We are familiar with the word Income Tax Return. An income tax return is a small percentage that the government takes from our income. As per the law of our nation, we are liable to pay this money out of our income. Income Tax Return is an annual return of income. It enables the taxpayers to declare their income, expenses, tax liability, deductions, savings, investments, etc. during the applicable financial year. These annual records must be mandatorily submitted to the Indian revenue authorities in a prescribed format known as ITR form. We pay income tax only if we are liable to do so.
If you earn more than the amount free from taxation by the Government, you must file the tax return according to the tax brackets of each year. That is you must file your income tax return if your income exceeds the basic exemption limit set by the Indian tax authorities.
Who Needs To Submit Income Tax Return Filing
Individuals and businesses must pay income tax only if they fall into specified income brackets defined by the tax act. The following organizations and businesses must file their Income Tax Return Filing on a mandatory basis in India.
- Individuals who make more than ₹2.5 lakh in a financial year regardless of their age. The maximum rises to ₹3 lakh for people in their 60s to 79s and ₹5 lakh for people in their 80s and olders. Sections 80C to 80U and additional exemptions under section 10 should be subtracted from the gross income before determining the final taxable amount.
- No matter how much earnings a company makes or loses during the year, it still generates income.
- Those who wanted to get a refund on the taxes they have paid more than what they are entitled to pay.
- NRIs with a yearly income in India of more than ₹2.5 lakh.
- Transactions made in India by foreign entities that are eligible for treaty benefits.
- Affluent individuals who have assets or financial interests outside India.
Benefits Of Income Tax Return Filing
Processing of Document
Income Tax return is a key document for the purpose of processing applications for various purposes. If lodging an application for processing of a house or auto loan, bankers seek the copies of tax returns filed to verify the individual’s source of income. Besides securing a loan, the income tax return helps in the processing of obtaining credit cards, insurance policies etc.
Act As Legal Document
Income Tax Returns have massive legal value. It is recorded with the government. ITR can act as legal proof in two ways,
- Identity Proof : ITR filing can be used as identity proof in various scenarios such as while applying for an AADHAR card or any other document. The government accepts it as address proof as well.
- Income Proof : ITR has the detailed list of all your income and expenses. So the ITR can be used as income proof as some transactions such as the purchase of property do require you to show proof of income.
Tax Refund Claiming
Any individual can claim a tax from the IT department by filing ITR. This is mostly beneficial for salaried and self-employed persons falling in a high-income bracket.
Easy VISA Processing
ITR receipts play a vital role in the process of visa application. The immigration authorities request for copies of tax returns filed in the past. Tax return filing ensures smooth processing of VISA applications as immigration authorities then deem the individual as tax-compliant. Salaried personnel and self-employed people can benefit from this by filing ITR. Certain embassies of the US, Canada, UK etc are particular about the tax returns records of individuals.
To claim losses it’s necessary to file an income tax return with the due date. For an individual taxpayer losses are from capital gains, business or profession etc. By income tax return filing the one can track losses that can be claimed in the future.
Serves As Proof Of Income
Self-employed taxpayers do not have any proof of income unlike salaried individuals who receive income certificates. Thus income tax returns serve as proof of income for self-employed taxpayers with detailed break-down of income and expenses during any financial year. Also ITR filing can be used to furnish these documents before various forums as proof of income.
Under the section 8D of the Income Tax Act the IT department offers deduction upto ₹50000 on health insurance premiums paid in a specific fiscal year. It will be a great advantage for senior citizens to undergo treatments without any hassle.
Paying Income Tax Return timely will help to avoid penalties.
Filing Income Tax Return helps with interest deduction while applying for home loans. Filing ITR by an NRI will help them to get a standard 30% deduction on home loan interest and property taxes.
If you are planning to start your own business and required to fill government tenders, have to furnish ITR of preceding years. It serves as a proof of financial status and acts as a check on timely payment of obligation.
Income Tax Return filing is a legal, moral and social duty of every citizen of the country. It provides a platform to the assessee to claim refund of taxes already paid. If you want to know more about income tax return filing join Finprov Learning.