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September 29, 2020

10 Reasons why Women Entrepreneurs should file ITR

by shivam jaiswal in Income Tax

10 Reasons why Women Entrepreneurs should file ITR

Globally, women have been on a remarkable journey of entrepreneurship and leading with positive belief and confidence. They have overcome criticism and breaking the trends to prove themselves beyond the stereotypes. This effect was also seen to impact the Indian corporate world.

From being homemakers to successful entrepreneurs, women in India have come a long way. As women all over are independently earning income, various income tax provisions and benefits also become applicable to them. While no special benefits for women are available vis a vis men, they should do their own tax planning.

For income tax returns purposes as well as to build up their retirement corpus, a woman must take care of her risk appetite, return expectation and liquidity aspects and then invest money in tax saving instruments. This ITR filing and investments exercise will go a long way in helping her in achieving financial goals.

What do you mean by an ITR?

An income tax return (ITR) is basically a document that is filed as per the provisions of the Income Tax Act, reporting one’s income, profits and losses and other deductions as well as details about tax refund or tax liability. The deadline for filing Income Tax Return for corporate and other assessees who are to get their accounts audited under Income Tax Act 1961 or under any other law for the time being in force is 30th September and for others, it is 31st July every year as have been prescribed under the Act.

However, with the ongoing COVID -19 pandemic a lot of income tax due dates were extended by The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 read with Notification No. 35 /2020, dated 24-06-2020. In view of the same, the due date of furnishing ITR for FY 2018-19 has been extended till 31st July, 2020 and for FY 2019-20 till 30th November, 2020.

Individuals or HUF who are less than 60 years of age and has gross total income more than Rs 2.5 lakh i.e. above basic exemption limit has to mandatorily file income tax returns, according to the Income Tax Act.  For senior citizens, the basic exemption limit is Rs 3 lakh, and for those who are more than 80 years old, the basic exemption limit is Rs 5 lakhs

Taking charge of one’s financial lives is something that every person must do and working women are no exception. Tax filing is also one such job that they should do on their own without being dependent on their spouse or parents. Nowadays there are many simple, easy, quick, online ways in which you may file your taxes and this is a boon for working women. Here are 10 reasons why women should file their ITRs:

1) Easy loans approvals

  • While applying for loans, the eligibility and quantum of loan would depend on one’s income.
  • The first thing any lender of a loan would check while the loan sanctioning and disbursement process is proper documentation
  • Majority of banks and NBFC’s ask for a copy of ITR’s for at least 3 consecutive years to sanction a loan. Lenders consider ITR as the most authentic document supporting an individual’s income.
  • Hence, if you file your ITR from an early stage, availing any loan in the future would become easier.

2) Buying a high insurance policy

  • With the increase in lifestyle-related diseases, it has become extremely important for everyone to have health cover irrespective of age or income.
  • It is always better to enter a health insurance policy as early as possible to get various advantages.
  • Insurance companies ask for ITR receipts if you opt to buy a term policy with sum insured of Rs 50 lakh or more.
  • This helps them to determine whether the insured will be able to pay their premiums at the pre-determined frequency.
  • If insurance companies have reasons (non-compliance) to believe that you are a tax-evader, they will not give you policies with more cover
  • So, if students want to buy an insurance policy once they start earning, it would be advisable that they start filing their ITR so it serves as an income proof for them.

3) Provides financial support to the family

  • Tax saving is important for women because apart from their individual capacity, if they maintain a good tax status, then it can support their family to leverage on their collective credit strength.
  • For instance, if a person wanted to buy a home on loan, but the income eligibility was not as per the bank’s requirement, then the wife could contribute in as a co-borrower to strengthen the loan eligibility, provided she filed an ITR that showed a high disposable income.

4) Helps in tax saving

Tax saving can help women use the saved amount in investing and building a higher corpus for retirement, and in accomplishing financial goal more efficiently. The income tax returns allow a taxpayer to claim deduction or exemption for investments, payments and expenditure incurred during the period. Women can claim the following deductions if they file their ITR’s:

  • Deductions for tax-saving investments under section 80C, 80CCC and 80CCD.
  • Deduction for payments such as medical insurance and expenses under section 80D, 80DD and 80DDB.
  • Interest on housing and other eligible loans under section 80E, 80EE, 80EEA and 80EEB.
  • Donations under section 80G, 80GG, 80GGA and 80GGC.

