As a citizen, filing income tax return (ITR) is not just your legal responsibility, but also your civic responsibility. The Government of India has made it mandatory for certain types of persons to file their income tax return.
Filing an income tax return (ITR) offers several benefits, both in terms of compliance and practical advantages. In this article we will discuss major benefits of filing income tax returns in India.
Legal Compliance
Every resident individual whose income exceeds the basic exemption limit during the financial year is liable to file his or her income tax return as per the tax laws. Failure to file can result in penalties and interest charges.
Filing your ITR on or before 31st July of the assessment year ensures compliance with tax laws and helps you avoid penalties or legal issues for non-filing.
For the financial year 2023-24 (assessment year 2024-25), the due date of filing income tax return is 31st July 2024.
In cases where you have business income and the accounts are required to be audited under section 44AB, then the due date of filing is 31st October of the relevant assessment year and the audit report filing due date is 30th September of the relevant assessment year.
Timely filing and payment of taxes avoid interest charges on late payments or non-filing.
Filing income tax return on or before the due date helps you avoid late fees and penalties for late filing
Fines for late filing of income tax return can range from 1,000 to 10,000 rupees, depending on the delay. In addition to it, you may be required to pay interest on unpaid taxes and penalty for non-filing.
Financial and Tax Benefits
If you have paid excess tax through TDS or advance tax, filing your income tax return (ITR) allows you to claim a refund from the government.
As per our laws, tax may have been deducted (TDS) from your salary, professional receipts, interest and rent. You need to keep records from which taxes are deducted. You should check form 26AS and AIS before filing your tax return. These forms will give you a complete list of income from which tax has been deducted and deposited.
AIS will give you a complete picture including your financial transactions reported to tax authorities which includes stock trading, buying and selling of mutual funds, and divided.
Refunds can not be issued if ITR is not filed.
Refund money can be used towards investment, savings or other financial requirements.
Filing Income tax return (ITR) enables you to carry forward losses from previous years (e.g., business losses, capital losses) to set off against future income, which can reduce your tax liability in subsequent years.
Proof of Income
An Income tax return (ITR) serves as proof of income when applying for loans or mortgages, as banks and financial institutions often require ITRs for assessing your creditworthiness.
It can also be useful for visa applications, as many countries require proof of income and financial stability.
Acknowledgement of income tax filing and tax computation statements serves as proof of your income and financial history. Lenders and agencies consider IT filing documents such as acknowledgement of filing and computation when making their decisions.
Financial Planning
Filing Income tax return (ITR) helps in maintaining accurate records of your income and expenses, which can be useful for personal financial planning and budgeting.
Tax filing helps to assess your tax liability and understand how different incomes are taxed. You can plan when your income grows and tax liability increases.
Certain investments and tax-saving instruments require you to file ITR to claim benefits or deductions.
Legal Safeguard
Properly filed returns with accurate disclosures minimize the risk of disputes with tax authorities and help in easier resolution if any queries or audits arise.
Consistently filing Income tax return (ITR) helps establish a good financial reputation and compliance record.
Timely filing income tax returns ensures compliance with tax laws, reduces penalties and legal issues.
Carry Forward of Losses, tax credit and deductions
If you have incurred losses (e.g., from business, profession, or capital gains), filing Income tax return (ITR) enables you to carry forward these losses to offset against future income, which can reduce future tax liabilities. You will miss carry forward of losses benefits if you don’t file your ITR.
Filing your ITR allows you to claim various deductions and tax credits available under the Income Tax Act, which can reduce your overall tax liability.
To claim tax deductions, you must officially report your income and expenses to the government through a filed IT return.
Some government schemes or subsidies may require proof of income or tax return filings as part of eligibility criteria.
Filing Income tax return (ITR) provides a record of your income and taxes paid, which can be useful for future reference or in case of audits.
In summary, filing your income tax return not only ensures compliance with tax laws but also provides numerous financial and practical benefits that can aid in better financial management and access to various services.
