Why Income Tax Return or Why Not?

Manuj Sharma

1/4/20241 min read

Filing an Income Tax Return (ITR) in India has several benefits:

1. Easy Loan Approval: Filing your ITR can be beneficial when applying for various loans such as vehicle loans or home loans. Major banks often require a copy of your tax returns as proof of your income statement.

2. Claim Tax Refund: There may be instances where tax has been deducted (TDS) from your income, even if your total taxable income is below the basic exemption limit. In such cases, you must file an ITR to claim a refund of the TDS.

3. Income & Address Proof: Your ITR can serve as proof of your income and address.

4. Quick Visa Processing: When applying for a visa, most embassies and consultants require copies of your tax returns from the past couple of years.

5. Carry Forward Your Losses: By filing your return within the original due date, you can carry forward losses to subsequent years. These losses can be offset against the income of future years, thereby reducing your tax liability.

6. Avoid Penalty: If you are required to file your tax returns according to the income tax act but fail to do so, the tax officer has the right to impose a penalty of up to Rs. 5,000.

7. For Buying Term Insurance: To approve term insurance plans, insurance providers often require applicants to submit their ITR records as proof of their annual income.

8. Claim Refund of Excess Tax Payments: Even if your income is below the taxable threshold, taxes may still be deducted from sources such as your salary or fixed deposit. In such cases, individuals can claim a refund for the tax deducted by filing an ITR.

Please note that while filing an ITR has many financial and non-financial benefits, it is also the social responsibility of every taxpayer. It’s always a good idea to consult with a tax professional to understand the specific benefits and requirements related to your situation.