#FinancialBytes: Reasons to file ITR even if income is non-taxable
Many people assume that since their estimated net income for the year doesn't exceed the tax exemption limit, they need not file an income tax return (ITR). However, for a number of good reasons, all earning citizens of India should file yearly ITRs within stipulated deadlines. Here are top 9 benefits of filing ITR even if your income is below the taxable bracket.
ITRs serve as important financial documents
An ITR receipt makes for an important financial document, since it is much more detailed than Form-16 provided by your employer. It lists all your major sources, as well as other sources of income, and taxes paid (even if nil) during the year. Also, since an ITR receipt is sent to your registered residential address, it can also serve as an address proof document.
Helps with bank loans, credit cards, and carrying forward losses
By letting banks assess financial statuses better, ITRs helps in streamlining loan application procedures. Additionally, banks may reject credit card applications to those who haven't filed their ITRs. Also, according to the I-T department's rules, one cannot recompense or carry forward unadjusted losses of the current year to future years without filing an ITR. Hence, ITRs help avoid such problems.
About paying extra interest, and visa applications
When you don't file your ITR on time, the belated return could lead to an extra 1% monthly interest on the remaining tax payable by you. So, file one to avoid this extra charge. Furthermore, it's also important for a hassle-free visa application procedure as visa authorities and certain foreign embassies (like US, UK) often ask for copies of your past ITRs.
Importance of ITR when buying insurance policy, and for freelancers
In cases of insurance policies with a higher cover, insurance companies may want to check whether you're a tax evader, and might not clear your application if they find so. Additionally, ITR receipts are supremely important for freelancers and independent professionals. Such individuals lack a Form-16 (since there's no employer), and ITRs are the only proof of their income and taxation compliance.
