Advantages of filing ITR even if total income is below exemption limit below 2.5 Lakhs
Income Tax Return (ITR) is a form which a person is supposed to submit to the Income Tax Department of India. It contains information about the person’s income and the taxes to be paid on it during the year.
Income can be of various forms such as :
Income from salary
Profits and gains from business and profession
Income from house property
Income from capital gains
Income from other sources such as dividend, interest on deposits, royalty income, winning on lottery, etc.
The Income Tax Department has prescribed 7 types of ITR forms – ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, ITR-7 and applicability of the form will depend on the nature and amount of income and the type of taxpayer.
It is provide proof of income if you are travelling abroad or have plans to do so soon. The employer certificate will be helpful if someone is salaried, but if they are self-employed, they must present their income information. ITR returns will therefore be useful as documentation of income.
Proof of income for self-employed
When a person works for themselves, they are not required to provide earning proof, such as a Form 16 and an employer’s salary certificate. ITR returns, which are the most practical proof of income, will therefore be helpful.
Carrying capital losses forward
The Income Tax Act allows people who have incurred capital losses to carry those losses forward for eight consecutive years and balance upcoming income and gains.
The Income Tax Department has a rule that states losses for a year cannot be carried over unless the return for that year is filed on time for the due date in maintain track of these losses. Therefore, file the return before the date for declaring the capital loss incurred, even if it is a loss return and you have no income to report.
There are many people who make small incomes, including:
Interest on deposits with a bank or business
Agriculture income, tax-free bonds, etc., are examples of tax-free income.
These people’s total income will usually be below the taxable limit, and that they might feel that they are not required to file any tax returns because they pay no taxes (because TDS is already deducted). However, they will be able to collect legal proof of income by filing the ITR (if they require it).
Claiming Tax Refund
One can also ask for a refund from the income tax department if they have paid their taxes on their income. To be eligible for this tax refund, an ITR must be filed.
The feeling of receiving a tax return is similar to receiving a payroll credit. Many salaried individuals fail to complete their ITR because they believe that Form 16 and the tax on their salary have already been deducted. However, there are also situations where the company has paid more tax on the employee’s behalf without taking into account the actual housing rent, tax-saving investments, or insurances. So, in this case, filing an ITR will result in a refund request to the income tax office.
The ITR for the last two to three years is required documentation for any loan application, including those for a car, a house, etc. ITR is an important document that will assist the lender in determining the borrower’s ability to repay.
Purchasing a high life cover
The insurance company will need proof of income when a customer purchases a greater level of life insurance coverage in order to determine the customer’s coverage amount. Salary receipts or the ITR for the last three consecutive assessment years are required for these bank statements.
The bank statement will also not serve as a reliable proof because sometimes people do not receive their salary receipts or their monthly income is paid by other organisations. Therefore, it is preferable to file the ITR return.
Claim Excess TDS
Tax can be taken from your salary, FD, or any other source even if your income is not taxable. For instance, if your total income is under 2.5 lakhs but you received Rs. 1 lakh from a bank FD, the bank is required to deduct 10% tax from this amount. In this situation, the tax that was deducted by filing an ITR can be repaid. In plain English, a person must submit a tax return in order to claim any TDS that was taken at the source.
Processing of documents
When applying for loans, one’s income, which can be verified by filed ITRs, will determine eligibility and the amount of the loan. “Your year income and the taxes you paid on it are shown in detail on your income tax return. Additionally, these documents are recognised by a number of organisations for faster loan and immigration processing.