Income Tax is a word that instantly invokes several mixed emotions; you might run, but you cannot hide from this civil responsibility. As the end of the financial year draws close, taxpayers around the country prepare for the inevitable task of filing their taxes.
Most people find this process burdensome, and some even skip it, but that is a bad idea! By ignoring your ITR, not only will you be avoiding your legal duties, but you will also be missing out on many financial benefits that come with it.
Are you curious to know what you are missing out on? Then, read on as we discuss the importance and benefits of filing ITR.
Importance of ITR filing
An Income Tax return, or ITR, is not only one of the many legal obligations an Indian citizen has to perform but is also a civil responsibility towards our country. This document includes a detailed list of all our income, expenses, exemptions, and tax deductions for a particular financial year.
Although regarded by many as a cumbersome ordeal, people often overlook the advantages of ITR filing. From serving as a way to reclaim your excess taxes to offering a streamlined visa application process, a continuous tax filing habit shapes your monetary landscape and improves your financial credibility.
Furthermore, by filing your taxes, you also ensure an official record of your income and expenses to the government. If you fall above the tax exemption bracket, filing your taxes is necessary. Even if you have paid your taxes, failing to do so can attract penalties and punishments.
Benefits of filing ITR
Apart from balancing the books, Income tax return filing hosts a bundle of unheard advantages that positively impact your financial life. Let us have a look at certain excellent benefits of filing ITR:
#1. Tax refunds and deductions
The Income Tax Department of India has specific provisions for which you can claim deductions in your tax amount or even refunds if the tax deducted at source is more than your tax liability.
For example, if your income falls under the tax exemption bracket, you are not liable to pay taxes to the government. In this case, if a certain amount is deducted as tax from the source, like bank FD, you can ask the IT department for a refund through tax returns.
Similarly, suppose you fall into the high-income bracket. In that case, you can avail of various tax deduction clauses like investment deductions, deductions on medical insurance premiums, deductions on education loan repayment, and so on.
#2. Income verification
Yet another primary reason for filing income tax return is its use as a legal income verification document. This is because a tax return file includes a detailed list of all your income and expenses in a financial year.
While most salaried employees are provided with Form 16 as proof of income from their employers, the ITR becomes a valid document for income verification for self-employed individuals.
Independent contractors or self-employed individuals can thus approach a financial institution for their financial services, providing the ITR as proof of having a constant income source.
#3. Proof of address
The government of India considers the income tax return file as a legal document that shows that you have paid your taxes for a specific financial year. But did you know that it has more than one usage?
Apart from serving as proof of tax paid or proof of income, the tax return file can also be used as address proof. This means that when you apply for important documents like an Aadhar card, Passport, or driving license, you can use the Income tax return file as a valid proof of address.
However, it is essential to know that not all institutions accept ITR as valid address proof. Hence, it is better to check the documents they accept as valid address proof before using your ITR.
#4. VISA application
Some crucial ITR benefits surface when venturing out on an international trip. To set foot in a foreign country, you need to have a valid visa, and one of the few vital documents for visa application in most countries is your past ITR filing records.
This is because most countries suffer from a problem where tourists end up overstaying and often immigrating into the country illegally. A missing ITR file record usually raises a red flag in their systems as it shows that you have not been duly performing your civil duty, making your application prone to rejection.
On the contrary, if you diligently file your taxes, you demonstrate your financial and civil discipline. This streamlines the overall process and enhances your chances of obtaining a visa for work, studies, or other purposes.
#5. Loan application
When you approach a financial institution for a loan, they ask for a list of documents before deciding on your loan eligibility; your ITR is one of these.
The lending institution verifies your financial circumstances by asking for your income tax returns for the past two to three years. This document serves as proof of income for those who do not have Form 16 and shows your financial discipline.
An ITR file is also required when approaching a financial institution for other services, like credit cards.
How to file ITR?
Owing to the digital e-filing portals, you can easily file your tax returns online by visiting the official Tax e-filing portal. You must fill in all the details in the applicable ITR form and e-verify it.
Parting words
Income tax filing is a significant responsibility as an Indian citizen that reflects your financial discipline. A thorough income tax filing track record will shower you with the multiple benefits of filing ITR and highlight your credibility financially.
One of the significant advantages of filing ITR emerges during interest rates negotiation when applying for a personal loan. If you approach a personal loan here at Tata Capital, your ITR file can help you bag the most competitive interest rates available. Avail of a quick and easy loan application process with Tata Capital today!
31 July 2023
6 mins read
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