ITR (Income Tax Return) Filing: Meaning, Benefits & Who Should Fill

Anyone with a source of income in India is required to pay taxes and file an income tax return for each fiscal year. This is not just a mandate as there are also many benefits of filing an ITR.

Read this article to know more about the benefits of filing an income tax return.

What Is an ITR or Income Tax Return?

An income tax return (ITR) is a form to report your earnings and taxes to the Income Tax Department. A taxpayer's tax liability is determined by his or her income. If the return reveals that excess tax was paid during the year, the individual is eligible for an income tax refund from the Income Tax Department.

Who Should File Income Tax Returns?

According to the Income Tax Act, only businesses or people in specified income brackets are obligated to pay income tax. The following businesses or entities are required to file income tax returns in India:

• Individuals aged up to 59 whose total income for the fiscal year exceeds ₹5,00,000. 
• Individuals aged between 60-79 whose total income for the fiscal year exceeds ₹3,00,000. 
• All registered businesses that generate an income, regardless of profits during the year. 
• Those who opt for a refund for excess tax deducted/income tax paid.
• Individuals with financial interests or assets in entities not located in India.
• International firms that benefit from the treaty benefit in India.
• NRIs who earn or accumulate more than ₹ 2,00,000 in a single fiscal year in India.

Benefits Of ITR Filing

Here are the many ways in which filing an Income Tax Return can benefit you:

• Loan processing is easier when financial institutions receive Income Tax Returns receipts from the previous year or years during the loan application process. This receipt is a supporting document to a consumer's income statement.
• You can receive additional TDS claims by submitting your Income Tax Returns. Even if your income is tax-exempt, you can still deduct taxes from your fixed deposits, paychecks or other sources. For example, if the gross income is less than ₹2.5 lakh, but someone receives ₹1 lakh from their Fixed Deposit (FD) in the bank, the bank has to deduct 10% tax from that amount. In this case, the deducted tax can be refunded by submitting an income tax return. Simply put, an individual must file a tax return to claim all TDS. 
• You can avoid unnecessary penalties by filing your income tax return. The Income Tax Act of 1961 governs the taxes that apply to you. As a result, if your income exceeds the exempt threshold, you must pay taxes. You will face penalties if you are qualified to pay taxes on your income but fail to file your Income Tax Returns. The income tax officer can levy a penalty of up to ₹5,000. If you do not file returns, you may face additional and more serious penalties. It benefits you to file an income tax return to avoid penalties.
• You can benefit from medical insurance by filing your income tax return. The IT Department deducts up to ₹50,000 for health insurance premiums during a fiscal year. This is per Section 80D of the Income Tax Act. 
• Income tax returns serve as authoritative sources of address verification. Income tax returns are accepted as proof of address. It can also be used to obtain an Aadhaar card, license, passport, and other documents that require proof of address. 

Effects of Failing to File an Income Tax Return 

Now that you know of the benefits of ITR filing, let’s consider some of the consequences of failing to file an ITR:

• If you qualify as a taxable person and have not paid your taxes, you will receive a notice from the income tax department.
• Assessors may face imprisonment in serious cases of tax evasion.
• If an individual cannot submit Income Tax Returns for valid reasons, the Tax Office will confirm with a detailed letter and supporting documentation. In this case, they can seek condonation relief.

Conclusion

Paying taxes is a citizen's obligation because it adds value to their country’s growth and development. Those who fall within a specified income tax bracket must pay income tax. Many tax experts advise that even with no tax liability, you should file your Income Tax Returns on time.

Disclaimer

The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.