What are the Benefits of Filing Income Tax Return on Time?

24 May 2021|

2 min read |

by ICICI Securities Team

Most millennials believe that if their earnings are below the taxable threshold, they need not file an ITR (Income Tax Returns). That, however, is not the case. When you start working and making money, you must file an income tax return.

In addition to being a decent corporate citizen, an income tax return acts as evidence of an individual's earnings and cumulative taxes charged. As a result, even though one's taxable income is below the basic exemption threshold, filing a tax return is still a good idea.

Income tax filing is required to claim all investment deductions (e.g., under Section 80C for employee contributions to a Provident Fund) and to claim exemption of qualifying long-term capital gains (e.g., investment in a new suburban house after the sale of another). To put it another way, if net income before deducting these qualifying assets and exempting eligible capital gains exceeds the above basic exemption limits, a tax return must get filed.

Here are the following income tax benefits:

ITR receipt is an important document:

An ITR receipt is relevant because it contains more information than Form 16, including your income, taxes, and other sources of revenue.

Use as address proof:

The ITR receipt is sent to your registered address and can get used as proof of residency.

Helps the bank loan documentation process simpler:

When you apply for a loan, such as an auto loan or a home loan, being a conscientious income tax filer makes it easier for banks to determine your source of income.

Compensate losses in the next financial year:

You cannot recoup the previous financial year's expenses/losses in the current year unless you file the ITR. According to income-tax provisions, unadjusted losses (with certain exceptions) cannot be carried forward to future years if tax returns are not filed on time. As a result, a tax return will be necessary to ensure that the losses are carried forward for future adjustment.

Avoid extra interest:

If you do not file your ITR on time, you risk incurring additional interest of 1% per month on the amount of tax you owe. Banks, for example, will subtract tax on fixed deposit interest above a certain threshold. A tax return will be needed to demand a refund of tax deducted by the bank (if any) on interest income, regardless of taxable income.

Credit card processing:

If you have not filed your ITR, banks can reject your credit card application.

Hassle-free visa application procedure:

As visa authorities request copies of previous tax returns, a tax return must qualify for a visa. While processing your foreign visa application, embassies, especially those of the United States, the United Kingdom, and Canada, are particularly concerned with your tax compliance.

To buy an insurance policy with a higher cover:

Insurance providers will not issue you plans with more coverage if they have reason to believe you are a tax evader.

It makes life simpler for freelancers and self-employed:

Form16 is not available to freelancers or others who work for themselves. They just have this paper to prove they submitted the ITR. They will have financing and transactional issues if they do not have this.

Disclaimer

ICICI Securities Limited has its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. The non-broking products / services like iLearn and Financial Learning are not exchange traded products / services and ICICI Securities Ltd. is just acting as a distributor/ referral Agent of such products / services and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism. iLearn is not an exchange traded product/service of ICICI Securities Ltd. All disputes with respect to the activity on the platform would not have access to Exchange investor redressal or Arbitration mechanism.

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