Why you should file Income Tax Return? Benefits of Filing Income Tax Returns
Most of the individuals who are non-filer of Income Tax Return are scared of filing of return thinking income tax department will track them and later send notices which will create trouble for them. Let me tell you, this is the myth. Income tax department never harass genuine tax payers. Other reason for non-filing are, “my employer has deducted tax at source on the salary income received by me hence I don't need to file my income tax returns. The Lazy one says “The deadline for filing tax returns is far away, why bother now.” If everyone follows the law and file return on time it has many benefits which are highlighted as follows:
1) Building a Strong Balance sheet over 20-30 years create Financial History
We know a small newspaper vendor in Mumbai Suburbs selling newspapers and earning livelihood. That’s his only business and his income is not more than 2 to 3 lacs. He has not filed his income tax return, though he might have savings of more than 20 lakh in last 20 years. He suddenly deposited Rs 15 Lakh cash accumulated in Bank in one year. Later he just received notice from Income Tax department regarding High Value Transition entered without Filing returns. For him it was difficult task to convince Assessing officer that it is saving from his past 20 years income and in he has just made cash deposit in bank. Had he filed his income tax return regularly it would have been easy to prove the transaction.
Also imagine a Family of Six Individuals – if everyone has filed Income Tax Return for Last 20 years they may have accumulated income and Strong combined Balance sheet of more than 1 Crore. So even in case your income is below taxable limit you should always file so that your asset side is strong enough, in case you need to provide proof.
2) Easy Home, Vehicle and Car Loan at reasonable rate from Bank
Getting loan is easy if you have collateral assets like Property. However getting at reasonable rate is challenge. Bank always check repayment capacity of borrower even if he has good property collateral. You should have income from which you can repay loan, bank needs proof of your income. The proof cannot always be receipts or deposit in your bank account. For bank the best proof of your income is your Income Tax Returns. And so bank insist on them and usually do not provide loan without ITR documents
3) Getting Education Loan for Student / Concession Loan for Student from Trust
Trust which are formed to help deserving student to pursue higher studies by giving scholarship or sponsoring their studies always cross check that benefit is passed to deserving student whose parents are not able to afford higher studies. The Easy way for them is to check income tax returns of parents to determine their income and eligibility for loan. In such cases even if your income is below taxable limit you should file your income tax return
4) Missed Claiming your Refund or loss carried forward
There are cases where individual TDS has been deducted from Income from Interest or from salary or else, however it just skipped to file return and claim refund of Tax. Even in such cases where income is below taxable limit individual should file return and claim Refund. In case you have not claimed your refund for last 6 years you can file return and still claim. For more details read article Get Refund of Income Tax by Filing Refund Claim or Loss Carry forward for Last 6 years
5) Applying for VISA in case of Travel Abroad
We live globalization, were many employees are working with MNC. There are several opportunities to work abroad. Most of country VISA requirement mandates copy of Income Tax Return for past 2 to 3 years. Even in case you have to visit for business purpose or in case of tourism the host country will always check your financial status through your income tax return filed papers. So in case you are planning holiday abroad in next year do start filing your income tax returns
6) Accidental Claim in Third Party Insurance
This is the rare benefit, incase if your family member has accidental death for example in case of road accident or terror attack victim the court and insurance company always ask for proof of income to arrive at the amount of claim. The Proof of Income which is best vaild in court is Income Tax Return. Basic formula applied by court is multiplying number of years of remaining life of deceased with average income in ITR of last 3 years.
7) Applying for Government Tender
Most of time selection body of the Government panel for tenders insist on particular threshold turnover. Your Income Tax return becomes basic proof which they demand for checking turnover reported in returns. The basically check the nature of business you are into for last 7 to 10 years. If you had file return showing your nature of business consistent it can be valid proof of your experience in that said business.
8) Buying a High Life Insurance Cover
Buying life cover of Rs 50 lakh or Rs 1 crore has become commonplace. However, these covers are available against your ITR documents to verify annual income.Life insurance companies, especially LIC, ask for ITR receipts these days if you opt to buy a term policy with sum insured of Rs 50 lakh or more if the income of the individual is not high he may not require high cover.
9) A stitch in time saves nine
Even if you have missed the July 31 deadline for last year, you can go ahead & file your tax return immediately. Penal interest is applicable for delayed filing, ONLY IF you have any pending tax liability. Suppose your entire tax liability has been paid up before March 31, 2015 then there is no penal interest liability for you to take care of at the time of filing your returns for March 2015. Also Read Article: Missed filing Income Tax Return for FY 2013-14 and FY 2014-15? Last Chance to file return before 31 March 2016
Also filing return will give you peace of mind and satisfaction that you are contributing for building nations wealth.
For any query you can write to firstname.lastname@example.org before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on.