What Is ITR?
ITR is a statement of your income and taxes to be paid submitted to the Income Tax Department. The tax is measured based on your income. You can claim a refund from the ITR department if you have paid excess tax. To calculate your actual tax liability and to claim a refund, filing your ITR is necessary.
ITR filing is compulsory for all individuals and businesses earning taxable income. The income can come from salaries, profit turnover, rental income from real estate, interest earnings from the bank, dividend income, capital gain income, or other income. In this article, we focus on understanding the benefits of filing ITR.
Who is Eligible to File Income Tax Return?
It is mandatory for the following to file ITR:
- Individuals aged less than 59 years with a yearly income over ₹2.5 lakh must file an ITR.
- For senior citizens aged above 60, the exemption limit is ₹3 lakh, and it increases to ₹5 lakh for super senior citizens above 80 years. The threshold income must be determined before factoring in all deductions and exemptions offered under Sections 80C to 80U and Section 10.
- All registered businesses earning revenue must also file an ITR, irrespective of profit or loss.
- Individuals with foreign assets or investments should also file.
- NRIs earning more than ₹2.5 lakh in income or accruals in India are also eligible to file ITR.
- Any foreign businesses earning profit from financial transactions conducted in India.
However, there are also exemptions where one is not required to submit regular ITR forms. On the list, we have individuals earning less than ₹2.5 lakh a year. However, it is still advisable to file ITR for its multiple benefits.
Know the Documents required for ITR Filing
Benefits of Filing Income Tax Return in India
There are multiple benefits to filing Income Tax Returns:
- Compliance with the law: Filing ITR is a legal requirement for all entities earning income above the exemption limit. Filing your Income Tax Return helps you comply with the tax laws.
- Easy loan approval: It can help get approval for home loans, car loans, etc. It helps establish your income history and tax-paying record. Most major banks will ask for ITR returns as proof of your income statement to calculate your eligibility.
- Claiming a refund: Taxpayers are eligible for refunds if excess tax has been deducted at the source or if they have made an advance tax payment. Taxpayers can claim the money back by filing ITR.
- Carrying forward losses: In cases of business or capital losses, filing ITR enables taxpayers to carry forward the losses to offset against a gain in the future and lower the tax burden in the subsequent year.
- Avoid penalties: Avoiding filing ITR can attract penalties and interest charges. By filing ITR on time, taxpayers can avoid the inconvenience. The ITR helps the Income Tax Department to track your financial activities. Failing to file can attract undue scrutiny from tax officials.
- Avail tax deductions and redemptions: ITR allows you to claim the various deductions and exemptions available to taxpayers under different sections of the Income Tax Act. It helps lower the overall tax burden.
- Complying with visa requirements: As a rule, many countries require the visa applicant to submit their ITRs to establish financial stability. It is another benefit of ITR you can receive. It will simplify the visa application process and increase your chances of approval.
- Establish financial credibility: It establishes your financial credibility. It serves as proof of income and is required as a supporting document for various financial approvals, including applying for loans, visas, or government tenders.
- Support financial planning: The Income Tax Return file provides a comprehensive view of an individual’s financial situation. Therefore, it assists in effective financial planning and helps individuals make informed investment decisions.
- Contributing to nation-building: The tax collected from the taxpayers is a major source of revenue for the government that it spends on various developmental and wellness programs contributing to the country’s development.
Effects of Failing to File An ITR
Filing an ITR is a moral and legal obligation for the residents of the country. If one fails to submit an ITR on time, it may attract penalties, and legal action can be taken against them:
- For the self-employed, independent contractors, and professionals, who don’t receive Form 16, the ITR file is the option to establish their financial credibility.
- Not filing ITR results is non-compliance with tax laws. The entity will receive a non-payment notice from the Income Tax Department.
- The IT Department will charge a penalty for failing to file ITR within the given timeline. A penalty of ₹10,000 will be imposed if one’s income is more than ₹5 lakh. If income is less than ₹5 lakh lakh, ₹1,000 penalty is charged.
- In the case of serious tax evasion, the assessee may face serious detention.
Read More About E-filing Income Tax
Now that you have understood the benefits of ITR, go ahead and file. You can read about our other articles simplifying ITR filing process and enrich your knowledge. To claim deductions on market-related instruments like ELSS, open a Demat account with Angel One and start investing now.
What is Form 16?
Form 16 is a TDS deduction certificate issued by the employer to all salaried employees. It contains details of the tax deducted and deposited. Form 16 is important for filing ITR.
Is filing ITR compulsory?
Filing an ITR is mandatory for all individuals and businesses earning taxable income. However, there are some exemptions. Individuals earning less than ₹2.5 lakh and super senior citizens above 75 are exempt from filing ITR.
What happens if you don’t file an ITR?
ITR filing is a moral and legal duty for all Indians earning taxable income. Failing to file an ITR may attract penalties and interest. Besides, you’ll also fail to cash in on the ITR filing benefits.
Should I file an ITR if my income is less than ₹5 lakh?
Any individual with an income less than ₹5 is eligible to receive a tax rebate of ₹12,500 under Section 87A of the Income Tax Act, irrespective of your choice of new or old tax regime. You can’t avail of the benefit if you don’t file ITR.