Filing your Income Tax Return (ITR) is compulsory as per the Government of India. This is the process where you declare your annual income, claim deductions and compute your tax payment. Individuals, HUFs, companies, and LLPs can enjoy many benefits of filing ITR.
As an employed individual, you are eligible to file ITRs if your annual income is over ₹2.5 Lakhs. The criteria for other categories vary as per government mandates.
Not filing your ITR leads to penalties and even imprisonment. In addition, it helps you get refunds, if you are eligible for them. It also helps you avail of credit and hold assets overseas. Despite this, many skip this step, assuming that the process is tedious and time-consuming.
However, the online government website to file income tax returns has simplified the process greatly. So, read on to know more about the benefits of filing income tax returns and who is eligible to do so
When you apply for any loan, lenders ask for ITR documents for the last 3 years as proof of your income. With the ITR documents, banks and NBFCs can evaluate the maximum amount of loan you can get. Even if you are applying for credit with a co-applicant, your co-applicant needs to submit his or her ITR.
By filing ITRs consistently and on time, you can make the process of getting a loan easier and simpler for yourself. This also holds true when you are applying for credit cards.
When filing your ITR, you can claim deductions on the annual health insurance premiums you have paid up to ₹1 Lakh under Section 80D.
Since these deductions apply to your parents, children, spouse and yourself, the combined benefit adds up to a substantial sum. This helps you reduce your total taxable income and thus decreases your tax payment.
In addition, submitting your ITR is key to arriving at your sum assured for your term insurance. Insurance providers use your tax returns to compute your income and thus the cover you get. This fact underscores the importance of filing ITR.
Filing Income Tax Return is mandatory for all citizens as per the Income Tax Act, barring income-based exceptions. If you do not file your tax returns by the due date, you may have to pay a penalty of ₹5,000. This penalty can go up to ₹10,000 if you don’t file your ITR belatedly.
You will also need to pay interest on the tax remaining unpaid. Moreover, you cannot qualify for a refund, even if you have paid tax in excess. To avoid such losses, file the ITR on the due date.
One of the benefits of filing ITR on time is that you can carry forward or set off your short-term or long-term losses to the subsequent year. This means that if you have faced any capital loss in any financial year you can make inter-head adjustments for those losses in upcoming years.
For a long-term capital loss, you can adjust the capital gains for the eight consecutive years thereafter. This helps you decrease your taxes in subsequent years by subtracting losses from future income. You cannot carry forward such losses without filing an ITR.
Generally, employers deduct tax from your income as TDS. Different categories of taxpayers receive income after TDS has been deducted. You can claim this amount and get refunds only if you file your tax returns.
If you own any property or hold bank accounts abroad, you must file your ITR. Even those whose income is below the taxable threshold are bound by this rule and need to submit income tax returns.
In addition to this, you will also need your ITR when you apply for a visa for travel.
Since you now know the importance of filing ITR, read on to know who is required to submit tax returns as per law:
If you have an electricity bill over ₹1 Lakh for a financial year
If your total current account deposit exceeds ₹1 Crore
If you are an Indian residence with source of income from abroad
If your foreign travel expenses exceed ₹2 Lakhs
If your gross total income exceeds:
₹2.5 Lakhs and you are under 60 years of age
₹3 Lakhs and you are 60 to 80 years old
₹5 Lakhs and you are 80+ years of age
If you meet these qualifying criteria, you can enjoy all the above-mentioned benefits of filing ITRs and avoid penalties. Filing taxes is the responsibility of all citizens to contribute towards the growth of the country as well as its instructional development.
The eligibility criteria for filing tax returns depend on your age and income. If you are under 60 years of age, the threshold for income is ₹2.5 Lakhs. The limit for individuals between 60 to 80 years is ₹3 Lakhs and for those above 80 years is ₹5 Lakhs.
Yes. You can file ITR online on the income tax website.
For the financial year 2022-23, the last date to file your income tax return is 31st July 2023.
Yes, filing ITR is mandatory for all eligible or qualifying businesses, HUFs and individuals.
Voluntary filing is when you file your tax returns although it is not required for you to do so.