If you are an Indian citizen and your gross total income exceeds the tax exemption limit, then you must file your Income Tax Returns (ITR). If your gross total income does not exceed the exemption limit, then it is not mandatory for you to file your ITR. A person whose gross income is up to Rs 250,000 per annum is not required to file ITR.
You are also required to file your ITR if your electricity consumption bill exceeds Rs 1 lakh in an year or you have undertaken foreign travel for over Rs 2 lakh.
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But, filing an income tax returns even if your income is exempted of tax is quite beneficial. Want to know how? Here is the explanation!
1) ITR as Proof of Income – Salaried class have the benefit of Form 16 which is issued by their employer and it acts as an income proof for individual. However, for the people who are self-employed, ITR filing document serves as an authentic income proof. It gives a detailed break-down of income and expenses incurred by these individuals during any financial year.
2) ITR for Claiming a tax refund – You can save on your taxes on the income from savings instruments like term deposits if you file an ITR. You can also save tax outgo on your dividend income by filing ITR. While these instruments are liable for taxes, you can claim the tax outgo through ITR refunds. Even if your total gross income from different sources is above Rs 250,000 and you have made investments in a manner that your net income is below Rs 250,000 in a year, you can get advantage of tax refunds and get the money back that is deducted at the source. Therefore, you must file your ITR. But, those investment instruments should be exempted under some provision of the IT Act.
3) ITR for loan sanctions from banks, financial institutions – Usually, banks demand three-year ITR while processing a loan for its customers. If you have an ITR filing document, your chances for a swift loan increase manifold. If you are planning to buy a car, house or looking for a personal loan, ITR will be a very helpful document for you. ITR is also helpful in getting credit cards, policies etc. It is very useful in cases where a self-employed person is seeking a bank loan.
4) ITR for claiming losses -Filing of tax return within the due date is mandatory to claim specified losses for an individual taxpayer. This loss can be in the form of capital gains, business or profession. If you have made a profit from the sale of mutual funds or equity shares, you can adjust these profits with losses incurred in the past by filing tax returns on time.
5) ITR for Application for VISA – Most countries demand ITR among the documents for issuing Visa to the individual. That gives the insight to the Visa processing officials about your current financial condition and income levels. It is also a proof that that an individual is tax-compliant citizen of the country.