6 Must-Know Benefits of Filing ITR (2022)
- Sep 16, 2022
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6 Must-Know Benefits of Filing ITR
1. Approval of Loans Coming Easy
When an individual applies for a loan, financial institutions require them to provide their previous year’s or years’ worth of ITR receipts. ITR receipts serve as supporting documents of the borrower’s income and provide financial institutions with assurance regarding the borrower’s stable income. ITR Filing can assist you in obtaining easier loan approvals for various types of loans, such as auto loans, personal loans, etc.
2. Proof of address and income
Proof of income and address can be found in the ITR filings. Filing an Individual Tax Return (ITR) is convenient for taxpayers who are self-employed and do not have any proof of income to produce, in contrast to salaried taxpayers who have withholding tax certificates.
3. Making a Claim for a Tax Refund
One of the most significant advantages of submitting an ITR is the opportunity to receive a tax refund. You may be eligible for a tax refund if you have invested in tax-saving instruments but have still paid excessive tax. People with high salaries or self-employed who fall into this income bracket benefit tremendously from this development.
4. Swift processing of VISA applications
The processing of VISA applications requires receipts for ITR payments. Embassies of countries such as the United States of America routinely request receipts to learn more about the tax compliance of individual citizens. ITR is the proof of the applicant’s income, and the embassy will check income details as well as the capability of the applicant to determine whether or not they can pay for their travel expenses.
5. Compensation for Losses
Any company or business can incur losses at any point in time during a particular Financial Year. Companies will file ITR forms to make up for their losses. In the Income Tax Act of 1961, Sections 70 and 71 explain the provisions for carrying forward losses from one year to subsequent years. These provisions allow for losses to be carried forward indefinitely.
This means you can carry over a loss from one year to the following assessment year and then deduct that loss from any future income you may receive (subject to certain conditions).
6. Avoid Penalties & Punishments
As mentioned, submitting an ITR may be a requirement for certain taxpayers. Taxpayers who submit their returns promptly avoid incurring significant fines and penalties. If one’s annual income is less than Rs. 5 lakhs, the Income Tax Department imposes a fine of Rs.1000, otherwise Rs.10000.
The Repercussions Of Failing To Submit An Income Tax Return
Now that we have discussed the benefits of filing ITR, let’s move on to the next topic and learn about the repercussions that an individual may experience if they were required to file their ITR but didn’t – namely, a fine.
– Whoever has an income within the taxable threshold will receive a notice from the Internal Revenue Service (IRS).
– In situations where the ITR was either not filed or was filed late due to a valid reason, the authorized body will accept a detailed letter along with supporting documents from the taxpayer and will grant the taxpayer relief from the condonation penalty.
– Every day an individual is late submitting their income return, the Department of Income Tax will assess a fine against that person. If an individual’s annual income exceeds five lakhs of rupees, then the individual is subject to a fine of ten thousand rupees. The fine is one thousand yen if your income is less than this.
– In tax evasion cases, the assessed person faces the possibility of serving a lengthy prison sentence.
A person who chooses to provide an amended return is not subject to any fine or price for doing so. However, following the provisions of Section 140B, he is responsible for paying an additional tax.
When a person files an updated return after the expiration of the due date for filing a belated or revised return but before the completion of a period of 12 months from the end of the relevant assessment year, that person is subject to an additional tax that is equal to 25 % of the total amount of tax and interest that the person owes on the filing of the updated return. This additional tax is required to be paid.
If the updated return is submitted after 12 months have passed since the end of the relevant assessment year. Still, before the completion of the period of 24 months after the end of the relevant assessment year, the additional tax that must be paid is equal to 50% of the total amount of tax and interest that must be paid.
In addition, a fee following Section 234F shall be imposed on such a person if that person has not previously submitted a return of income for the Assessment Year for which he is submitting an amended return.
How does a person go about claiming a refund for an amount that was deposited but not used to pay the tax on their declared income?
Under this plan, there is no opportunity to claim a refund of any excess tax paid. However, the Central Government is required to notify the category of eligible individuals to get a refund of the excess amount paid toward the tax, the surcharge, and the penalty.
Is it required to provide a value report of an unreported income represented in the form of investment in assets along with the declaration that must be made following the scheme?
Along with the declaration, you do not need to submit a valuation report if the undeclared income is in the form of an investment in an asset. This is because the filing of such a report is not required. Nevertheless, the declarant ought to have the valuation report. When electronically filing the declaration on the Department’s website, a facility will be available to upload the supporting documents.