All You Know About The Benefits of Filing ITR (Income Tax Returns)

Last Updated : March 10, 2023, 4:24 p.m.

The income tax return is a document you use to reveal your income, applicable tax on your income, tax exemptions, and tax deductions for a certain financial year. There are many reasons why you should file an income tax return. The vital reason for ITR filing is to claim tax deductions. Nonetheless, everyone is not required to file income tax returns. To demonstrate the privileges of filing income tax returns, the guide will aid you in understanding a few significant things about filing income tax returns.

Benefits of Filing ITR (Income Tax Returns)

A few benefits of ITR filing are as follows:

Smooth Loan Processing

Financial establishments look into income tax return receipts of the preceding year or years before approving a loan application. Banks and other financial establishments regard the income tax receipt as a backup document to the income statement of the loan applicant. Hence, ITR filing is  beneficial if you plan to apply for a car or a home loan. Suppose you are a salaried and self-employed working individual. In that case, you can take advantage of this benefit because you do not have to give any document as your proof of income and getting approval for loans will become easy.

Application for Visitors’ International Stay Admission

The income tax return receipt is crucial for processing visitors’ international stay admission applications. The possibility of a visitors’ international stay admission application will be rejected or marked as problematic if the applicant submits an income tax returns document. It demonstrates the civic responsibility of an individual. Many countries demand income tax returns for visitors’ international stay admission because of increasing security concerns. The document will prove your ability to handle travel expenses. ITR filing will make the processing of the VISA application easier.

Avert Penalties

ITR filing is compulsory for a few individuals. Timely filing of income tax returns will help you dodge huge fines. If the annual income is less than five lakhs in Indian rupees, the Income Tax department might impose a fine of Rs. 1000. The penalty fine may rise up to approximately Rs. 10,000.

Compensating Losses

A firm or a business enterprise might incur losses anytime during a financial year. To compensate for the loss, it will be helpful for every company or business enterprise to file income tax returns. If they follow the process, they can carry the tax losses forward in the upcoming financial year. Nonetheless, filing income tax returns is essential to claim tax losses.

Claiming Refunds

If you file an income tax return, you can claim a tax refund from the Income Tax Department. The claiming of refunds is important for salaried and self-employed working individuals falling in the high-income category.

Medical Insurance

The Income Tax Department offers reductions in taxes of approximately Rs. 50,000 on health insurance paid in a certain financial year. The tax deduction on medical insurance comes under Section 80C of the Income Tax Act. Senior citizens can take advantage of the tax reduction and undergo medical treatments without problems.

Reduction in Interest Rates

Filing income tax returns enables a reduction in interest rates when you apply for home loans. For instance, if you are a non-resident Indian and have invested in a real estate property in India, it becomes a taxable property, and you must file income tax returns. In this case, the advantage of filing income tax returns is that you can enjoy a basic thirty percent reduction on interest rates on home loans and taxes related to property.

Accurate Residence Address Proof

The IT returns are accurate proof of residence address. You can obtain an Aadhaar Card with the help of income tax returns. You require an Aadhaar Card, driving licence, and a few other documents as proof of residence address. There might be situations when usual forms of identification, such as identification cards, might not be accepted. Hence, you can use your income tax return in such cases.

Proof of Your Income

The income tax filing form serves as a proof of your income. Employers mostly give Form Number 16 to their employees. Income tax returns are a complete breakdown of your income and expenses for one financial year.

Scholarship Privileges

Some authorities check income tax returns as a source of income documentation. For example, suppose you are a salaried or self-employed working individual who wants to study further. In that case, you can submit income tax returns to claim a certain education institution’s scholarship. Income Tax Returns can help to establish your eligibility to provide evidence of your income, and insurance firms might approve them as acceptable documentation.

Funding for Business Ventures

If you are planning to start a new business venture or expand your existing business venture, you may need investments and funding from outside. The investors might probe about the specifics mentioned in your income tax returns document to analyse the profitability and steadiness of your business. They can double-check the data in the verified report by using your income tax returns forms.

Privileges for Professionals Working Independently

Self-employed working individuals and other professionals working independently do not get from number 16. As a result, their income tax returns are the only document that shows that they have completed their ITR filing. Without showing income tax returns documents as a proof of income, you, as an independent working individual, might fall into funding and transactional problems.

Conclusion

In addition to aiding you in exemption from paying income tax, ITR filing helps in numerous ways. If you are a responsible citizen, paying taxes is beneficial and getting a return on your paid tax is your right. It will be helpful if you make a proper balance paying the tax and receive your return on the paid tax. Hence, getting prepared to file income tax returns, even though your income is less than the minimum income for ITR filing in India. There is no reason that you should not file income tax returns. It would be best to pay your taxes on time and submit returns.