Top 5 Benefits of Income Tax Return (ITR) filing on time

Based on latest studies, India is setting new records in generating direct tax revenue. As of January 10, 2024, the tax collection increased 19.41% year over year to INR 14.70 lakh. The sum has exceeded the total budget forecasts for FY 2023–2024’s 80% tax collection target. Income taxation is important to a nation’s development. It is the government’s primary source of funding.

Salary payments, welfare programs, government initiatives, defense, etc. are all covered by this sum. Taxpayers must file Income Tax Returns with the appropriate tax amount to guarantee that each taxable entity pays its share of the government’s obligations. In this blog, we will discuss all the benefits of income tax return filing, including who needs to file one and what happens if they don’t. All right, let’s get started right now!

What is an Income Tax Return?

Income Tax Return or ITR is a form that is used to show an individual’s gross taxable income for the given financial year i.e. starting from April 1st and ending on March 31st of the next year. It is supposed to be submitted to the Income tax department to formally declare their income, deduction claimed, exemptions, and taxes paid. As per the rules of the Income Tax Act of 1961, a citizen under the age of 60 years must file Income tax returns if a part of their income is taxable i.e. exceeding INR 5 Lakhs in any financial year.

What are the major benefits of Income Tax Return filing?

Some of the important benefits of Income Tax Return filing in India are as follows;

What are the benefits of Income Tax Return
  • Important document for Loan Approvals and Credit Card Applications:
    • When you apply for a loan, whether to buy a car, a home, or for business purposes, financial institutions demand a collection of documentation to complete your request. Frequently requested papers include Aadhar Card PAN Card, Driver’s license, and Photo ID, among other things.
    • Proof of income is a frequently requested document by banks and financial organizations.
      They often require your Income Tax Returns for the last three years. This will assess your financial history and present circumstances to establish your loan repayment capabilities.
    • Furthermore, the importance of ITR goes beyond loan applications. When applying for a credit card, credit card providers take into account your financial situation.
  • Acts as Proof:
    • Income Tax Return has enormous legal significance. The return you fill out can be used as identity verification in a variety of situations, including when applying for an aadhar card or any other document.
    • The government also accepts it as proof of address. As previously stated, the ITR form includes a thorough breakdown of all your income and expenses. The tax you must file is estimated based on this information.
    • Thus, ITR can also be used as income evidence, as some transactions, like as the purchase of a home, require you to present proof of income. This is especially useful for self-employed individuals who do not receive Form 16.
  • Easy Visa Processing:
    • When arranging a trip abroad, it is critical to follow certain procedural requirements, including completing your Income Tax Returns. A regular record of filing income tax returns will considerably strengthen your visa application.
    • It indicates financial responsibility and adherence to legal requirements, which are positive aspects of the visa acceptance process. The ITR provides a complete summary of your financial condition, allowing embassies to see clearly how stable your economy is.
    • This transparency is critical because it allows the authorities to assess your ability to fund your trip and ensure that you do not pose a financial risk while in your country.
  • Health Insurance:
    • Section 80D of the IT Act allows taxpayers to claim a tax deduction of up to INR 25,000 per fiscal year on health insurance premiums paid. Senior citizens are eligible for higher deduction limits.
    • One of the most significant advantages of the ITR is that it allows taxpayers to deduct medical insurance costs.
  • Reimburse for Losses:
    • If you incur a loss on dwelling property, you can carry it forward for the next eight assessment years. During these years, it can be offset against income from residential property, lowering your taxable income.
    • Similarly, if you lose money in your business, you can carry it forward and deduct it from future business income. This provision helps to balance out revenue swings over multiple years.
    • The Income Tax Act of 1961 has provisions for carrying over losses from one year to next year in sections 70 and 71. You can therefore carry over your loss to the following evaluation year.

ITR Filing service in Hyderabad

Is it compulsory to file an ITR?

If your income exceeds the basic exemption limit, you are required to file income tax returns under Indian tax legislation. For tax payers, the income tax rate is predetermined. A delay in completing taxes not only results in late filing costs but also reduces your chances of obtaining a loan or a visa for a trip.

The Income Tax Act of 1961 requires you to pay taxes if your income exceeds the exemption limit. Failing to file your Income Tax Returns (ITR), although being entitled to pay taxes, can have serious consequences. Failure to file an ITR may result in a monetary penalty of up to INR 5,000 imposed by the Income Tax Officer. This penalty is used as a financial deterrence to ensure tax compliance.

  • Protecting against black money
    • In recent years, the government has taken some initiatives to combat black money and reduce money outflows from India. With this purpose in mind, the government required taxpayers to disclose foreign assets in their annual income tax filings for fiscal year 2011-12. Furthermore, even if you do not hold foreign assets and file your income tax return on time, the IT department will never consider your savings black money, because any income which are not reported to the department is marked as black money.
  • Startup Ventures Funding:
    • When starting a new company or expanding an existing one, you may need finance from outside sources such as venture capitalists or seed investors. These investors may ask for the specifics of your ITR to assess the company’s financial stability and profitability. They could also cross-check the data in the audited report against your ITR forms.

Conclusion

In conclusion, the surge in India’s direct tax revenue underscores the pivotal role of income taxation in fueling the nation’s development and funding essential sectors like salary payments, welfare programs, and defense. The benefits of income tax return filing on time will be from facilitating loan approvals and credit card applications to serving as proof for various transactions, income tax return filing plays a crucial role in shaping one’s financial standing and contributing to the country’s economic transparency and stability.

Filing Income Tax Returns with 24efiling ensures compliance with tax regulations.

FAQs
1. Why is it important to file an income tax return?

Filing an income tax return is important to fulfill legal obligations and avoid penalties from tax authorities.

2. What are the benefits of Income Tax Return e-filing?

E-filing income tax returns offers convenience, speed, and accuracy in processing tax returns.

3. Do we get money back in an income tax return?

Depending on various factors, taxpayers may receive refunds in their income tax return.

4. What is the use of tax returns?

Tax returns serve to report income, claim deductions and credits, and calculate tax liabilities accurately.

5. What are the benefits of Income Tax Returns filing?

Streamlined Loan Approval 
Authentication of Income 
Expedited Visa Processing 
Tax Refund Claims 
Offsetting Losses 
Utilization of Presumptive Taxation Scheme 
Penalty Avoidance 
Support for Medical Insurance

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