As the Income Tax Return (ITR) filing season starts, many taxpayers will focus on filing their returns simply to comply with tax laws and avoid penalties. However, an ITR is much more than just a tax document. It serves as an important financial record that can prove useful in several situations throughout your life, whether you are a salaried employee, a freelancer, a business owner or a retiree.
Why filing ITR is important for taxpayers
ITR is a document that officially states your timely tax payments. An ITR filed on time also showcases your creditworthiness. This makes the banker confident that you can pay regular equated monthly instalments (EMIs) of your loan, thus improving your chances of getting a loan.
5 benefits of filing ITR other than paying tax
Here are the five key advantages of filing your ITR that go beyond merely meeting your tax obligations.
ITR serves as an important document for loan approvals
It is very necessary for lenders to know if you are capable of repaying a loan. Along with other documents, lenders also ask for ITR documents to know your exact financial status and loan repaying capabilities.
Chartered accountant Abhishek Soni, CEO & co-founder, Tax2win, says, “Banks and financial institutions often ask for ITRs when you apply for a home loan, personal loan or a business loan. Your ITR helps them assess your income and repayment capacity.”
ITR helps you claim refunds
Claiming tax refunds is another major advantage of filing an income tax return. If you paid more income tax than you actually owed, you can file tax returns to get your refund.
Soni says, “If excess tax has been deducted from your income through TDS, filing an ITR is necessary to claim a refund. Without filing a return, you cannot get the excess tax back.”
ITR acts as proof of income
You can use your ITR as a proof of income because it contains comprehensive information about your yearly income and the taxes you have paid.
“An ITR is an official record of your income. It can be useful for self-employed individuals, freelancers and business owners who may not have salary slips to prove their earnings,” says Soni.
Filing ITR helps carry forward losses to save tax
Soni explains, “If you have incurred losses from shares, mutual funds, property or business activities, filing your ITR on time allows you to carry these losses forward and adjust them against future gains, which can help reduce your tax liability later.”
Filing ITR can help you get a visa
Income and tax statuses of a visa applicant are crucial while applying for a visa at international embassies, consulates or high commissions. Soni says, “Many countries ask applicants to submit ITRs as part of the visa process. A filed return helps show that you have a regular source of income and a stable financial record.”
