Benefit of filing ITR07/09/2022 0 By indiafreenotes
A form in which taxpayers declare their income details, tax payable on their income, exemptions, and deductions for a particular financial year is known as an income tax return. There are several reasons why taxpayers must file ITR, the primary reason being claiming tax deductions. However, every individual doesn’t need to file ITR.
The benefits of filing income tax returns vary across taxpayers. Depending on the category of taxpayer, we have enlisted the advantages of filing ITR in the following section.
- Seamless processing of loans: Financial institutions asks for ITR receipts of the previous year or years during a loan application. They consider this receipt to be a supporting document to a borrower’s income statement. Therefore, it is essential to file for ITR if an individual plans on securing a home or a car loan. Salaried and self-employed individuals can benefit greatly from this since they do not have to provide any other document as income proof and easily get loan approvals.
- Claiming refund: Any individual can claim a tax refund from the IT Department by filing ITR. This is highly beneficial to salaried and self-employed persons falling in a high-income bracket.
- Easy visa processing: ITR receipt is vital to process visa applications. The US embassy and others ask for this receipt to know more about an individual’s tax compliance. As this document acts as proof of an applicant’s income, the embassy will check the income details and ensure he/she is capable of taking care of travel expenses. Salaried personnel and self-employed people can benefit from this by filing ITR.
- Medical insurance: The IT Department offers deductions up to 50,000 on health insurance premiums paid in a specific fiscal year. This is under Section 80D of the Income Tax Act. Upon providing medical insurance, the senior citizens can avail of this deduction and undergo treatments without any hassle.
- Loss compensation: Any company and business can incur a loss at any time during a specific fiscal year. To compensate for the loss, companies need to file IT returns. By following this procedure, one can carry forward the tax losses in the coming year. However, assessees need to file ITR before the due date to claim the losses in the future.
- Avoid penalties: As mentioned earlier, it is mandatory for some individuals to file income tax returns. Timely filing ITR will help individuals and companies avoid hefty fines. If the annual income is not more than 5 lakhs, the IT Department levies a fine of 1000. The penalty can go up to 10,000 otherwise.
- Presumptive taxation scheme: Self-employed persons can avail of this taxation scheme by filing ITR with form number 4. Professionals like architects, doctors, lawyers can consider only 50% of their income as profit and be taxed accordingly if such income is below 50 lakhs. Businesses with annual turnover below 2 crores can also adopt this scheme and declare 6% (for digital transactions) and 8% (for non-digital transactions) of their income as profit.
- Interest deduction: Filing for ITR also allows interest deduction while applying for home loans. If an NRI has a rented-out or vacant property in India, it becomes a taxable property for which he/she needs to file tax returns. The benefit of filing ITR here is that the individual can enjoy a standard 30% deduction on home loan interest and property taxes.
Benefits of filing ITR if not in the bracket
In addition to this, one can file a NIL income tax return in case his/her yearly earnings fall below the taxable slabs. There are several benefits of filing NIL income tax returns. Some of them are:
- The ITR receipt serves as address proof.
- Filing NIL income tax returns will help an individual apply for credit cards seamlessly.
- One can also present the income tax return receipt as income proof in various cases
Benefits of filing ITR for deceased individuals
ITR should also be filed for deceased individuals if they pass away in the middle of a financial year. It is calculated on earnings generated till their date of death.
In such a case, their legal heir should file the IT returns. This is important because insurance companies need income proofs to sanction an amount for an accident during court trials. Therefore, by presenting the ITR receipts, one can easily obtain the claim amount.
Consequences of not filing ITR
Now that you know about the advantages of income tax return filing, here are some consequences they may face if they fail to file it:
- An individual will receive an income tax notice if he/she falls in the taxable slab.
- If a person cannot file IT returns due to a genuine reason, the authorisation body will accept a detailed letter and supporting documents. In such a case, he may apply for a condonation relief.
- In case of late filing of ITR, the IT Department will levy fines on an individual. Generally, one has to bear a penalty of ₹10,000 if his income is above ₹5 lakhs. If income is below this amount, the fine is ₹1000.
- During severe scenarios like tax evasion, assessees may be subjected to tough imprisonment.
However, there are some individuals who are not required to file an income tax return. Senior citizens above 75 years can get full exemption from ITR filing as per the Finance Minister’s announcement in the Union Budget 2021. (Source: 1).
By going through this comprehensive guide on the benefits of filing ITR, one can acknowledge the advantages of e-filing tax returns and applying for the same without any delay.