Most employees think that if their salaries fall below the taxable bracket they shouldn’t be filing ITR (Income Tax Returns). However, that is not true. One needs to file income tax return the time they enter a job and start earning. Experts say that apart from being a good corporate citizen, an income tax return also serves as a proof of income earned by an individual and total taxes paid. So it is always advisable to file one’s tax return even when the taxable income falls below the basic exemption threshold.
1.) Having an ITR receipt is important because it is more detailed than Form 16, entailing your income and taxation along with revenue from other sources.
2.) ITR receipt is sent to your registered address, which can serve as residential proof.
3.) Being a diligent income tax filer makes it easier for banks to assess your source of income when you apply for loans like an auto loan, home loan etc.
4.) Unless you file the ITR, you cannot recompense your expenses/losses in the previous financial year to the current. As per the income-tax provisions, if tax returns are not filed on time, unadjusted losses (with some exceptions) cannot be carried forward to future years. Hence, to ensure that the losses are carried forward for future adjustment, a tax return would be required to be filed.
5.) If you don’t file ITR, the belated return could lead to extra interest at 1% per month for the remaining tax payable by you. For example, banks would deduct tax from interest on fixed deposits exceeding a certain threshold. To claim a refund of tax deducted by the bank (if any) on the interest income, a tax return would be required to be filed regardless of the taxable income.
6.) From FY 2017-18 Rs 10,000 would be levied for non-filing of ITR. This black mark will remain for years to come.
7.) Banks can reject your credit card application if you haven’t filed your ITR.
8.) At times visa authorities ask for copies of past tax returns, hence to apply for a visa a tax return would be required to be filed. Embassies, especially those of US, UK, Canada etc. when processing your foreign visa application, are particular about your tax-compliance.
9.) To buy an insurance policy with a higher cover| If insurance companies have reasons (non-compliance) to believe that you are a tax-evader, they will not give you policies with more cover.
10.) Freelancer or self-employed people don’t have Form16. This is the only document they have to show that he has filed the ITR. Without this, they can face funding issues and transactional problems.
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