Are you wondering if you should file your income tax return or not? Despite common misconceptions, benefits of filing income tax return (ITR) in India are plenty. They extend beyond just legal compliance. It's time to break the myths and understand the advantages of filing ITR.

In this blog, we will explore the various reasons to file ITR and why it is a wise decision for individuals and businesses alike. Read to find out how filing your income tax return can not only help you stay on the right side of the law but also positively impact your financial well-being.

Benefits of Filing Income Tax Returns:

1. Easy Loan Approval:

Loan approval depends on many factors. While many people already understand the importance of credit score, there are other important points too. One of the points that can make your loan application better is ITR. Filing your ITR plays a vital role in improving your chances of getting approved for loans.

Whether you're applying for a home loan, business loan, or vehicle loan, having your ITR filed is going to be important. Lenders often ask for your tax returns to check how stable your income is and to assess your creditworthiness. Therefore, having your ITR filed is crucial when seeking approval for loans.

2. Claiming Tax Refunds:

At times, tax gets deducted directly from your income source. It doesn't matter if you're under the old tax system or the new one, or if your income is below the taxable limit. Filing your Income Tax Return (ITR) allows you to request a refund for the tax deducted, ensuring you get back what belongs to you rightfully.

Tax refunds these days are often processed within a few weeks, sometimes in a few days. Thus, ITR doesn’t only mean having to pay money. Often, you get money from the government if you are eligible.

Also Read: Old Tax Regime vs. New Tax Regime – Which Tax Regime is Better for Income Tax Return Filing?

3. Income & Address Proof:

Your Income Tax Return (ITR) is an important document that holds weight in providing proof of your income and residential address. In practical terms, when you present your ITR as part of any transaction or verification process, it serves as an official record. The document shows your earnings and residential details, authenticated by the tax authorities.

By submitting your ITR, you demonstrate transparency. Plus, you also establish credibility in financial transactions. This instils confidence in stakeholders, such as lenders, landlords, or government agencies, and facilitates smoother processes. Thus, you can ensure that your financial affairs are conducted with integrity and accountability.

4. Quick Visa Processing:

Are you planning an international trip? When you apply for a visa, your Income Tax Returns are often evaluated by authorities, including embassies and visa consultants. They typically request tax returns from the past few years as part of the application process. Therefore, it's crucial to ensure that you file your income tax returns on time.

Submitting your tax returns promptly can significantly expedite the visa processing procedure. This proactive approach helps prevent unnecessary delays and ensures that your travel plans proceed smoothly. By having your tax affairs in order, you enhance your chances of obtaining timely approval for your visa, allowing you to embark on your international adventure without any hitches.

5. Carry Forward Your Losses:

Filing your tax return within the deadline offers a significant advantage: you can carry forward losses to offset future profits, ultimately reducing your tax liability. This strategic maneuver holds particular importance for businesses, as it can lead to substantial savings over time. Whether you're a small business owner, an MSME proprietor, a salaried employee, or managing a large organization, this provision can make a considerable difference in your tax savings strategy.

By ensuring timely filing, you harness the opportunity to optimize your tax planning and maximize your financial resources. This approach not only fosters fiscal responsibility but also empowers you to make informed decisions about reinvesting profits, expanding operations, or enhancing personal financial security. In essence, timely tax filing serves as a cornerstone of prudent financial management, enabling individuals and businesses alike to navigate the complexities of taxation with confidence and efficiency.

Also Read: How to Submit Income Tax Return Online?

6. Avoid Penalty:

Failing to file your tax returns in accordance with the Income Tax Act can result in unwelcome consequences. These consequences may include penalties of up to INR 5,000. Apart from the financial burden, such penalties also tarnish your compliance record with tax authorities. However, by diligently adhering to the deadline for filing your income tax return, you shield yourself from the risk of penalties and legal repercussions.

Ensuring timely tax filing not only helps you avoid financial penalties but also upholds your reputation as a responsible taxpayer. By fulfilling your tax obligations punctually, you demonstrate your commitment to compliance and contribute to a smoother functioning of the tax system. Moreover, timely filing allows you to stay on top of your financial affairs, fostering a sense of confidence and peace of mind. Therefore, prioritizing the timely submission of your tax returns is essential for maintaining financial integrity and regulatory compliance.

7. For Buying Term Insurance:

When considering purchasing term insurance, your ITR records play a pivotal role in the determination of your coverage amount. Term insurance providers rely on your ITR as an important document to evaluate your annual income, which in turn influences the coverage amount you qualify for. By filing your ITR regularly and accurately, you not only demonstrate financial responsibility but also improve your eligibility for higher coverage levels.

8. Claim Refund of Excess Tax Payments:

Filing your tax return enables you to reclaim excess tax payments deducted from sources like salary and fixed deposits, even if your income falls below the taxable threshold. For instance, if your annual income is below INR 2.5 lakhs, but taxes are deducted from your salary, FD interest, insurance payouts, etc., filing your return allows you to reconcile your actual tax liability.

By submitting your return, you request a refund for the excess taxes paid, optimizing your tax liabilities and maximizing savings. This process ensures efficient tax management, safeguarding your financial well-being by keeping your hard-earned money where it belongs.

Tax filing is often seen as a tedious and time-consuming task. However, the benefits that come with it far outweigh the effort involved. ITRs can help you get quicker loan approvals, claim tax refunds, and stay on the right side of the law. Plus, having proof of income can boost your chance of accessing financial services and building financial security for yourself and your family. So, what are you waiting for? Seize the benefits, secure your financial future, and file your ITR today!

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com