Financial Bytes: Five reasons why filing income tax is beneficial
Filing income tax returns (ITRs) on time every year is very important and individuals having an annual income of Rs. 2.5 lakh or more have to file ITRs mandatorily. Being tax-compliant is beneficial as there are many benefits of filing ITRs on time even for individuals whose income is below the exemption limit. Here are five benefits of filing ITRs to know about.
File ITR on time to avoid penalty, interest on unpaid-tax
The Income Tax Department levies a maximum penalty of Rs. 10,000 under Section 234F of the I-T Act if an individual files ITR after the due date. One can avoid such unnecessary penalties by filing ITR before the last date. Also, filing income tax returns on time can help individuals avoid paying an interest of 1% per month on the unpaid amount of tax.
#2: ITR receipts act as detailed proof of income
Taxpayers must also understand that ITR receipts are important and these should be preserved carefully. ITR receipts act as detailed proof of their income and tax payments. These receipts also contain more details about their total income and sources of income than Form 16.
ITR receipts help in hassle-free processing of loans, credit cards
Filing ITRs on time is beneficial also because ITR receipts are useful in hassle-free processing of bank loans. Almost all banks and NBFCs require the applicant's ITR receipts of the last three years for processing high-value loans. These receipts are also useful for smooth processing of credit card applications. Banks and NBFCs generally consider ITR receipts as authentic proof of an individual's income.
For enabling easy processing of visa applications
Apart from helping in hassle-free processing of bank loans and credit card applications, ITR receipts are also useful in easy processing of visa applications of individuals. Embassies of developed countries or visa authorities are particular about individuals' tax-compliance and may ask for copies of ITR receipts of previous years to process one's visa application. This will also help them assess the applicant's income.
#5: ITR is extremely beneficial for self-employed individuals, freelancers
ITR receipts can be extremely beneficial for self-employed individuals, freelancers, and independent professionals as they do not get Form 16 or salary certificates from the employer. Therefore, ITR receipts are important for them as they act as proof of total income and payment of taxes.
