10 BENEFITS OF FILING INCOME TAX RETURNS
- Easy Loan Approval
Filing your ITR can be beneficial when applying for various loans such as vehicle loans (2-wheelers or 4-wheelers) or home loans. Major banks often require a copy of your tax returns as proof of your income statement. This is a mandatory document for loan approval.
2. Claim Tax Refund
There may be instances where tax has been deducted (TDS) from your income, even if your total taxable income is below the basic exemption limit, or you have no tax liability for that year. In such cases, you must file an Income Tax Return to claim a refund of the TDS.
3. Quick Visa Processing
When applying for a visa, most embassies and consultants require copies of your tax returns from the past couple of years. These documents are among the mandatory requirements. Therefore, it is advisable to file your ITR in a timely manner.
4. Carry Forward Your Losses
By filing your return within the original due date, you can carry forward losses to subsequent years. These losses can be offset against the income of future years, thereby reducing your tax liability. Without filing an income tax return, this benefit would not be possible.
5. For Buying Term Insurance
To approve term insurance plans, insurance providers often require applicants to submit their Income Tax Return (ITR) records as proof of their annual income. The coverage amount is determined based on the individual’s earnings, and presenting the ITR helps insurance providers assess a person’s higher income level.
6. Reliable Proof of Address
The Income Tax Return is valid as address verification. Even an Aadhaar Card can be obtained using it. Aadhar Cards, licenses, passports, and other documents like those are all required to have address proofs. Frequently, these documents do not accept common forms of identification like ID cards. Your Income Tax Return can be applied in such cases.
7. Authentic Evidence of Your Earnings
Form 16 is typically given by employers to their employees as proof of income. The ITR Filing form serves as actual income verification for self-employed or independent contractors.It includes a thorough breakdown of a person’s income and expenses for the entire fiscal year.
8. Scholarship Advantages
Various authorities view an ITR as a source of income documentation (both government and private). For instance, you can submit an ITR to claim specific institute and/or university scholarships. The ITR aids in establishing the prospective student’s ability to prove their income, and insurance companies also accept them as acceptable documentation.
9. Losses can be Carried Forward
Section 70 and 71 of The Income-tax Act 1961 contains some provisions for carrying forwarding losses of a particular year to the subsequent year. This means that you can move your loss to the next assessment year.
Here are a few examples:
a. Losses from house property can be carry-forward till the next 8 assessment years and can be set off from income from house property.
b. Loss from business can be carried forward and paid with the future income from the business.
If you do not file an Income tax return, you cannot carry forward or set off your losses.
10. For Purchasing High Coverage Insurance
More people are purchasing life insurance policies for over ₹50 Lakhs. However, insurance companies will not accept it unless you show them your ITR records that show your yearly income.