Are you a salaried employee, or someone who owns a business or engaged in any profession where your income exceeds Rs. 2.5 lakh in a fiscal year? If so, you have to pay your taxes and file your income tax returns. If you opt for the new tax regime, the threshold is Rs. 3 lakh in a year. Paying taxes is not just another responsibility of being an Indian citizen, but provides many benefits. To be sure, an income tax return is a document that taxpayers use to declare their income specifics along with the due tax on that income, along with exemptions and deductions.
Filing IT returns offers certain benefits for regular taxpayers. So, if you are curious to know about the benefits of filing an income tax return or ITR, keep reading. In this blog post, we will discuss the benefits of ITR in detail.
Benefits of ITR
As mentioned, filing ITR or income tax return has multiple benefits for regular taxpayers. We will discuss some essential benefits of filing ITR.
1. Easy loan approval
The first and foremost benefit of filing an income tax return is easy loan approval. Banks and financial institutions ask for various documents while processing a loan request. The loan can be for anything from personal, business, home, or vehicle advances. However, before sanctioning the loan, lending firms must ensure that the borrower has the wherewithal to repay the loan which they determine by checking records of income. Income tax return acts as proof of your earnings over the years. Therefore, filing ITR regularly will help you avail a loan easily.
2. Income proof
One of the popular benefits of filing an income tax return is proof of income which you may require for a number of reasons. The document of income tax return is the declaration of your income specifics along with due or paid tax on it, as well as exemptions or deductions claimed. As a result, the documents of your tax returns can serve as proof of your income. Apart from that, like an Aadhaar card, PAN Card or passport, ITR documents can also serve as proof of address.
3. Quick visa processing
Quick visa processing is one of the top benefits of ITR filing. When it comes to tackling the tedious process of visa processing, many turn to consultant services to get the work done. However, the embassy or consulate might ask you for several mandatory documents. The record of income tax returns for the past few years can always be included to back up your salary credentials and vouch for your ability to travel and pay for your expenses in a foreign country. So, filing ITR regularly also facilitates faster processing of your visa.
4. Claim tax refund
Benefits of ITR also include the right to claim tax refunds. Usually, tax can be deducted from your salaried income, consultancy income, rental income, or fixed deposits. In certain cases, tax is deducted more than the total income or there are no tax liabilities for the fiscal year concerned. In such cases, you have the advantage of filing an income tax return to claim your tax refund. Remember, when you pay your taxes regularly, you have the right to claim your tax refund when extra tax is deducted from your account or you do not have any tax liabilities for the year.
5. Compensate for losses
There is always the possibility that one can face a loss in business, stock market investment, rental property-related earnings, or something else. But when you follow an income tax return process, you can lawfully carry forward your losses for subsequent years. This will also help you reduce your tax liabilities based on the amount of loss you have faced. However, you can only benefit from ITR for compensation when you regularly file your taxes. If you skip your income tax liabilities, you won’t be able to leverage this ITR benefit.
6. Presumptive taxation scheme
Under 44AD Income Tax Act, businesses with less than Rs. 2 crore of yearly turnover can opt for the presumptive taxation scheme where they can pay their income based on a presumptive income. However, to avail of this benefit, they must declare that they have an annual turnover or gross income receipt of 8% for non-digital transactions and 6% for digital transactions. Also, you must remember that one can only avail of this presumptive income taxation benefit if they follow the regulations and file ITR regularly.
7. Avoid penalties
Another benefit of filing an ITR is the opportunity to avoid penalties. Paying tax for the taxable income is mandatory according to the Income Tax Act. And if you fail to file your taxes within the due date, you will have to pay a fine on the due tax that has not been paid. So, if you do not want to face significant penalties, you must file your taxes regularly.
8. Medical insurance
Lastly, under section 80D of the Income Tax Act, you can also get tax benefits for availing medical insurance. According to this provision, if you pay a premium for medical insurance, you can get up to ₹25,000 deduction on your taxable income. However, this benefit is also subject to you filing your regular tax return. If you are a regular taxpayer and have medical insurance for yourself or your family, you can benefit from the tax exemption on medical insurance.
Conclusion
Regular payment of taxes is mandatory for any individual who has earnings above Rs. 2.5 lakhs in a fiscal year. Also, avoiding tax can lead to significant penalties. On the positive side, paying taxes can have a bunch of benefits for the taxpayers from refund claims, presumptive taxation schemes, medical insurance benefits, income proof, quick loan approval, visa processing, and many others. Above, we have discussed some of the most important benefits of ITR filing regularly.
