ITR stands for Income Tax Return, and there are various ITR Forms that taxpayers should file. T...
If your income falls under the ambit of taxable income, then you are mandatorily required to file an ITR. The tax returns must be filed by individuals in India if their taxable income exceeds 2.5 lakh rupees. Apart from this, individuals paying towards consumption of electricity in excess of 1 lakh rupees or those who undertook foreign travel of more than 2 lakh rupees must file tax return. There are numerous benefits of filing an ITR even if you earn below the taxable limit. This article explains just that.
The last date of filing an ITR for the FY 2020-21 or AY 2021-22 is September 30, 2021. A resident individual below the age of 60 years earning up to 2.5 lakh rupees per annum is exempted from income tax. A person is required to file ITR in case they have a gross total income more than the tax exemption limit.
Individuals who are more than 60 years but are less than 80 years of age, the exemption limit shall be 3 lakh rupees, and in case of individuals of more than 80 years, the exemption limit is 5 lakh rupees.
The following are the benefits of filing an ITR even if you don’t have a taxable income:
Certain passive income like the term deposit interest or the dividend income suffers tax withholding. It can be exempt for many individuals in case it’s below the threshold. By filing an ITR online, tax refund can be claimed in the bank account of the individual that is KYC compliant.
ITR is an essential document for processing applications for serving different purposes. For instance- While lodging an application for the processing of a house loan or a car loan, the bank may ask for the copies of tax returns filed in order to verify the source of income of the individual. Filing tax returns prudently allows smooth processing instead of explaining as to why the returns were not filed for certain years. Apart from securing a loan, the ITR helps in processing the application for credit card or insurance policies.
When individuals are seeking a job or want to conduct any business visits outside India, the immigration department may ask for copies of tax returns filed by such person in the past. Filing tax returns helps in the easy processing of visa application. This is owing to the fact that immigration authorities deem the individual as tax compliant. There are a few embassies, such as US embassy, Canada, UK embassy etc., that are very particular about the tax records of the individual.
By filing the income tax return within the due date, it helps in claiming specified losses for an individual taxpayer like the losses arising out from capital gains, business or profession etc. Therefore by filing tax returns, it will benefit the individual to claim the losses carried forward in future years, and it will also serve as a document to track losses that would be claimed in the future. For instance- An individual taxpayer who makes profit from the sale of mutual funds/equity shares can adjust these profits with losses incurred previously by filing the return on time.
The self employed taxpayers lack any proof of income, whereas salaried individuals receive a salary certificate in Form 16. Thus, the income tax return is valuable and serves as a proof of income for the self employed taxpayers with detailed breakdown of income and expenses incurred by the individuals during the financial year. The self employed taxpayers can provide these documents to various forums as a proof of income.
There are cases and conditions under law which necessitate individuals to file an ITR even if they have income below the taxable bracket:
Considering these benefits and requirements under law, one should file an ITR even if they don’t have a taxable income. Many are unaware of these benefits, therefore, end up not filing ITR. Hence, the government must raise awareness regarding the same, which will help the people reap the rewards.
Read our article:Essentials points to note if you are filing ITR this Year