Benefits of filing Income Tax Return

Taxation is frequently viewed as a burden by taxpayers. Paying a portion of your hard-earned money to the government regularly may seem inconvenient. In actuality, the income tax you pay to the government supports you and our country’s overall prosperity. Before we discuss the benefits of paying income tax and filing ITR, let us first define income tax.

Indian tax system

The government’s primary source of revenue is the income tax. Income tax is a type of direct tax that you must pay based on your income. Each taxpayer is assigned a tax slab based on their age and total taxable income for the fiscal year. The taxpayer’s income tax rate is determined by their tax bracket.

Additional direct taxes include corporate tax, capital gains tax, and others with income tax. Similarly, indirect taxes like the Goods and Services Tax (GST) and various other taxes, including property tax, entertainment tax, professional tax, registration fees, and stamp duty. Let’s take a look at what are the advantages of paying a tax:

Loan approvals

When you apply for a loan, particularly a home loan, a vehicle loan, or any type of loan, significant banks may seek a copy of your tax returns. This can be an ITR from the previous two to three years. Having an ITR might also assist you in obtaining a larger loan amount or have your loan application reassessed if it was initially denied.

This is because banks rely on their determination of your ability to repay the loan on your income. Income tax returns provide a detailed accounting of one’s earnings and the taxes paid on them in prior years.

Visa applications

During the visa interview, many foreign consulates demand you present your previous years’ income tax returns. While the most recent one may suffice for some, others will want up to 2-3 years’ worth of returns. This is mandatory in the United Kingdom, the United States, Europe, and Canada, but not in South East Asian and Middle Eastern countries.

This is because income tax filings demonstrate that you are not attempting to flee the nation to avoid paying taxes. Even if you are traveling abroad for enjoyment or business, it is essential to keep your ITR receipts with you, as they will come in handy in an emergency requiring assistance from a consulate.

Self-employed individuals

Freelancers, consultants, entrepreneurs, and partners in businesses are not qualified to file Form 16. If their yearly income is greater than the basic exemption limit, they may provide ITR receipts as proof of income. This is useful for any financial or business transaction. Additionally, it serves as a confirmation of tax payment.

Advantage of tax refund

Refunds from the IT Department can be obtained only if income tax returns have been filed. Even if your income is below the tax exemption threshold, you may be eligible for returns from various savings vehicles if ITRs are submitted. Fixed deposits are an example of where tax is deducted at the source at a rate of 10%.

Compensation

For self-employed individuals, ITR receipts may be required to file a claim for compensation in the event of a motor vehicle accident resulting in disability or death. This is because, to determine the proper balance, the individual’s income must first be determined.