People must submit their tax returns whose annual income exceeds the basic exemption limit of Rs 2.5 lakh. Even when there is no tax obligation, an income tax return (ITR) must be filed if the total income exceeds the limit mentioned above.
The "income tax return" is a form in which taxpayers state details of income, deductions, exemptions and taxes payable on their taxable income. ITR filing is mandatory to claim tax deductions under Section 80C, 80D, etc. and other eligible exemptions such as long-term capital gains exemptions, which may finally bring your taxable income to zero.
The filing of income tax returns not only keeps you in compliance with taxes but also offers the following benefits:
1. Avoid penalties by filing ITR Beginning with the fiscal year 2017-18, the Department of Income Tax imposes a fine of Rs 10,000 under section 234F to individuals who do not submit their ITR. The filing of ITR on time avoids unnecessary penalties. Although the fine has been kept at Rs 1,000 if your annual income is not higher than Rs 5 lakh, as a law-abiding citizen, it is your duty to file your tax returns.
2. The ITR receipt is a very important document
You must preserve the ITR receipts with care since they are a very important proof of your income and the payment of your taxes. It is much more detailed than Form 16. It contains your total income details and has details of your income from other sources.
3. The ITR receipt is very useful in processing hassle-free bank loans
When you apply for high-value loans such as loans for homes and automobiles, most banks and NBFCs asks for ITR receipts for the last three years. Lenders consider ITR to be the most authentic document that supports a person's income. Therefore, if you plan to take out mortgage or housing loans in the future, you must submit ITR regularly
4. Processing of visas
Embassies from developed countries such as the United States, the United Kingdom, Canada and Australia apply for ITR receipts in recent years to process their visa application. They are very specific about their tax compliance and, therefore, they are asked to present the previous ITR receipts. This helps them evaluate their income and ensure that they can take care of their travel expenses.
5. Compensate losses in the next fiscal year
Unless and until you have filed an ITR you cannot carry forward losses from the current fiscal year to the next financial year. According to the income tax law, individuals are not allowed to transfer losses and compare them with future years' income if the ITR is not presented within the expiration date. Therefore, it is important to file ITR in time to claim the losses in future years.
The e-filing has started for the FY 2018-19 and the due date is 31 July 2019. Be a responsible citizen and file your taxes to avoid the last-minute panic.