As the time to file Income Tax Return for Financial year ending March24 (Relevant to Assessment Year 2024-25) is approaching, It is time to get ready to file Income Tax Returns.
Many assesses are under mistaken belief that:
- Their income Tax has been deducted at Source and therefore why should they even file their Return?
- Just afraid of complexity of income tax laws. They are often unable to understand the forms, compliances.
- Afraid that in case they file their return, their case shall be selected for scrutiny leading to unnecessary hardship and legal costs.
- Filing of Income Tax Return will cost them huge sum as professional charges.
To allay above fears, taxpayers must note that filing of return is mandatory even if adequate TDS has been deducted at source.
Here today, I would wish to allay the above fears as also to emphasize that the timely submission of income tax returns is not just a regulatory requirement but a strategic financial move that can significantly impact your fiscal health.
iling of Income Tax Return in time has many advantages and some of them are:
1. Easy Loan Approval- return filed in time comes handy in approval of loans though it is not sole deciding factor:
Filing your ITR can be beneficial when applying for various loans such as vehicle loans or home loans. Major banks often require a copy of your tax returns as proof of your income statement. This is a mandatory document for loan approval.
Mandatory for Claiming Refund of Income Tax:
There may be instances where tax has been deducted (TDS) from your income, and the Tax Deducted at Source exceeds your liability of Income Tax Payable, you must file an Income Tax Return to claim a refund of the Tax so deducted at Source.
ITR Filed serves as Income Proof:
Your Income Tax Return can serve as proof of your income for application for Credit Card and other facilities..
ITR also helps in Quick Visa Processing:
When applying for a visa, most embassies and consultants require copies of your tax returns from the past couple of years (Usually three). These documents are among the mandatory requirements. Therefore, it is advisable to file your ITR in a timely manner.
Carry Forward Your Losses to future years to claim offset the same and save Taxes:
By filing your return within the original due date, you can carry forward losses to subsequent years. These losses can be offset against the income in future years, thereby reducing your tax liability. Without filing an income tax return, this benefit would not be possible.
Avoid Penalty for late filing of Income tax Return:
Failing to file your ITR on time attracts a late filing penalty, which can range from Rs. 1,000 to Rs. 10,000 or 100% of the tax payable, depending on the delay. Early filing helps you avoid this penalty.
For Buying Term Insurance:
To approve term insurance plans, insurance providers often require applicants to submit their Income Tax Return (ITR) records as proof of their annual income. The coverage amount is determined based on the individual’s earnings, and presenting the ITR helps insurance providers assess a person’s higher income level.
8 Not filing the return can come with consequences difficult to handle.
Not filing your Income Tax return (ITR) in India can come with significant consequences, and they can be quite difficult to handle. Some of the consequences could be Income Tax Department launching Tax Evasion Proceedings and taxing the amount discovered as Income having escaped taxation, seizure of unexplained income etc. The Income Tax Department may choose your case for scrutiny or audit if you haven’t filed your ITR. This can involve additional paperwork, documentation, and potentially lengthy inquiries.
9 Peace of Mind:
Filing your ITR on time ensures you are compliant with the Income Tax Act and avoids any potential legal issues or scrutiny from the tax authorities.
10 Impact on credit score:
Not filing your ITR can negatively impact your credit score. A good credit score is important for getting loans, credit cards, and other financial products at favorable rates.
Difficulty in business dealings:
If you’re a business owner, not filing your ITR can make it difficult to do business with other companies or government agencies. They may require you to provide proof of your tax compliance before entering into any agreements.
In some cases, the Indian government may restrict your travel abroad if you have outstanding tax liabilities.
The process of filing ITR has become increasingly convenient and user-friendly with online platforms and various resources available. For the unversed, and those not having confidence to file their return themselves, seeking professional help from a tax advisor can ensure you accurately file your ITR and avoid any potential issues.