Income tax return filing is mandatory for Indian citizens if their income in a financial year is more then the basic exemption limit. Under the old tax regime, the basic exemption limit is Rs 250,000 for an individual, Rs. 300,000 for senior citizens and super senior citizens are exempted up to Rs 500,000. Rs 250,000 is the basic exemption limit under the new tax regime as well, irrespective of taxpayers' age.
Apart from this, ITR filing is compulsory for those who have paid over Rs 100,000 for consumption of electricity or have gone on a foreign travel spending over Rs 200,000 in an FY, or want to claim refund on tax or carry forward losses to the next financial year.
10 Benefits of Income Tax Return Filing
It is beneficial to file the tax return even when it is not otherwise mandatory to file an ITR. There are many benefits related this. Let's take a look at few of them:
1. Claim Refund: If you have excess tax (in the form of TDS, TCS, or advance tax), then you can claim a refund by filing an ITR. You won't be able to claim refund if you fails to file ITR on time.
2. Carry forward of losses: If you have calculated losses from any source of income which cannot be set-off against the current year’s income, you cab carry forward such losses to future years by filing an income tax return. This will help you in reducing the tax liability in subsequent years by setting off such losses with the future income.
3. Mandatory to file: Several entities (companies, firms, etc.) must furnish the ITRs irrespective of the income/loss during the year. Further, Section 139 stipulates various circumstances in which filing of an ITR is mandatory irrespective of the amount of income.
4. Avoid Higher Tax Deduction/Collection: Filing your ITR on time ensures you're not subject to increased tax deductions or collections under Section 206AB or Section 206CCA. These sections apply when individuals fail to file their ITR within a specific period and the tax deducted or collected during that time exceeds a set limit.
5. Escape Late Fees and Interest Charges: Neglecting to file your ITR promptly can incur late fees and interest charges under Section 234A and Section 234F. These penalties can range from Rs 1,000 to Rs 5,000.
6. Streamlined Loan and Credit Card Applications: Many financial institutions, including banks, request copies of your ITR as income verification when processing loan or credit card applications. Regularly filing your ITR can expedite the approval process for these financial products.
7. Simplify Visa Applications: Certain countries demand copies of your ITRs for the past few years as part of the visa application process. Having your ITRs filed in advance can make this process smoother and more efficient.
8. Prevent Arbitrary Tax Assessments: The Income Tax Department is precluded from making a best judgment assessment of your income if you've filed your ITR. This prevents the department from arbitrarily estimating your tax liability based on their own assumptions.
9. Serve as Valid Income Proof: An ITR serves as a reliable proof of income for individuals, particularly beneficial for low-income groups who may need to demonstrate their income for various purposes, such as claiming subsidies or benefits.
10. Establish Address Proof: A consistent history of filing ITRs can be used as valid proof of residence when applying for Aadhaar or a passport.
