The month of July has arrived, and the reverse countdown has started. The last date for filing Income Tax Returns (ITR) for individuals is 31st July 2023. It is always a good idea to file your ITR as soon you get your Form 16/Form 16A and the other relevant documents. If your taxable income is below the basic exemption limit, it is still a good idea to file your ITR, as it has certain benefits. Some of the benefits of filing your ITR include:
Faster refund if you file your ITR early
If you wait till the last week or last date for filing ITR, the portal may work slowly or throw up technical errors due to the high traffic. Hence, if you file your ITR early in July, you can do it smoothly. Also, if your Tax Deducted at Source (TDS) and/or Tax Collected at Source (TCS) is higher than your net tax payable, you will get the refund early. If you file your ITR in the last week of July, chances are you will have to wait longer for the refund due to a higher backlog of pending ITRs to be processed.
The income tax return is considered a valid income proof document for your loan application. The ITR is one of the important documents in deciding: a) Whether you are eligible for the loan, and b) If eligible, then for how much amount.
For salaried people, the employment offer letter, salary slips, etc., may play an important role in loan applications. But, for self-employed, professionals, business persons, etc., the ITR plays an important role in loan applications.
If you are self-employed and have been filing your ITR every year, the consistent track record of filing ITRs may boost your chances of the loan getting approved quickly.
Carry forward capital losses
Do you have any capital loss you incurred on your investments in equities, mutual funds, etc? You can carry forward these capital losses to the subsequent financial years. You can set off the carried forward capital losses against capital gains in the subsequent financial years. However, to carry forward the capital losses, you need to file the ITR.
When you travel abroad, you need to obtain a visa for that country. When applying for a visa, many countries require you to submit your ITR along with the other documents. The ITR gives information about your financial position, which quickens the visa approval. Some countries require submission of the last 3 years ITR with visa application.
Valid income proof
You can use the ITR as valid income proof for specific purposes. For example, when you apply for life insurance above a specific amount, the insurance company will require you to submit your ITR. Based on the ITR, the insurance company can decide whether you are eligible for the amount of life insurance you have applied for.
For most credit cards, banks have specified income eligibility criteria. Within the same bank, different credit cards may have different income eligibility criteria depending on whether the credit card is a basic, premium, super premium card, etc. For self-employed people, banks ask for ITR to determine the eligibility for a specific credit card applied for.
In case of some personal accident insurance policies, the insurance company pays the insured a specified amount at a specified frequency in case of loss of earning capacity. The insurance company may ask for the ITR to determine the specific amount to be paid in such cases.
The ITR can be submitted in certain cases where you need to submit income proof to determine your net worth.
Avoid penalties and interest
If you delay filing your ITR, you have to pay penalties for delayed ITR filing and interest on the outstanding income tax amount. When you file your ITR on time, you can avoid these penalties and interest.
Contributing towards nation-building
When you file your ITR on time and pay your income tax, the Government gets revenue to build infrastructure. In the last few years, the Government has focused a lot on building infrastructure. You must have noticed in the last few years, there has been a tremendous increase in new roadways, airports, railway lines and trains, seaports, etc. As a citizen, you can benefit by using the modern infrastructure that saves time and provides convenience.
The Government can also use the tax collected for its social welfare programmes, such as building houses, toilets, supplying electricity, gas cylinders, healthcare, etc., to poor people in rural and urban areas.
The Government can build infrastructure and carry out its social welfare programmes only when you file your ITR and pay taxes on time. Thus, you can be proud of the fact that the taxes paid by you go towards nation-building.
Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached at LinkedIn.