A tax return must be filed if net income exceeds the basic exemption limit before deducting these eligible assets and exempting any eligible capital gains. All investment deductions and exemptions from long-term capital gains taxes must be claimed on the income tax return. Additionally, there are some advantages to filing your Income Tax Return (ITR) on time every year.
Benefits of filing income tax return
According to Kotak Securities, on time ITR Filing There are many advantages. Here are a few examples:
1. Higher Life Insurance Cover
Your ITR can enable you to get an important life insurance policy. If insurance providers believe you are a tax evader, they may decide not to provide this benefit to you.
2. Faster Loan Processing
ITR filing documents for the last three years may be required if you are seeking a loan. This will make it easier for the bank to assess your financial position and loan repayment capacity. The processing period of your loan can be extended by submitting these documents. The same is true for credit card processing.
3. Third-Party Contingent Claims
Suppose you want to file an insurance claim in the event of an accident. Insurance companies require your ITR proofs before taking legal action. If you do not include ITR facts then your claim amount may get reduced. Your claim could potentially be denied depending on the circumstances.
4. Quick Visa Application
Traveling abroad? You have to get a visa first. For this you will also have to present ITR proof. This is to ensure that you have a stable financial position. If you wish to travel internationally, your most recent tax return must be submitted when applying for a visa.
5. Getting Capital for Startups
You may need funding from outside sources such as venture capitalists or seed investors. These investors may inquire about the specifics of your ITR to evaluate the financial stability and profitability of the business. They can also cross-check the data in the audit report using your ITR form.
6. Benefits for Freelancers and Independent Professionals
Self-employed or independent freelancers do not receive Form 16. Their ITR is often the only record that shows that they have filed income tax. Without this proof, they may run into financial constraints and transactional issues.
7. Helps carry forward losses
Losses of an individual or company from one financial year can be carried over to the next one, if necessary. Such loss may be reported under the head “Earnings and profits of business and profession” or “Income from capital gains”. But only if you have submitted your ITR before the deadline, you will be eligible for this benefit. If you file later than that point the loss cannot be carried forward.
Penalty for not filing on or before due date
Late filing charges are levied on the taxpayer for submitting the return after the deadline. Section 234F of the Income Tax Act of 1961 levies this levy of Rs. 5,000 However, the cost of late filing for small taxpayers with total income up to Rs. 5 lakhs shall not exceed Rs. 1,000. Before filing of delayed ITR, this fee has to be paid.