Once your income reaches a certain threshold, tax is applied. You must submit an income tax return in order to pay the taxes.
ITR is a form where you fill out the information about the income you made during the previous fiscal year (1st April-31st march). Everyone, whether a salaried individual or a partnership, must file an ITR.
You can benefit from filing an ITR as well. Here are some of the numerous advantages of submitting an income tax return for you.
- It Serves as A Legal Document in One.
Income Tax Return is of great legal significance. It is noted with the authorities. It serves as legal evidence in two ways:
As an ID Proof
The return that you complete may be required as identification in a number of circumstances, including when requesting an AADHAR card or any other document. It is also recognized by the government as valid proof of residence.
As an Income Proof
The ITR form includes a thorough list of all of your incomes and spending, as was previously mentioned. The tax you need to file is determined based on this.
Since some transactions, like the acquisition of property, do need you to present proof of income, ITR can also be utilised as such.
For those who are self-employed and do not receive Form 16, this may be useful.
- May Aid in the Claim of Deductions
The government permits you to take various deductions in order to lighten the burden on taxpayers and to motivate more individuals to pay their taxes.
- By taking advantage of certain exemptions and deductions, you can lower the amount of tax you ultimately owe by making certain investments.
- Rebates and TDS can also be reclaimed.
However, you must file an income tax return in order to be eligible for these tax breaks. You are not eligible to make a deduction if your ITR has not been filed.
- Serves as Important Documents for Loan Applications
The bank requests certain paperwork from you when you decide to apply for a loan to buy something, like a car or a new home, or for your business.
With the other important documents like Aadhar card, PAN card, driving permit, Photo ID, etc, your income proof is one vital document that is requested. ITR for the previous three years was frequently requested by banks. This is done to determine if you will be able to repay the loan given your history and present financial circumstances.
- Avoiding Punishment and Penalties
The Income Tax Act of 1961 governs the taxes that are applicable to you. So, if you earn more than the exempt amount, you must pay taxes.
Therefore, if you are qualified to pay taxes on your income but do not file your income tax returns, you will be penalized.
A fine of up to Rs 5000 might be assessed by the income tax officer. You may also face further severe penalties if you fail to file your returns.
To avoid these fines and penalties, you should file an ITR.
The nation benefits as much as you when you file your income tax return. The government uses the taxes you pay to strengthen the nation’s infrastructure and other services like healthcare and defense.