The deadline to file the Income Tax Return (ITR) for the financial year 2022-23 (assessment year 2023-24) is July 31, and the tax department has opened its portal for individuals to file their taxes for the current assessment year.
There appears to be a huge misconception among some salaried individuals who don’t have any tax liability. Such salaried individuals think that they don’t have any tax liability and hence they don’t need to file ITR. This assumption of the salaried is wrong.
The existing tax laws make ITR filing mandatory if the gross total income in a fiscal year exceeds the basic exemption limit. There are, however, some cases where ITR will have to be filed mandatorily even if income is below the basic exemption limit.
For AY 2023-24, an individual below 60 years of age is required to file ITR if his/her gross total income is more than Rs 2.5 lakh in a fiscal year. The basic exemption limit is the same for these individuals in both old and new tax regimes.
Here're five key benefits of filing ITR
Legal document
The biggest benefit is that it acts as a legal document because it is recorded with the government and acts as legal proof in two ways:
A) Identity Proof
The ITR you fill can be used as identity proof in several cases such as while applying for an Aadhaar card, or any other government document. The government accepts it as proof of address as well.
B) Income Proof
The ITR form contains a detailed list of all your incomes and expenses. The tax return, therefore, can be used as income proof as some transactions such as the purchase of property do require you to show proof of income.
Claim Deductions
To cut the burden on taxpayers and to encourage more people to pay their taxes, the government allows certain deductions. These deductions and exemptions can be availed in some investments and hence help in lowering the tax an individual ultimately pays.
Further, despite your income being below the taxable limit, your employer has cut TDS (tax deducted at source). Or you made some money via freelance work and the company deducted TDS at 10 percent. But since your income is lower than the taxable limit, you can claim a refund.
Applying for Loans
Tax experts say the biggest advantage is that it helps when you apply for a loan in future. For any home loan, car loan, etc, most lenders seek proof of tax returns of the previous three years. This is done to assess an individual’s past and current financial position and whether he/she will be able to repay the loan or not.
Planning to Go Abroad
If you do not file your ITR, then it can put brakes on your plans to go abroad. ITR form is one item on the list of documents that are needed by the countries that you want to visit. This is because a history of filing ITR helps your case and improves your chances of getting visa approval.
Tax Refund
A reason why you have to compulsorily file ITRs is to claim tax refund or set off losses. If you have suffered losses, for instance, from stock market transactions and you want to carry it forward to the next year, you must file ITR, even if your annual income is below the taxable limit.
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