 2.5 lakh should file ITR. Income up to Rs 5 lakh is tax-free. Experts advise that even if you have no tax liability, you should file ITR on time for enjoying several benefits.

Save Interest

Not filing ITR on time may lead to an interest in the tax payable. However, as per the provisions under Sections 234A and 234B, you can save interest applicable on the payable tax by filing ITR on time. There is no relief on penalty for late filing of ITR.

Taxpayers are required to pay interest for delays in the ITR filing. As per the Income Tax rule, if a taxpayer has not paid advance tax or paid less than 90% of his/her liability then he/she would have to pay interest under Section 234B at the rate of 1% per month or part of the month till the date of payment of tax.

Avoid Penalties up to Rs 10,000

There is a cost of filing delayed ITR! Filing of ITR after the due date may lead to a penalty of up to Rs 10,000 as per the Income Tax rules.

Avoid notice from the Income Tax department

The Income Tax department may send a notice if not filing ITR before the due date. And that may become an unwanted headache for you. Hence, it is always better to file ITR on time.

Loan Approval Becomes Easy

It is easier for ITR filers to get their loan requests approved by lenders. When you apply for a loan, the bank would ask you to provide a copy of your ITR statement as proof of income statement. ITR report is a mandatory document for getting loan approval. Those who don’t file ITR may find it very difficult to get their loan request approved by any formal lender. So, if you are planning to get a loan in near future, ensure that you are filing your returns on time.

Carry Forward Losses

As per the Income Tax rules, you can carry forward losses to subsequent years if filing ITR before the due date. This provision will help you in reducing your tax liability from any future income. Apart from the above, taxpayers who file their ITR on time also get their Income Tax Refund faster than others.

Claim Tax Refund

There can be instances when tax has been deducted (TDS) from your income even when your total taxable income is less than the basic exemption limit and you have a nil tax liability for that year. In such a case, you will have to claim a TDS refund for which you will have to file an Income Tax Return mandatorily.

Frequently Asked Questions:

Q1: Why should I file an income tax return?

A1: Filing an income tax return is mandatory if your income exceeds the taxable limit set by the government. However, even if you fall below the threshold, filing has its benefits, such as establishing financial credibility, applying for loans, and claiming refunds.

Q2: What are the advantages of filing income tax returns?

• Legal Compliance: Filing taxes is a legal requirement, and failure to do so can result in penalties.
• Claiming Refunds: If you have excess taxes deducted, filing a return allows you to claim a refund.
• Financial Credibility: Regular filing enhances your financial credibility and facilitates transactions like obtaining loans or applying for visas.
• Income Proof: The tax return serves as proof of your income when required for various purposes.

Q3: Can I get a refund by filing income tax returns?

A3: Yes, if you have paid more taxes than you owe, you can claim a refund by filing an income tax return. This often happens when the employer deducts more tax at source than required.

Q4: What documents do I need for filing income tax returns?

A4: Common documents include:

• Form 16 (provided by your employer)
• Bank statements
• Investment documents
• PAN card
• Aadhar card
• Details of other income

Q5: Is there any benefit for salaried individuals in filing income tax returns?

A5: Yes, filing returns is crucial for salaried individuals. It helps in claiming deductions, exemptions, and benefits like HRA (House Rent Allowance), LTA (Leave Travel Allowance), and others. It also establishes a transparent financial record.

Q6: Can filing income tax returns help in getting a loan?

A6: Yes, lenders often require income tax returns as proof of income and financial stability. Regular filing can improve your chances of getting loans at favorable terms.

Q7: What is the penalty for not filing income tax returns?

A7: Failure to file income tax returns can result in penalties, interest on unpaid taxes, and legal consequences. The penalty may vary based on the delay in filing.

Q8: How can I file my income tax return?

A8: You can file your income tax return online through the official government portal or use various authorized e-filing platforms. You may also seek assistance from a tax professional.

Q9: Is there any benefit for senior citizens in filing income tax returns?

A9: Yes, senior citizens may be eligible for various tax benefits, exemptions, and rebates. Filing returns ensures they avail these benefits.

Q10: Can I file income tax returns if I have no taxable income?

A10: Yes, even if your income is below the taxable limit, filing returns is beneficial. It establishes a financial record and may be required for various transactions.

Remember to consult with a tax professional or refer to the latest tax regulations for accurate and up-to-date information.