Importance of Filing Income Tax Returns

As fellow taxpayers of the country, it is important to keep a keen eye on the yearly changes in the taxation norms and also on the income tax slabs that each one of us fall under. It is the with the help of these tax slabs that we are essentially able to determine how much tax we owe to the Indian Government and how much refund we are eligible for.

However, sometimes the question arises as to whether or not one is eligible to pay income tax. This fact is associated with the matter that all incomes below the minimum exemption limit are basically exempted from tax. The peripheral question that arises in this regard is whether or not that individual should file an income tax return.

Well, more than or less than the taxable limit, it is always considered a prudent action to file one’s income tax return on time, with accuracy! Therefore, the below mentioned points are certain to ensure that you are indeed filing your tax returns, whether or not you fall under any of the slabs.

Before that, let us get acquainted with a term that is very common in a scenario such as this one. The term is known as ‘’NIL-ITR’’. You file a NIL-ITR when your total salary is less than the exemption limit, yet you want to go ahead and file an income tax return. In a case like this, since you do not owe any taxes to the Government, your liability will be NIL, and hence your return will be NIL-ITR.

You must file your income tax returns in any given outline for the following reasons

  1. Your capital losses and gains will get an adjustment: If equity or share market investment has been your topmost investing agenda, then timely filing of income tax return will prove to be extremely rewarding for you. In case you total annual salary is less than the basic exemption limit, then filing an ITR might not be a requisite, however, your capital losses can be adjusted against your capital gains. Additionally, upon doing so, you can also ensure that your losses (if any) are carried forward for the next eight consecutive years, depending on whether or not you have filed your return for that particular financial year.
  2. Your tax refunds will be easy to claim if you file income tax returns: Once deduction of a certain kind of tax takes place, one can only claim a tax refund if one is filing an income tax return, for that particular fiscal year. Therefore, if you are an NRI who is paying TDS on his rental amount, or if TDS is getting deducted on your the fixed deposits of your bank accounts, it is vital that you file your returns in order to be eligible for a refund. You will be required to claim your refund online on the portal once that year’s ITR filing is done.
  3. Loans will come to you easily if you have been filing your tax returns accurately: Apart from being just another important financial document, your income tax return also acts as proof for your income as it indicates all the earnings that you have made in a single year. As a result, NBFCs and other financial institutions actively seek for this document once you make a request for a particular loan amount. Return filing despite having a lower taxable income will in fact prove to be beneficial in this regard.
  4. You will be able to claim your tax deductions very easily: If you are earning more than Rs.3 lakh (which is the basic exemption limit), and are also seeking for multiple exemptions in order to being your income down to that level, you will undoubtedly be required to file your ITR for that particular fiscal year. Even if you do not have any tax liability, filing a tax return is still a mandate if you are seeking for any deductions for the future.
  5. Owning assets (foreign assets) will be much easier: The law mandates any individual to accurately file their income tax returns if they have the possession of any foreign asset. This provision also includes any immovable property that you might possess such as a bank account. Failure to comply with this rule might attract consequences such as a heavy penalty and it is also considered a serious economic offence.

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