The primary source of revenue for the government is taxes. Every Indian citizen, organization, or business must typically pay income tax on their yearly earnings/income during a fiscal year.
Salary, dividends, interest, capital gains, and other profits are examples of taxable income. The only acceptable option to defend one’s income in this situation is to submit an income tax return.
Income Tax Return: What Is It?
An income tax return is a document that an individual or entity is required to file with the government, usually on an annual basis, to report their income, expenses, and other relevant financial information. The purpose of filing an income tax return is to calculate the amount of income tax owed to the government, or the amount of tax refund that the individual or entity is entitled to receive.
The income tax return typically includes information about the individual’s or entity’s income from all sources, such as wages, salaries, investments, and other sources of income. It may also include information about deductions and credits that the individual or entity is entitled to claim, such as business expenses, charitable donations, and other allowable deductions.
The income tax return must be filed by a specific deadline, which varies by country and jurisdiction. Failure to file the return on time or accurately can result in penalties or fines, and may also result in an audit by the tax authorities.
What Benefits Come with ITR Filing?
One valid technique to demonstrate income is through income tax filing. It is a significant record that goes further than Form 16 in proving your pay and tax deductions from the previous employer. ITR, however, also contains data from Form 16 and other revenue sources.
ITR filing can be done at your convenience online. The taxpayer must go to the income tax department’s official website, select the ITR filing option, and pay the applicable taxes in order to submit an ITR online.
The advantages of submitting income taxes are:
Aids in loan applications
ITR submission on time will benefit the applicant for a house loan or auto loan. Additionally, a copy of your income tax return is one of the crucial documents that most Indian banks require in order to approve your loan.
For instance, SBI requests the most recent salary slip with all deductions, the TDS certificate/copy of ITR/Form 16 from at least two prior financial years from applicants seeking a vehicle loan. Additionally, it is helpful when a loan application is turned down.
Assists with refund claims
While an ITR is active, a tax refund is not possible. Even if the taxpayers may primarily invest in FDs, a 10% source deduction is made for such investments. You are eligible to file tax returns and receive a complete refund if the total taxable amount is less than Rs 2.5 lakhs.
Carry Capital Losses Forward
Income tax filing is necessary in order to carry capital losses forward. In this manner, capital gains made the next year can be modified. A long-term capital gain loss can be immediately carried over for the eight years after it occurs. These losses, including any short-term losses, are only offset by a long-term capital gain.
The ITR receipt is a key document with several uses. It is a thorough document that includes information about your income, tax liability, and additional sources of revenue.
As Address Proof, useful
The ITR receipt, which is mailed to the registered address when you file an ITR online or offline, can also be used as address verification.
Vital for the Processing of Visas
ITR receipts are useful for visa applications as well. Foreign consulates may request a copy of your ITR from prior years if you are traveling internationally, especially when you are applying for a visa. If you are visiting the US, UK, Canada, or any other European nation, having an ITR copy is essential. You must maintain the accuracy of your ITRs regardless of the reason for your trip abroad.
Money for a Startup
When starting a startup, a person might require funding from various capital ventures. To gauge the business’s profitability and stability, investors may inquire about the ITR. The data may also be cross-checked by the investor with ITR. In order to obtain finance for the startup, it is crucial to file the ITR.
Get High Life Coverage
It is now necessary to purchase life insurance with a bigger sum assured because accidental death is rising quickly. To provide the family with the most financial support in the event of the insured’s untimely death, people prefer purchasing life insurance with a sum between Rs. 50 lakh and Rs. 1 crore. These covers are available in exchange for an ITR copy.
At the time of paperwork, several life insurance firms, including LIC, want a copy of the ITR. Even the level of protection provided by a life insurance or term insurance plan is based on a number of variables, one of which is the income of the policyholder.
Sufficient for Self-Employed
If Form 16 cannot be used, the ITR is the only record demonstrating their source of income. The only prerequisite is that the yearly income must be greater than the basic exemption threshold of Rs. 2.5 lakh.
Businessmen can easily complete all financial operations using ITR evidence. Additionally, it serves as a valid proof of tax payment for independent contractors.
Suggested Read: Income Tax Notice