5) Helps in Record Keeping and avoids unrelated paperwork

  • An ITR contains all details of all sources of income, personal details, tax payments, investments, purchase / sale of property, expenses, loans or deposits, outstanding demands/refunds, pending assessment of the taxpayer.
  • All the details required about your business will be consolidated in one document. A woman, particularly one with children, will routinely be juggling a job and running a household – in itself a frantic mix of kids’ lunch boxes, housework, and organising appointments and social arrangements.
  • Therefore, having all the business-related information in one place will help her multi task better.
  • Filing ITR online also reduces unnecessary paperwork, thus making management of important documents easy.
  • Moreover, the Income Tax Department communicates with you online and you also get all the required documents as soft copies, which can be archived on your computer, online storage, or email where they are safe and accessible.

6) Helps in claiming refund

  • In certain cases where tax has been deducted from the income of a person wherein his/her total income is less than the minimum exemption limit, such person can claim a refund on the tax deducted by filing ITR.
  • For instance, if you have invested in a bank FD and you forgot to submit Form 15H/G, your bank will deduct TDS if interest from the FD is more than Rs 10,000 for the year despite the fact that your income for the year is below the exempted limit. In such a case, you can claim refund by filing ITR. 
  • There could be a possibility that there has been tax deducted at source (TDS) on the name of a student who makes an income or investment in India.
  • If TDS has been cut or If you have a refund due from the Income Tax Department, the person will have to file the ITR to claim refund of the same 

7) Income Proof

  • ITR serves as income proof.
  • It will help your insurer to understand the compensation required to be paid in case of accidental death or disability.
  • Credit card sanctions, loan sanctions etc always require an income proof for the pre sanction or disbursement process.
  • Lenders consider ITR as the most authentic document supporting an individual’s income.
  • Salaried persons get Form 16 as their income proof but businessmen, consultants and partners of firms do not get Form 16.
  • Hence, ITR receipts become an even more important document for them, as for all sorts of financial transactions, ITR receipts will be the only proof of income and tax payment for the self-employed.
  • Freelancer or self-employed people do not have Form16. ITR is the document they have to show as income proof. Without this, they can face funding issues and transactional problems

8) Credit Card Processing

  • Somekey factors that determine credit card eligibility are age, monthly income, credit score, employment status, ITR etc.
  • Banks can reject your credit card application if you haven’t filed your ITR.
  • Hence, if you file your ITR on time regularly, your credit card application processing in the future would become simpler.

9) Set off and Carry forward of losses

  • Set off of losses means adjusting the losses against the profit or income of that particular year. After making the appropriate and permissible set offs, there could still be unadjusted losses.
  • These unadjusted losses can be carried forward to future years for adjustments against income of these years.
  • However, unless you file your ITR, you cannot recompense your expenses/losses in the previous financial year to the current.
  • If tax returns are not filed on time, unadjusted losses (with some exceptions) cannot be carried forward to future years.
  • Hence, to ensure that the losses are carried forward for future adjustment, a tax return would be required to be filed

10) Cultivates habit of savings and investments

  • Not a lot of people are aware of all the tax savings investment options available under income tax provisions.
  • The most popular tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act. Section 80C includes various investments and expenses you can claim deductions on – up to the limit of Rs. 1.5 lakh in a financial year.
  • Apart from the 80C deductions, there are various deductions under Section 80 you can use to save on income tax. 
  • When one sits down to file their ITR they become aware of all the tax saving investment options.
  • This cultivates the habit of savings and investments among taxpayers. Saving money is important because it helps protect you in the event of a financial emergency.
  • Additionally, saving money can help women pay for large purchases, avoid debt, reduce your financial stress, leave a financial legacy, and provide you with a greater sense of financial freedom.
  • Investing ensures present and future long-term financial security. The money generated from investments can provide financial security and income.

The option of taking professional help to file your taxes can prove to be convenient since you may save on the time to calculate and verify your tax liability and other things like deductions, rebates etc. Depending on the income level you may either choose to file on your own or take professional help. If you are in a low-income bracket with less assets and investments, then your tax filing will be easy and you can even do it very quickly. In case you belong to the high-income brackets with multiple assets, investments and income avenues then taking professional help is recommended to have peace of mind that you have paid the correct amount of taxes.

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