With just two days left to file income tax returns, taxpayers falling in the Rs 5-lakh bracket and earning less than the Rs 10,000 limit, have the option of not filing their returns. However, there are a number of reasons why you should file.
An Income Tax Return (ITR) receipt is an important document because it is more elaborate than Form 16 the other important document for salaried individuals. Reason: Form 16 shows salary from only one employer and the tax deducted by it. Whereas, ITR also shows income from other sources also, including investments, which one might not have disclosed to the employer. In effect, is a more realistic depiction of the individual's monetary position.
If you have decided not to file returns on or before July 31, heres why you should revisit your decision:
Borrowing: While applying for a home loan, many banks make do with your Form 16. But, according to industry experts, if you arent getting a loan or not as much as you want, then handing over the last three years of ITR receipts will help. The ITR gives a sense of the borrowers total income and his/her ability to support the loan repayment.
Nihar Jambusaria, National Head Tax Advisory Services, BDO India, says: Home loans can get rejected if banks think your income cannot support it. Here, ITR can help, as your total income is stated there (Form 16 only has income from one employer).
International travel: When travelling abroad, consulates ask you to furnish ITR receipt of the last couple of years at the time of the visa interview, says Homi Mistry, tax partner, Deloitte, Haskins and Sells.
Some embassies may ask for the last three years of ITR, while others may ask for the most recent certificate.
Experts suggest when travelling abroad, whether on a business trip or on a holiday, income-related proofs should be carried along, such as salary slip, Form 16 and ITR receipt. Consulates specify these requirements in most cases.
Government tender: Jambusaria says if you plan to start a business and you need to fill government tender for the same, you will need to show your tax return receipts of the previous five years.
However, this is not a law. This may vary according to the internal rules of the government department and the number of ITRs required may also vary. This again, is to show your financial status and whether you can support the payment obligation or not.
Self-employed: Businessmen, consultants and partners of firms do not get Form 16. And, hence, ITR becomes a must for such individuals, if their income exceeds the basic exemption limit of Rs 1.60 lakh. For any financial transactions, ITR will be their only proof of income and tax payment.
Last, if you have a refund due from the Income Tax Department, you will have to file returns, without which you will forgo the amount.