Benefits of filing ITR, Even if your Income is below Exemption limit
‘Income tax return’ is a form in which taxpayers declare their income details, deductions, exemptions, and taxes payable on their taxable income.
It is mandatory to file income tax returns of individuals having annual income is in excess of the basic exemption limit of Rs 2,50,000. It is mandatory to file even when there is no tax liability, an income tax return (ITR) must be filed if the total income exceeds the above-mentioned limit.
Filing ITR offers the following benefits:
1 – Evidence of accumulated earnings over the years
A person is earning some small income over the years which is below the taxable limit and over the years they accumulate good amount. Now it may happen after a few years they might get tax scrutiny for some reason. If someone has not filed the ITR over the years, it will be a lengthy and difficult process to explain the sources of income earned over the years. However ITR will be legal proof of income earned in each year.
2 – ITR serves as evidence of income for Self-employed
Being self-employed, it does not provide earning proofs such as salary certificate from the employer i.e form 16. But if you have ITR it works as most convenient proof of income.
3 – VISA processing
Embassies of developed countries like the USA, United Kingdom, Australia and Canada ask for ITR receipts of the past years to process your visa application. This helps them to assess your income and ensure whether you are able to take care of the expenses on your trip or not.
4 – Helpful for those with very small earnings
There are many people who get some small incomes such as
- Interest on Bank/ Company deposits
- Dividends received
- Family pension (amount of pension received by a legal heir)
- Tax-free incomes – Tax free bonds, Agricultural Income, etc.
These people total income might be below the taxable limit and they might feel that they are not supposed to file any tax returns, as they don’t have to pay any tax (because TDS is already deducted). But by filing ITR they will get legal proof of income (in case they need it).
5 – Carry forward of capital losses
If you have incurred capital losses in previous years, the Income Tax Act allows you to carry forward losses for eight consecutive years, and set off it against future gains and income.
Set off the losses will be allowed in case if return has been filed on or before the due date of filing. So, even if it’s a loss return, you do not have any income to show then file your return before the due date to declare the capital loss incurred.
6 – To Claim Tax Refund
You can file for a refund from the income tax department, if you have paid excess tax on your income. In order to get the refund, it is mandatory that you file Income Tax Return.
7 – Easy to get loans
If you apply for any loans such as a home loan, car loan, etc., then ITR for the last 2-3 years is required by banks, as ITR is mandatory documents. ITR will help your lender to assess your credibility and is an important document.
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