Why is income tax filing important?

By | October 23, 2021

We recognise that completing IT returns may be time consuming, especially if you are young and have just filed a few. However, the advantages outweigh the time and effort required to file it. It is also the responsibility of all responsible people of the country. According to the income tax legislation, filing IT returns is required for some but optional for others. Regardless of whatever group you fall into, it is critical that you file it. 

The IRS now allows you to file your income tax return online, which takes only a few minutes in most circumstances. This essay goes over five important reasons why you should file income tax returns on a regular basis.

Who is required to file income tax returns?

According to income tax legislation, any assessee whose gross total income (GTI) exceeds the lowest income tax bracket for his or her age must file an ITR. Assessees under 60 years old, between 60 and 80 years old, and over 80 years old have basic exemption limits of 2.5 lakh, 3 lakh, and 5 lakh, respectively.

Individuals who have a GTI below the basic exemption amount may be required to file an income tax return in certain circumstances. If you fall under any of the categories listed below, you must file an ITR.

  • If your electricity cost is more than Rs. 1 lakh for a single bill or Rs. 1 lakh for the entire financial year,
  • If you have a current account with a bank or cooperative bank with a balance of one crore rupees.
  • If you are a regular resident with income from a foreign nation AND/OR assets in a foreign country AND/OR signing authority over any account outside of the country.
  • If you have spent a total of Rs. 2 lakh on yourself or others for a trip to another country.

Before claiming a deduction on capital gains incurred under any of the following provisions – 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB – make sure your GTI does not exceed the basic exemption level.

Why should you not delay filing an income tax return?

There are a variety of reasons to file a tax return. Even if your income level does not qualify for required filing, it is a good idea to file returns voluntarily. Most jurisdictions, for example, require evidence of tax returns from the previous three years when registering immovable assets. When people file returns, it is easy to register the transaction.

Here are five reasons why you should not delay filing your ITR.

  1. It simplifies the loan approval process.

ITR receipt makes your bank loan processing hassle-free. Let’s say you’re looking for some type of loan (other than mortgage). Before approving a loan, the lender will typically want proof of income. You will be required to submit your tax returns for the previous two or three fiscal years as part of the procedure.

When applying for high-value loans such as vehicle and home loans, most NBFCs and banks require ITR receipts from the previous three years. ITR receipts are frequently regarded by lenders as the most authentic documents that prove an individual’s income. If you plan to take out a car or a home loan in the future, you should file an income tax return on a regular basis.

  1. It aids in the reimbursement of any losses that have been carried forward.

You can only carry over losses incurred under the headings “Capital Gains” or “Profits and Gains from Business or Profession” to the next financial year by filing your income tax return.

If the losses sustained by a corporation or an individual are not disclosed in the tax return for a financial year, they cannot be proved for exemption in later years for tax calculation. These losses include both short and long-term capital losses, speculative and non-speculative losses, and a variety of other losses. Because you never know when you might need to file a claim for prior losses, it’s a good idea to file returns on a regular basis.

  1. You can get TDS refunds with it.

If your employee deducts tax at source or you have a contract that requires TDS, you can claim a deduction by filing your income tax return for the year by the deadline (July 31 or as declared of the succeeding year). In such circumstances, the income tax department adjusts the TDS paid and calculates your net tax liability. If you are not obligated to pay tax, you can file an ITR for a refund. You can follow your refund by checking the status of your tax return.

  1. It aids in the development of a country.

Any tax you pay contributes to the development of your country. It is one of the most important sources of revenue for the government. The government collected 9.45 lakh crore in direct taxes in FY19. The money might be spent on infrastructure or other development projects by the government.

  1. It will assist you in obtaining a visa or credit card.

If you’re applying for a visa or a credit card for an international trip, the issuer will ask for proof of income. In most circumstances, you must provide your tax returns from the previous three years. It will assist the other party in determining whether or not you are eligible for a visa or credit card. 

You must submit your ITRs throughout the verification procedure if you plan to go to the United States, Canada, or any portion of Europe.

Conclusion

Return filing is a sign of accountability. Individuals who make a certain amount of annual income are required by the government to file a tax return by a certain deadline. It is the individual’s responsibility to pay the correct amount of tax. In addition, failing to pay tax might result in penalties from the Department of Revenue. 

Citizens who earn less than the required amount of money might voluntarily file returns. Filing returns demonstrates that you are a responsible community member. It is easier for enterprises and individuals to enter into following transactions if any, because their income is recorded by the tax department with applicable tax. Hence, never miss out on filing your ITR.