Each year, millions of taxpayers are tasked with the duty of filing their Income Tax Return (ITR), yet many view it merely as a formality. In reality, timely filing of income tax offers significant advantages. It not only helps you avoid legal complications but also provides financial benefits down the line.
Taxpayers are required to submit their income tax returns by July 31. Let’s explore the importance of filing ITR and the benefits it brings.
1. Preventing legal issues
Failing to file your Income Tax Return (ITR) according to your income can lead to actions from the Income Tax Department. The government monitors individuals whose income is taxable but who do not file returns. By submitting your returns on time, you can steer clear of financial discrepancies and legal challenges.
2. Simplifying loan applications
If you’re considering applying for a business loan, home loan, car loan, or personal loan, your ITR can be a crucial document. Banks and financial institutions assess the applicant’s income and tax payment history before approving loans. Having ITR documents from the past 2-3 years can significantly ease the loan approval process.
3. Assisting with visa applications
When applying for a visa to travel abroad or for work or study in another country, your ITR becomes an essential document. Many embassies require 2-3 years of ITR receipts to verify that the applicant has a stable financial background and can support their expenses.
4. Opportunity for tax refunds
If you have overpaid taxes, filing your ITR allows you to claim a refund. Often, employees have excess Tax Deducted at Source (TDS), which can be reclaimed through the ITR process. Without filing, you may miss out on this entitlement.
5. Assistance with Insurance and Investments
When considering a substantial insurance policy, like a term plan worth 50 lakhs or 1 crore, insurance companies often require your Income Tax Return (ITR) details. Additionally, if you’re looking to invest in the stock market, mutual funds, or other financial instruments, having an ITR establishes a solid financial history that enhances your credibility.
6. Enhances Your Credit Score
Submitting your ITR can positively impact your credit score when applying for a credit card or other financial services. It demonstrates to banks and financial institutions that you are a responsible taxpayer with a stable financial background.
7. Aids in Future Financial Planning
Filing your ITR provides a clear record of your income and expenses. This not only aids in refining your financial planning but also proves beneficial for significant investments or retirement strategies down the line.
8. Access to Government Schemes and Grants
Your ITR is a crucial document for accessing various government schemes and subsidies. If you intend to apply for government financial support or programs, filing your income tax return may be a requirement.
9. Essential Documents for Business
For entrepreneurs and freelancers, filing an ITR showcases your financial health and business transparency. This can facilitate your participation in business loans, tenders, or other corporate opportunities.
10. Prevents Future Financial Disputes
In the event of an investigation by the Income Tax Department, your ITR serves as your strongest defense. It acts as official proof of your income, confirming that you have accurately reported your earnings and taxes.