The CBDT is constantly explaining to citizens why is it essential to file income tax returns by conducting various drives. Yet, citizens are hesitant to file income tax returns and are unaware of benefits they may procure from filing income tax returns. Moreover, most working populations think that if they fall under the tax liability/exemption bracket, they need not file an income tax return and can not avail of timely income tax return filing, benefits. So here are ten reasons that may make you put on your thinking caps and start thinking about filing income tax returns.
1. Refund on TDS
TDS means tax deducted at the source. TDS aims to deduct tax from the very source of income at the time of payment. As per the TDS concept, a person (deductor) responsible for making payment of specified nature to any person (deductee) shall deduct TDS and remit the same into the Central Government account. The deductee would be entitled to get the credit of the TDS amount so deducted based on Form 26AS or TDS certificate issued by the deductor. So when you provide services that are under the preview of TDS, then on receiving your payment, you may receive the amount after deducting the amount of TDS. The TDS deducted is your tax credit with the department. If there is no tax liability or less liability on self-assessment of tax liability than the TDS deducted, the same can be claimed only if one file his ITR. So, if you want to receive such TDS deducted as a refund, it's essential to file an IT return.
2. Proof of Income
Salaried individuals obtain form 16 from their employer, and that works as Proof of income for them. But, in the case of and self-employed person, certain salaried individuals, partners of a firm, freelancers and professionals where you don't receive Form 16, any supporting document or cash income, filing income tax returns can be treated as the Proof of income. The income tax return is a statement that is a declaration given by you and filed with the department of taxes, and hence it becomes a valid proof of income. Therefore, an acknowledgement of income tax return filed can work in places where you need to give Proof of income to meet certain compliance.
3. Ease in VISA application
If you are travelling overseas, Embassies of developed countries like the United States, United Kingdom, Australia, and Canada ask you to furnish ITR receipts of the last couple of years at the time of the visa interview. Some embassies may ask for ITR acknowledgement of the previous three years, while others may require the most recent ITR receipt. The authorities are very particular about your tax compliance, and hence, you are required to furnish previous ITR receipts. It helps them assess your income, its source and ensure that you can take care of the expenses on your trip.
4. Loan approvals and procurement
Most banks need a copy of ITR either latest or for three consecutive years to sanction/approve a loan. Even if you provide your form 16 and other documents, they still ask you to furnish a copy of the ITR filed. So if you are going to apply for a loan in the future, where you need to furnish your I-T returns, it would be wise to start filing your income tax return.
5. Carry forward of business loss
If you had a loss in the initial years of your business and now make profits, you can save on paying higher taxes if you had filed those loss returns. Under the income tax act, it has a clause where you can carry forward losses made for eight years if you file your return on or before the due date. Only filing your ITR on or before the due date can help you carry the forward loss. So now, if currently, you are in the phase where you are suffering losses in your business, file your income tax return and save yourself from paying higher taxes in future.
6. Avoid Interest and Penalties
The IT Department levies a penalty of Rs 10,000 u/s 234F on the individuals who don't file their income tax return with effect from FY 2017-18. Also, if one doesn't file ITR on time, the belated return could lead to extra interest monthly. The penalty is Rs 1,000 if the annual income is not more than Rs 5 lakh. Therefore, filing ITR on time avoids unnecessary penalties and interest. It also saves your time from unnecessary assessment procedures under the income tax provisions.
7. Credit Card Approval
Just like in the case of loan approval, credit card approvals may require furnishing income tax returns filed as income proof. Also, upgrading to various premium and elite cards need you to furnish ITR as Proof of income.
8. Raise Funding for Freelancers & Professionals
Unlike salaried individuals, freelancers, self-employed business persons or professionals who don't receive Form 16. They may keep their books of accounts in place and even account for them, but it is suitable for funding if figures from books and accounts are reflected in the income tax returns. So, to raise funds from investors as an individual, you need to timely file your income tax returns.
9. Address Proof
The Acknowledgement of income tax returns filed bears your address; hence it can be used as additional Proof of your address.
10. Investing in higher insurance cover/premium investments
If you don't file taxes, the case may be interpreted as a tax evader on the grounds of noncompliance by investment/ insurance companies from where you want to raise investments/insurance covers. If insurance companies believe that you are a tax-evader, they will not give you policies with more cover, and the same goes with investment companies. So, to make that investment or raise that insurance cover, you need to file your income tax return timely.
Also, this is a nation-building process. Taxes paid by common people are one of the primary sources of income for the government; the money collected through taxes in the ex-chequer is used to build infrastructure and other development projects. The government spends the collected money on healthcare, infrastructure, defence, education, and launching various schemes for the masses. Thus, on a macro level will help us build our nation. So if the points mentioned above don't interest you, think on the lines of your contribution to creating your nation. So, be smart, responsible and file your Income-tax returns before it's too late to do so.