Why Filing ITR Is Essential And Who Must File It

An Income Tax Return (ITR) is a prescribed form mandated for submission to the Income Tax Department of India by taxpayers. This document serves as a comprehensive disclosure of an individual's income earned during a specific financial year, along with the associated tax liability.

The financial year in India commences on April 1st and concludes on March 31st of the subsequent year. Consequently, the ITR pertains to income generated within this defined period.

Considering the advantages of filing your income tax return, even if it's not mandatory, can be beneficial. It helps in claiming tax refunds, carrying forward losses, and serves as a proof of income. These benefits can outweigh the effort, ensuring financial and legal advantages in the long run.

Discover who is eligible to file ITR-1 for Assessment Year 2024-25 by clicking here.

Why Is Filing The Income Tax Return Necessary?

Filing an income tax return offers several important benefits:

• Easy Loan Approval: Banks and financiers require proof of consistent income for loan applications, making ITRs a mandatory document for approval.
• Claim Tax Refund: Filing an ITR allows you to claim refunds on excess tax deducted from sources like fixed deposits, rental income, and salary.
• Income & Address Proof: ITR serves as proof of income and address, useful for obtaining documents like Aadhar cards, licenses, and passports.
• Quick Visa Processing: Embassies often require ITR copies for visa applications to demonstrate financial stability and civic responsibility.
• Carry Forward Losses: Filing on time allows you to carry forward losses from investments, business, or rental income to offset future tax liabilities.
• Obtaining Government Tenders: Contractors need to file accurate and timely ITRs to qualify for government tenders, as scrutiny committees check returns from the past few years.
• Buying Term Insurance: Insurance providers require ITRs as proof of income to determine coverage amounts.
• Funding for Startup Ventures: Investors may review ITRs to assess a business's financial health and profitability before providing funding.

Other Benefits:

• Avoid Penalty: Non-compliance with filing requirements can lead to penalties up to Rs. 5,000, though smaller penalties apply for incomes under Rs. 5,00,000.
• Protection against Black Money: Disclosing foreign assets in ITRs helps combat black money and regulate money outflows.
• Financial Transparency: ITRs provide a clear picture of your financial situation, aiding in various legal and financial processes.