A tax return must be filed if net income exceeds the basic exemption limits before subtracting these qualified assets and exempting any eligible capital gains. All investment deductions and the exemption from long-term capital gains taxes must be claimed on an income tax return. Additionally, there are some advantages for filing your income tax returns (ITR) on time each year.
Benefits of filing income tax returns
According to Kotak Securities, timely ITR filing has several advantages. Here are a few examples:
1. High life insurance cover
Your ITR may enable you to obtain a substantial life insurance policy. If insurance providers believe you are a tax evader, they may decide not to provide you with this benefit.
2. Faster loan processing
The last three years’ worth of ITR filing documentation may be required if you’re seeking for a loan. This would make it easier for the bank to evaluate your financial status and loan repayment capacity. The processing period for your loan could be sped up by submitting these documents. The same is true for credit card processing.
3. Third-party accidental claims
Let’s say you want to file an insurance claim in the event of an accident. Your ITR proofs are normally required by insurance companies before legal action can be taken. Your claim amount can be decreased if you don’t include the ITR facts. Your claim could potentially be denied, depending on the circumstances.
4. Quicker visa applications
Taking a trip abroad? You must first obtain a visa. You would need to produce ITR proofs for this as well. This is to make sure you have a steady financial situation. Your most recent tax returns must be submitted when applying for a visa if you want to travel internationally.
5. Obtaining capital for startups
You might require funding from outside sources like venture capitalists or seed investors. These investors could inquire about the specifics of your ITR in order to evaluate the business’s financial stability and profitability. They could cross-check the data in the audited report using your ITR forms as well.
6. Benefit for freelancers and independent professionals
Self-employed or independent freelancers do not receive Form 16. Their ITR is frequently the sole record that demonstrates they have submitted income taxes. Without this evidence, they can run into finance constraints and transactional issues.
7. Helps in carrying forward losses
A person or a company’s losses from one fiscal year can, if necessary, be carried over to the next one. Such losses may be reported under “earnings and gains of business and profession” or “income from capital gains”. But only if you submitted your ITR before the deadline, you will be eligible for this advantage. Losses may not be carried forward if you file later than that point.
Penalty for not filing on or before due date
A late filing charge is collected from the taxpayer when they submit their return after the deadline. Section 234F of the Income-tax Act of 1961 imposes this levy of Rs. 5,000. However, the late filing cost for small taxpayers with total income up to Rs. 5 lakh will not be more than Rs. 1,000. Prior to filing the belated ITR, this fee must be paid.