Most millennials think that if their salaries fall below the taxable bracket they shouldn’t be filing Income Tax Returns (ITR). Even when there is no tax liability, an income tax return (ITR) must be filed. Individuals whose annual income is in excess of the basic exemption limit of Rs 2.5 lakh must mandatorily file their income tax returns.
What is ITR?
ITR’ is a form in which taxpayers declare details of income, deductions and exemptions. Filing income tax returns is mandatory to claim tax deductions under Section 80C, 80D, etc. An ITR gives information about your yearly income and tax liability to the Income Tax Department. In fact, it is a mandatory activity that every citizen should do if, your gross annual income is more than the basic exemption limit.
But, filing an income tax return even if your income is exempted from tax is quite beneficial. Here are the benefits of ITR filing.
1) ITR for bank loans
Most banks ask for ITR receipts of the latest 2-3 years when you apply for a home loan or car loan. Lenders consider ITR as the most authentic document supporting an individual’s income. This enables the banks to know your income stability, which thereby helps in quick sanction. Hence, to apply for loans a tax return would be required to be filed.
2) ITR for address proof
One of the best options for address. If you do not have proper address proof when you apply for a loan or any other facility, an ITR document will save you from the hassle. ITR receipt is sent to your registered address, which can serve as residential proof. In fact, you can also submit it as proof of income.
3) ITR for visa processing
Most countries demand ITR among the documents for issuing Visa to the individual. Embassies of the United States, United Kingdom, Canada, and Australia ask for ITR receipts of the past years to process your visa application. This helps them assess your income and ensure that you are able to take care of the expenses on your trip. It is also proof that an individual is a tax-compliant citizen of the country.
4) ITR to claim tax refund
One of the biggest benefits of ITR filing is you get to claim a tax refund. If you have made investments in tax saving instruments and have paid more income tax, you are liable for a tax refund.
5) Compensate losses in the next financial year
As per the income tax laws, individuals cannot carry forward losses faced in the current financial year to the next financial year. Hence, to ensure that the losses are carried forward for future adjustment, a tax return would be required to be filed.
Generally, taxpayers are required to file ITR by July 31 of any year (unless extended by the government). For the FY2020-21, the deadline has been extended to September 30, 2020, in view of the constraints due to the COVID-19 pandemic.