In this article, we are going to explain many similar questions regarding ITR and why it is important.
A lot of individuals seem to think that filing a tax return is voluntary and therefore, it is not necessary. This article highlights the few key topics on the same and makes you understand why income tax return is so important and don’t keep it as an optional.
Basically, filing a tax return is an annual activity seen as a social duty of every responsible citizen of our country.
It’s a sign that you are responsible for. The government mandates that individuals who earn a specified amount of annual income must file a tax return within a pre-determined due date. Failure to pay tax will invite penalties from the income tax department authorities.
1. Here’s we first need to know what is Income Tax Return?
Income tax return means to show your income & expenditure to the government after taking various deductions refund or make the payment of tax.
Now the question is why should we pay the TAX?
When its come to run our own house, there are many necessary utilities we have to take care like clothes, internet, food, house maintenance, medical, etc.
In the same scenario, India is our home and the collected taxes are the income of our country and the ruling government. The money collected used by the government for various development the said necessary utilities.
If we are not going to tack care our home the who will?
2. Importance of Income-tax in India.
Income tax is undoubted the most important source of revenue for the Indian Government. It is established to levied tax on various activities of the citizen and non-citizen of India. In the form of Direct & Indirect Taxes.
In India, there are two types of taxes mainly Direct Tax & Indirect Tax. Indirect tax levied on Goods & Service. Indirect tax is transferable tax where the liability to pay tax can be shifted to ultimate customers.
Direct tax is borne and paid directly by the individual on whom it is imposed. E.g. Income tax, wealth tax, etc.
Indirect tax is passed by the taxpayer to the ultimate consumer e.g. GST.
Why you should file income tax returns even if your income is non-taxable.
When it comes to filing their tax returns, may people procrastinate? Some delay it, some don’t file their returns until they are pushed to as a necessity for taking a loan. They show little urgency towards filing their returns until the income tax authority does not an immediate notice to individuals for missed deadlines.
Many taxpayers missed out benefits given in income tax. There is lots of confusion especially among those whose income falls below Rs. 2.5 Lakh per year about whether they need to file an Income tax return or not.
3. It is mandatory to file an Income tax return?
There is a misconception that people without taxable income do not need to file their tax returns. However, even if you have zero tax liability, filing a tax return has lots of advantages e.g. claiming a tax refund, getting a visa, applying for a loan, set off losses.
Let’s see how it can make you benefit from filing an Income tax return
Having filed the Income-tax return will help individuals when they have to apply for a loan all major banks can ask for a copy of tax returns.
State Bank of India asks vehicle loan applicants for the latest salary slip showing all deductions, TDS certificate or form 16 copy of income tax returns for the last three financial years.
Even while applying for a housing loan.
II. To Claim Refund :
If you have a refund due from the Income-tax department, you have to file returns.
Some taxpayer may be primarily investing through a fixed deposit on such investments tax is deducted at sources (TDS) at 10%. If the individuals total taxable income is less than the threshold limit. i.e. 2.5 Lakhs they can file the return and claim a full refund.
III. To Carry forward losses:
If you do not file returns you will not be able to carry forward capital losses (short term as well as long term) if any, in a financial year to be adjusted against capital gains made in the subsequent years.
A long term capital loss in one year can be carried forward for eight consecutive years immediately succeeding the year in which the loss is incurred. Long term capital loss can be adjusted only against a long term capital gain in the year. But short term capital loss can be adjusted against long as well as short term capital gain.
IV. Visa Processing:
If you are traveling overseas, foreign consulates ask you to furnish income tax return receipt of the last three years at the time of the visa interview.
This is especially true if you plan to travel to the US, UK, Canada or Europe not so stringent for southeast Asia or the middle east.
V. Buying a high life cover:
Buying a life cover of Rs. 50 Lakhs or Rs. 1 Cr. Has become commonplace. However, these covers are available against your ITR documents to verify annual income. Life insurance companies especially LIC, ask for ITR receipts. If you opt to buy a term policy with a sum insured of Rs. 50 Lakhs or more.
The sum insured one can get with a term cover depends on many factors one of which is the income of the insured.
VI. Government Tender :
If plans to start their business and need to fill a government tender, they will need to show their tax return receipt of the previous five years. This again is to show your financial status and whether you can support the payment obligation or not.
However, this is no strict rule it may vary depending on the internal rules of the government department even the number of ITRs required can vary.
VII. Self Employed:
Businessman, consultants, and partners of firms do not get form 16. Hence, ITR receipts become an even more important document for them for all sorts of financial transactions. ITR receipts will be the only proof of income and tax payment for the self-employed.
Hope you found the value of the said article. Please let us know if you need any ITR and TAX assistance. We are always happy to assist you.