Why Income Tax Return Filing is Important

Contents Covered

• Why Income Tax Return Filing is Important?
• Conclusion

1. Why Income Tax Return Filing is Important?

Filing of the Income-Tax return not only helps you but also helps the Nation. The tax that you pay is used by the Government to build infrastructure and to improve other facilities of the Nation such as medical, defence, etc.

Here are reasons you should not miss out on filing income tax returns.

1. It contributes to Nation-building.
   Any amount you pay as tax helps in building our Nation. It is one of the major contributors to the government’s cash inflow. For FY 2022-23, the government collected ₹ 19.68 Lakh crore as direct taxes. The government can use the amount for building infrastructure or for other developmental activities.
2. It helps you claim any carried forward losses.
   If you have incurred losses under the heads “Capital Gains” or “Profits and Gains from Business or Profession” and want such losses to be carried forward to the next financial year, you can do so only by filing your income tax return.
3. Claim Tax Refund
   There may be instances where tax has been deducted (TDS) from your income, even if your total taxable income is below the basic exemption limit, or you have no tax liability for that year. In such cases, you must file an Income Tax Return to claim a refund of the TDS.
4. Easy Loan Approval
   Filing your ITR can be beneficial when applying for various loans such as vehicle loans (2-wheelers or 4-wheelers) or home loans. Major banks often require a copy of your tax returns as proof of your income statement. This is a mandatory document for loan approval.
5. Avoid Penalty
   If you are required to file your tax returns according to the Income Tax Act but fail to do so, the tax officer has the right to impose a penalty of up to Rs. 5,000.
6. For Buying Term Insurance
   To approve term insurance plans, insurance providers often require applicants to submit their Income Tax Return (ITR) records as proof of their annual income. The coverage amount is determined based on the individual’s earnings, and presenting the ITR helps insurance providers assess a person’s higher income level.
7. Avoid Notices
   Filing your Income Tax Return on time can help you avoid notices from Tax Authorities. It ensures compliance with tax regulations, minimize the risk of penalties, and allows you to claim any eligible deductions or credits, ultimately reducing your tax liability. Additionally, timely filing can prevent unnecessary audits or inquiries into your tax affairs.
8. Optimization of tax

   It helps you to save tax by pushing you to invest in various tax-saving instruments, such as ELSS, PPF, NPS, insurance, etc. These instruments can help you to reduce your taxable income and also provide you with long-term returns.

9. Mental relief
   Once your taxes are filed, you can relax knowing that you’ve taken care of this important task and can focus your energy on other aspects of your life.
10. 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 on time can make this process smoother and more efficient.
11. The only way to communicate
    Yes, filing an Income Tax Return (ITR) is indeed a fundamental way of communicating with the Income Tax Department. It is the primary method by which a taxpayer reports their income, deductions, and tax payments for a financial year. This process helps both the taxpayer and the tax authorities ensure that the correct amount of tax is paid and accounted for.

2. Conclusion

Income Tax Return is very important to contribute to nation-building. Additionally, it helps to claim TDS refunds, makes your loan applications easier to process, and helps you to carry forward any losses. You also need to file an ITRM to claim deductions and exemptions under the Income Tax Act, 1961.

Any Question, feel free to connect with us