Why to File Income Tax Return

What is Income Tax?

Income tax is a direct tax. This means the burden of this tax cannot be shifted to others. Any one, individual, HUF, company, firm or any other artificial person incorporated under any law, who has income in India or a is resident in India, deriving income from outside India, needs to pay income tax. Also, non-residents deriving income from India needs to pay income tax.

Now the definition of a resident and a person is a vast definition and has some litigation. For this you need a professional guidance to Tax Planning.

Benefits of Paying Income Tax and Filing Income Tax Return

     1.)    Contribution Towards Nation Building: By paying income tax one can contribute towards the nation building. All the roads, expressways, dams etc. we see are made from the taxes collected by us. At the end, it is us who use these facilities and infrastructures.

 

     2.)    Helps in Obtaining Loan: Banks or other financial institutions will grant loan to those who have the capability to pay it. Income tax return is a proof of your income, thus giving an assurance to the lenders about the correctness of your income. If you have shown good income in your return and paid taxes then it is certain that you will get the loan with minimum hurdles.

     3.)    To Claim Refund of Taxes: Most of us might be aware of the concept of tax deducted at source. It might happen with most of us that income gets credited in our bank account but a certain percentage is deducted in the name of taxes. Now, at the end of the year it might be possible that you are not liable to pay any income tax. But a portion of your income is deducted during the year. The only way you can get that money back is by filing the income tax return and claiming refund of the deducted money.

     4.)    Helps in Visa Processing: If you are planning a visit abroad then the foreign consulates will ask you for ITR. It is immaterial whether you are planning a visit for leisure or business. Producing ITR before them gives them assurance that you have a source of Income in India, and will return to India.

 

     5.)    Higher Life Insurance Cover: These days if a person goes to an insurance company to buy a life insurance then the insurer will ask for his/her ITR. In other words, we can say that ITR is a primary document to get a life insurance. Higher the salary or income of the individual as per the ITR, higher will be the life cover he will enjoy.

     6.)    Tenders: A businessman who responds and supplies goods as per the tender will notice that the companies, specially PSUs, put a turnover or income condition as eligibility criteria. If a business entity fails that eligibility criteria then that entity automatically gets rejected. Thus, it becomes more important for the business entity to file their income tax return.

     7.)    Set- Off and Carry Forward of Losses: there may be cases when you might have losses from owning a house property, capital losses or losses from business. If you will file the ITR in time then you can carry forward and set off these losses in next assessment year or further assessment years.   

      This would mean that if you have profits in any future years then the losses of earlier years can be set off. 

      Now you have some reasons to file income tax return. So next time if you think that you need not pay tax thus are not required to file income tax return, then do keep this points in mind. For the updated business and financial news visit at Planify.