If their income is below the taxable threshold, most millennials believe they do not have to file an ITR (Income Tax Return). Sadly, that isn’t true. Making money and starting to work requires filing an income tax return.
Besides being a good corporate citizen, income tax returns show an individual’s earnings and cumulative tax debt. Due to this, even if one’s taxable income is below the basic exemption threshold, filing a tax return is a good idea.
All investment deductions (e.g., Section 80C for employee contributions to a Provident Fund) and the exemption for long-term capital gains must be claimed on an income tax return. Alternatively, if net income before deducting the above qualifying assets and exempting eligible capital gains exceeds the above basic exemption limits, a tax return must be filed.
The following benefits are available to you because of income taxes:
A receipt for ITR is essential:
Unlike Form 16, ITR receipts contain more information about your income, taxes, and other sources of revenue.
Use this as address proof:
You can use the receipt as evidence of your residency if it is sent to your registered address.
Facilitates the loan documentation process for banks:
It is easier for banks to determine your source of income when you are a conscientious income tax filer, such as when you apply for a home loan or an auto loan.
Losses in the next financial year:
In the current fiscal year, you cannot recoup expenses/losses from the previous year. Unadjusted losses, except for certain exceptions, cannot be carried forward to future years if tax returns are not filed by the due date. A tax return is therefore required to carry forward the losses.
Extra interest:
Failure to file your ITR on time will incur additional interest of 1% per month. For example, banks will deduct tax from fixed deposit interest. No matter your taxable income, a tax return will be needed to claim a refund of tax deducted by the bank on interest income.
Processing credit cards:
Your credit card application may be rejected by banks if your ITR has not been filed.
A hassle-free visa application process:
Tax returns must qualify for a visa as visa authorities request copies of previous tax returns. It is particularly important for embassies in the United States, the United Kingdom, and Canada to check on your tax compliance while processing your foreign visa application.
A higher-coverage insurance policy can be purchased as follows:
A tax evader may not be issued policies with greater coverage by an insurance provider.
The following are some ways in which it simplifies life for freelancers and self-employed individuals:
Freelancers and self-employed individuals are not eligible for Form16. Their ITR is only supported by this paper. In the absence of this, they will run into financing and transactional difficulties.
Also Read :
- How do i claim a deduction under section 80c to 80u of income tax
- A step by step guide to e filing your income tax return online