Benefits of Filing Income Tax Return on Time and its Importance

Are you in a confusing state and not able to make up your mind, whether to file ITR, Or did you hear elsewhere that if your income is less than the basic exemption amount, you should forego submitting your Income Tax Return? Before you decide not to submit your ITR, read on to learn about the advantages of filing an Income Tax Return even if you are not compelled to do so. You’ll be glad you did it afterwards. Let us discuss some Benefits of Filing Income Tax Return on Time.

Before we get to the subject at hand, we should first understand what Income Tax Returns (ITR) is.

ITR is a sort of form in which individuals enter information about their income together with taxes to the government of India.

Benefits of Filing Income Tax Return on Time- Income Tax Returns

ITR is a sort of form that provides information about an individual’s income and taxes that must be paid throughout the fiscal year (Starting from April 1 to March 31st next year).

Revenue can take several forms, depending on the business, job description, and other sources of income. Income may be classified into two types:

• Income from a salary; and 
• Income from other sources.
• Profit from a business enterprise.
• Rent or income from residential property.
• Income derived from capital gains.
• Income from other sources, such as dividends, royalties, interest on deposits, and so on.

Every individual is required to file a separate ITR for each form of income as stipulated by the Income Tax Department. According to the Income Tax Department, there are seven types of ITR Forms that must be completed based on the nature and quantity of the taxpayer’s annual income.

Benefits of Filing Income Tax Return on Time- ITR Forms and its Types

According to the Income Tax Department, there are seven different sorts of ITR Forms. They are as follows:

• Form ITR – 1: Individuals may file this form if their total income is up to 50 lakhs in salary plus one house property, excluding lotteries and agricultural income up to 5000 rupees.
•  Form ITR – 2: Individuals and HUFs who are ineligible to file ITR 1 but have income and profits from a profession or company fill out this form
• Form ITR – 3: Every individual who earns money from a company or profession fill out this form.
• Form ITR – 4: This form is required for any person/individual, HUF, or firm who is a resident of India and has an income of up to Rs. 50 lakh from any profession or business as defined in Section 44AD, 44ADA, or 44AE.
• Form ITR – 5: The ITR—5 form is filled out by the following entities:
  • Firms 
  •  Body of Individuals 
  • Co-Operative Societies 
  •  Limited Liability Partnerships (LLPs) 
  • Association of Persons 
  • Local Authorities 
  • Artificial Judicial Persons 
  • Estate of Insolvent 
  • Estate of Deceased 
  • Investment Fund and 
  • Business Trusts
•  Form ITR – 6: The businesses fill this type of form electronically, with the exception of those seeking exemption under Section 11, which is revenue from religious or charitable property.
• Form ITR – 7: Companies can complete this form in accordance with the regulations of the Income Tax Act. The following are the requirement of prevalent provisions to fill out the ITR – 7 form:
  • Section 139 applies to those who possess property for charitable or religious purposes (4A).
  •  Political organisations (Section 139(4B))
  • Section 139(4C): Medical institutions, news organisations, educational institutions, and scientific research organisations, as well as institutions or associations included in sections 10(23A), 10(23B), and 10(23C) (23B).
  • Section 139(4D) exempts colleges and universities, as well as any other institution, from reporting revenue and losses in compliance with the Act’s provisions.

Benefits of filing ITR on Time

• It Avoids the Penalty: There is a penalty for filing an ITR late! According to Income Tax laws in India, failing to file an ITR by the due date specified by the Income Tax Department may result in a penalty of up to Rs 10,000.

• Carry your losses forward: Individual taxpayers must file their Income Tax Returns on time in order to claim particular losses, such as losses from capital gains, losses from a business or profession, and so on. This means you can deduct certain losses from relevant income, thus lowering your future income tax burden. This is not possible unless tax payer files a tax return.

• Interest Saving: Failure to file an ITR on time may result in interest being levied on the tax payable. However, if you file your ITR on time, you can avoid paying interest on the overdue tax under Sections 234A and 234B. There is no penalty relief for late ITR submission.

• Simple Loan Approval: Filing the ITR will help people when they apply for a car loan, a mortgage loan, and so forth. Further, for evidence of income, all financial institutions may seek a copy of your tax returns. Further, this document needs to submit in order for the approval of the loan.

• Request a Tax Refund: To get a tax refund, most individual taxpayers with passive income, such as term deposit interest or dividend income, must file a tax return. Further, even for salaried taxpayers who had excessive taxes withheld, documents must be submitted in order to get a refund of the excess taxes.

ITR’s Importance

Filing ITR demonstrates Indian residents’ feeling of duty. Only with the aid of ITR does the government learn about the yearly accounts of its citizens and their transactions, which finally assists in improving the country’s economic aspect and formulating advanced action plans for the benefit of the country.

Here are some of the reasons why you should file Income Tax Returns:

• Filing tax returns indicates accountability as well as it is quite crucial in various situations.
• Further, you will need these data if you apply for a loan or a credit card.
• ITR records are a crucial document to have if you wish to file a claim for compensation for earlier losses.
• Moreover, it will also be useful and advantageous in the event of updated results.

Endnote

If you thought submitting Income Tax Returns was a time-consuming chore, you may rest assured that it is not. The only thing you need to remember is which ITR to submit and which returns will do the work for you.

For more information about this topic kindly connect to our experts.