Many individuals wish they could ignore the taxman when he comes knocking. The only thing that is worse than income tax is not paying it. Deferring income tax payments can have serious consequences for you. Furthermore, there are some advantages to filing your income tax returns (ITR) on time each year.
WHAT ARE TAX RETURNS ON INCOME?
An ITR is a document that you fill out to report your earnings and tax liability. The form is sent to the Internal Revenue Service.
Every year, Indians are expected to file their ITRs. They must state their income obtained throughout the year, whether as an individual or a business entity, in this section. Salary, dividends, interest, and capital gains are all examples of possible sources of income.
A penalty may be applied if a person fails to file their taxes within the deadline. It may be investigated by the Internal Revenue Service in some situations.
The assessee may be eligible for a tax refund if they paid too much tax in a particular year. This would be subject to the interpretations and calculations of the Internal Revenue Service. To make tax compliance easier, taxpayers have been divided into several groups based on the amount of money they earn and where it comes from.
THE BENEFITS OF COMPLETING TAX RETURNS
ITR filing on time has several advantages. Here are several examples:
Process loans more quickly
If you’re seeking a loan, you may be required to provide proof of ITR filing for the previous three years. This will assist the bank in determining your financial status and loan repayment ability. These papers may also shorten the time it takes to process your loan. This is also true when it comes to credit card processing.
Visa applications require it
You must first obtain a visa. You’ll need to submit ITR evidence for this as well. This is done to ensure your financial security.
Allows losses to be carried forward
If necessary, losses suffered by an individual or a company during a financial year might be carried forward to the following year. These losses can be reported as ‘earnings and gains from business and profession’ or ‘income from capital gains.’ However, you will only be eligible for this benefit if you file your ITR before the deadline. If you file later, there’s a danger that your losses won’t be carried forward.
There will be no late filing fees
You can avoid penalties by filing your ITR on time. There’s also the advantage of being able to make changes to your ITR if necessary.
Accidental third-party claims
Let’s say you want to file an insurance claim in the event of an accident. To begin legal processes, insurance companies normally demand your ITR documentation. If you fail to provide the ITR information, your claim amount may be decreased. Your claim may potentially be denied depending on the circumstances.
Funding for new businesses
Are you thinking of starting a business or expanding an existing one? You may require funding from outside sources, such as seed investors or venture capitalists. Such investors may request your ITR information in order to examine your company’s financial stability and profitability. Your ITR forms will also assist them in double-checking the statistics in the audited report.
Benefit for freelancers and self-employed individuals
Form 16 is not sent to freelancers or self-employed individuals. The ITR is frequently the only proof that they have submitted income tax. They may encounter funding and transactional concerns if this proof is not in place.
