The last date to file income return (ITR) is looming closer on July 31. As of now there is no indication of this date to be extended beyond this month.
Undoubtedly, tax payers have plenty of reasons to file their returns on time, particularly when they have outstanding tax liability.
On the other hand, when there is no such liability, tax payers tend to refrain from filing their returns. Chartered accountants, however, advise their clients to maintain the consistency of filing their returns year after year.
One would wonder what are the reasons for filing returns in case of zero liability of income tax. Here, we list out some of the reasons. There are a number of benefits arising out of it.
Reasons for which you should file ITR before July 31
Seeking loan approval: At the time of applying for a loan, bank representatives would ask you for the income tax return of the past two years, at least. As a matter of fact, the return is proof of income and even if no tax liability arose at the end of the year, the filing of return is advisable if you are planning to raise a loan in the near future.
Visa processing: In case you are planning to travel abroad, you should have the income tax return for the past few years since the embassy could ask for it. This is considered one of the key documents that indicates your financial soundness and genuineness of transactions you claim to have carried out.
Carry forward losses: Even if there is no tax liability, there could be some losses this year which you need to carry forward to the subsequent years. This can be done when you file a return for the year you incur a loss.
Claim tax refund: When there is a tax refund, the income tax refund will process the same when you file the ITR. Let us say you have overpaid your tax in the form of TDS (tax deducted at source) or TCS (tax collected at source) than you are supposed to pay, then you need to file your income tax return in order to claim the refund.
This year, the government has introduced a higher rate of 20 percent of TCS on foreign remittances under LRS. This rate is not tax liability and one is entitled to get it back at the time of filing of return.
Evidence of earnings for any other purpose: If you want to show your net earnings for any purpose whatsoever during a time period, then you are advised to file income tax return.
To sum up, payment of income tax and filing of income tax return are often complementary but not necessarily interchangeable. So, even if you do not have any income tax liability, you are still advised to file income tax return for a variety of reasons. These include applying for a loan, visa or tax refund, among others.