Income tax is a tax which is levied by the government on the financial income of individuals within their jurisdiction. Every individual, every year must file an Income Tax Return to know whether they have any tax liability or they are eligible for any tax refund. The government uses these funds to serve public and to improve infrastructure.
An individual taxpayer is required to furnish his or her return of income if the person’s gross taxable income of all heads before claiming exemptions is more than the basic exemption limit for the relevant assessment year. As per section 139 (1) of the I-T Act, it is essential to file Income tax return when the gross total income (before allowing any deductions under section 80C and 80U) exceeds the basic exemption limit i.e. Rs. 2,50,000 even if the taxes due is nil. The limit is Rs. 3,00,000 for senior citizens who are above the age of 60 years but less than 80 years and Rs. 5,00,000 for Super Senior Citizen who are above 80 years of age.
It is mandatory to file income tax return in India if the following situations are applicable;
- A company or a firm must file ITR irrespective of whether they have loss or profit during the Financial year.
- Any individual who wants to carry forward the loss under any head of income.
- A person who wants to claim income tax refund.
- Filing of return is mandatory for a Resident Individual who has any asset or financial interest in an entity which is located outside India. However, it is not applicable for Non-Resident Indians (NRI) and Resident or for Resident but Not Ordinary Resident in India (RNOR’s).
- Any individual who is a resident and a signing authority in a foreign account.
- Individuals with exempted Long-Term Capital Gains (LTCG) from the sale of equity shares or sale of a unit of business trust or sale of a unit of equity oriented mutual funds of more than Rs. 2,50,000 in a financial year. Since the financial year, 2016-17 it has become mandatory to file Income tax return even though these gains are exempted from tax.
- An individual is required to file Income Tax Return (ITR) when he is a recipient of any income under the derivation of property which is held in trust for any charitable, religious, political purpose, a research organization, a non-profit university, educational or medical institution, news agency, trade union, hospital, infrastructure debt fund, any authority or body of trust.
- At the time of applying for visa or loan, the concerned authority may ask for the proof of filing Income Tax Return (ITR).
Non-Filing of Income Tax Return (ITR) may result in penalty, interest, prosecution, and scrutiny by the Income Tax Department. There are also various benefits of filing Income Tax Return, so to avail these benefits Income Tax Return must be filed.
Some of the benefits can be listed as follows;
- For an Accidental Claim in Third Party Insurance
Filing of ITR can help an individual in the future in case of accidental death of any member during a road accident. During the trial of the court, insurance companies ask for the proof of income to arrive at the amount of accidental claim and if return is not filed for the previous years then it could lower the amount of claim or even a zero claim, as insurance companies only consider Income Tax Return as evidence (ITR). In the eyes of law, no wealth record, fixed deposits, business etc. are given as much importance as it is given to filing of Income Tax Return (ITR).
- For Applying for Loans from Banks
If an individual applies for any loan such as a housing loan, personal loan etc. then the bank will ask to furnish the ITR of the last three years as a proof for the declaration of income. Before granting the loan, the bank wants to know the financial capacity of the individual from the income details as shown by the individual in the Income Tax Returns.
- For Obtaining Government Tenders
The value of Business Profiles of various professional service providers, contractors, corporate agencies is dependent on the yearly Income Tax Returns (ITR). The returns must not only be filed on time but should also be filed in an accurate manner, signed and enclose all the necessary documents. If anyone wants to expand his business and obtain more tenders from the government, one needs to file a return every year.
- For Obtaining Visas for Outside India
The high commission of various countries maintains the record of the documents including Income Tax Returns (ITR) of visa applicants. The objective behind this is to know whether you are financially sound before the visa is issued which is why they depend on the ITR of the immigrant. Every individual is required to file a genuine return if they want to go abroad. Failure to file for return of the past years may lead to a lower chance or being issued a foreign visa or a work permit in a foreign country.
- For the Appointment to Judicial Jobs
A candidate who is a lawyer or a Chartered Accountant, who wants to continue in the profession is required to present the annual profession income tax return. The candidate’s credibility is checked, based on the last five to seven-year ITR. In a judicial interview, last seven-year of ITR records are checked.
- For Funding Start-Ups
Investors not only want to know about the profitability but also about the scalability, various cost parameters and the validity of the data which is produced from the auditor’s report.
- For Obtaining LIC Agency
All insurance corporations before allotting an agency check the financial condition of the agent. Previous three year’s Income Tax Return (ITR) is called for before allotting any agency.
Since now you know how important it is to file your Income Tax Return (ITR). File your Income Tax Return (ITR) on time and avail the above-described benefits.