It’s that time of the year again when crores of Indian taxpayers gear up to calculate their income earned over the past financial year and file an income tax return (ITR) before the deadline. This year, the government has extended the income tax filing deadline to 30th September 2021 for taxpayers not covered by a tax audit. Given the second wave of the COVID-19 pandemic, it has provided the much-needed breathing space for tax filers to correctly estimate their taxes and submit their ITR on time.
While tax returns are usually filed only by persons whose gross total income exceeds the taxable limit, does it make sense for others to file an ITR too? The answer is yes. There are multiple benefits to filing an ITR, even if you don’t have taxable income in a particular year. Let’s get into them.
1. To get a bank loan
Most banks and financial institutions in India ask for income tax returns of the past three years whenever a person applies for a loan. If you have your ITRs for the past three years, it will make it much easier and faster for your loan to get processed. Hence, if you plan to purchase a house or car someday or need a loan for any other reason, then go ahead and file an ITR today. It will be a very useful document for you in the future and not just for loans but also for getting other credit forms.
2. To claim an income tax refund
Certain incomes earned in India, such as bank term deposits, dividend income, etc., qualify for a tax deduction at source (TDS). This means that your money has still been withheld and deposited with the government even though you don’t exceed the taxable limit. If you’re a salaried individual, excess TDS could also have been withheld if you hadn’t disclosed your tax-saving investments and deductions accurately to your employer. In these cases, the only way you can get your money back is by way of an income tax refund. To get a refund, you must file an income tax return.
3. To claim an income tax loss
If you have incurred an income tax loss under heads such as capital gains or business and profession, you would be required to file an ITR to claim this loss. What is more important is that you file this ITR within the due date. If you don’t, you will lose out on carrying the loss forward and setting it off against future years’ incomes.
4. To get a visa for international travel
If you’re planning on travelling internationally to the US, Canada, countries in Europe, etc., you will need to submit your ITR copies to obtain a visa. Filing one’s income tax returns is a sign that the person is tax-compliant. It also gives immigration officers an indication of the financial status of that person.
5. To get authentic proof of income
If you’re a salaried employee, then you could use your Form 16 as proof of income. However, if you’re a business owner or a freelancer, it would be harder to prove your income sources and how much you earn. An ITR is a great proof of income as it gives a detailed breakdown of your income earned and expenditure incurred during a financial year. In fact, you can even use your ITR as proof of address for obtaining documents such as an Aadhaar card.
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I’m a Chartered Accountant by profession and a writer by passion. ClearTax lets me be both. I love travel, hot tubs, and coffee. I believe that life is short, so I always eat dessert first. Wait.. life is also too short to be reading bios… Go read my articles!