Top Benefits of Filing Income Tax Return (ITR) on Time

A stitch in time saves nine. Well an ITR on time has nine benefits that should encourage you to file well before the due date. An Income Tax Return (ITR) is a document that is used by taxpayers to declare their income, calculate taxes, and claim deductions for a specific financial year. If your income exceeds the basic exemption limit, you are mandated by the Government to file an ITR. Even though it may seem like quite a task, there are several benefits to filing an ITR on time. So let us guide you through how filing an ITR on time can be advantageous for you. 
 

1. Avoiding Penalties and Interest

July 31st is the deadline to submit your ITR for individuals. Failure to do so results in cumbersome penalties and interest charges. According to Section 234F of the Income Tax Act, individuals who miss this deadline will be subject to a penalty of Rs. 5,000 (previously Rs. 10,000). To add to it, interest will be charged on the unpaid tax amount from the due date until the date of payment. The interest is calculated per the Section 234A of the Income Tax Act. 
 

2. Preventing Tax Audits

Even though timely ITR filing does not grant you complete immunity from tax audits, it can significantly reduce your chances of being scrutinized. The ones who pop up on the radar of the tax authorities are usually those who don't file their returns or are late in doing so. Long story short, make sure you are filing your ITRs on time so you can avoid any chances of being audited.
 

3. Claiming Tax Refunds

In many instances, you can be overpaying on your tax liabilities through TDS or TCS. Claim a refund for excess tax payments made through Tax Deducted at Source (TDS), and Tax Collected at Source (TCS) by filing your Income Tax Return (ITR). It is the primary evidence of your income and tax payments that allows you to request a refund for any overpaid amounts. Avoid losing out on funds that rightfully belong to you by filing your ITR on time.

4. Income and Address Proof

You can use your ITR as a legitimate proof of your income and address. This can be beneficial in various situations, such as:
 

• Loan Applications: Banks and financial institutions often require ITRs as proof of income when reviewing loan applications. If you have a well-documented ITR, you can significantly improve your chances of securing loans.
   
• Government Schemes: Government schemes and benefits often require ITRs as an eligibility criterion. For example, some housing subsidies, education loans, or agricultural subsidies may require proof of income in the form of an ITR.
   
• Visa Applications: Showing your financial stability through timely ITRs can boost your chances of getting a visa for travel, study, or work purposes.

5. Insurance and Loans

ITRs can help you obtain term insurance and loans. Insurance companies often use ITRs to screen applications for term insurance plans, using them to evaluate financial stability and determine appropriate coverage amounts. In the same vein, financial institutions consider ITRs to evaluate creditworthiness and income stability. File for your ITR on time and you can receive favorable terms when applying for insurance and loans. 
 

6. Government Schemes and Benefits

Several government schemes and benefits may require ITRs as proof of income. They can include:

• Housing Subsidies: Government-sponsored housing schemes offer subsidies for affordable housing options on the basis of your income. ITRs can be used in the verification process for these schemes.
   
• Education Loans: Financial institutions or government agencies may review your ITRs to assess your financial capacity and determine your eligibility for educational loans.
   
• Agricultural Subsidies: Agricultural Subsidies are provided by the government to provide support to the farming population of India. To avail these schemes, Farmers may need to provide ITRs as income proof. 

7. Eligibility for government tenders:

An ITR is a business’ proof of its financial stability and tax compliance. If you are a business owner interested in bidding for government tenders, ensure you have filed for an ITR accurately and well before time. This is a marker of financial stability and tax law compliance which is surveyed by authorities when you are bidding for tenders.

8. Improve your CIBIL score:

Your CIBIL score is a marker of your creditworthiness. Late or inconsistent filing of ITRs can hamper your credit score and make it more difficult for you to avail of a loan. It is a good practice to set a schedule for filing your ITR on time to improve your creditworthiness and receive good terms while availing a loan.

9. Carry Forward Your Losses

Losses are a part of the lifecycle of every business or individual’s life. Losing money in the stock market, from your business, or on any assets can be quite a setback. However, you can offset these losses against your future income which helps you save on taxes. Keep in mind, this is only possible if you file for your ITR before the due date where you can carry forward your losses to subsequent years.

Filing your ITR might be a cumbersome process for many that may be put off till the last instance. But take heed, non-compliance with the tax laws results in many penalties and sanctions that far outweigh the time you may save not filing for ITRs on time. We hope that our list has provided you with a new perspective that will motivate you to file for them on time. A helping hand never goes amiss when dealing with such an important and complex legal procedure. Well, it’s a good thing that JJ Tax is here to save the day! File your ITR with the help of our team of experts and you will find the whole process to be a cakewalk. The app is easy to operate and you can find all your legal and tax queries answered in the chat option. Download now!