First of all, Welcome to Stake Planum. If you are confused whether to file an Income Tax Return or not then you are at the right place. This blog will help you to understand benefits of filing ITR and why it is important. It will also include what will you loose if you don’t file or forget to file Income Tax Return. So let’s start –
Firstly, filing of income tax return is compulsory whose annual income crosses threshold limit prescribed under IT act and hence if you are not filing your returns even after crossing threshold than you are exposed to contingent risk of penalties coming your way.
Secondly, can you file your returns voluntary even if you are not crossing mandatory threshold then the answer is yes, many individuals file there ITR even if they don’t cross threshold limit to avail various benefits of filing ITR.
Lets quickly get rid of myths of filing ITR –
- Filing of Income Tax return means paying Tax –
If you are not crossing threshold limit than you don’t have to pay any tax and still you can file your return and avail benefits.
Now many people think that filing of Income Tax Return means paying tax to government, which is wrong, there are many deductions under income tax act by which you can plan your tax and end up paying lowest Tax.
- Filing of Income Tax return requires lots of Documents and its cumbersome process –
This is the second myth that people usually carry, in fact filing of return involves basic documents which are readily available and its hassle free process.
Okay! So we hope you have clear picture now, let’s directly jump to Benefits of Filing Income Tax Return –
- Claiming refund of taxes –
There could be a possibility that someone has already deducted tax on your behalf called Tax Deducted Tax (TDS) on some investments or from salary. So to get refund of your tax it is mandatory to file Income Tax return. Many time people forget to even claim their refund amounts.
- Avail a loan or credit card –
When you apply for a loan or a credit card, banks will check how you fare when it comes to your finances. If you have filed your Income Tax returns regularly, it stands as proof that you have a regular income and have paid appropriate taxes on it. Financial institutions would ask to see your IT returns for the last few years before approving your home loan, a car loan or a credit card. Insurance companies may also ask for IT receipts when you are buying term insurance of a higher amount. Filing your income tax returns on time helps you to improve your creditworthiness for future loans.
- Helps in visa processing –
Being regular with your IT returns filing comes in handy when you are planning an international trip. If you are travelling abroad and applying for a Visa, the foreign consulate would require proof of your income, if you are not visiting someone who acts as your sponsor. You will be asked for Income Tax receipts for a certain period. Also, if you are planning to visit countries like USA, Canada or even Europe, IT Return filing is in fact, essential.
- Helps adjusting your capital gains and losses –
If you invest in equities, you will most likely incur capital gains and losses. According to the Income Tax laws, capital losses can be adjusted against capital gains (Profit – Losses). But for that, filing income tax returns is mandatory. Also, if you have any capital loss, you can carry forward it for the next 8 consecutive financial years, if you file your Income Tax returns regularly.
For Example –
Year 1 Loss – (1,00,000)
Year 2 Loss – (2,00,000)
Year 3 Profit – 4,00,000
Taxable Profit – 1,00,00 (4,00,000 – 2,00,000 – 1,00,000 = 1,00,000)
So this were few benefits of filing Income tax returns, and it is needless to say that it is always beneficial to stay on the right side of law.
Lastly, just filing your return is not necessary planning your taxes and availing all the exemptions available in the act is important to save your taxes and avails above benefits. Tax planning varies on case to case basis and it should be done with proper guidance.
If you have any concerns or want to know how you can plan your taxes than you can contact Stake Planum Team and we are there to help you with no charges.
You can drop your contact details in “Contact Us” section.