Income Tax Season is around the corner and everyone who is required to file the return of income is rushing to the office of their Chartered Accountants in order to get their returns uploaded on or before the due date. Whether you fit the bill of requirement for mandatory filing of Income Tax Return of not, there are several benefits of filing your ITR on time.
We’ve prepared a quick summary for your reference below!
Avoiding Penalties and Fines
Just like every other late payment, filing of INCOME TAX RETURN after due date also attracts certain penalties and fines. Late filing attracts interest at a rate of 1% per month and a fee ranging from one thousand rupees to ten thousand rupees depending upon the income and date of filing. Income Tax Department notices may also follow adding to the hassle.
Filing your returns on time enables faster processing and receipt of refunds. If your tax refunds are of a considerable amount, faster refunds would ensure less opportunity costs and less blockage of working capital.
Avoiding interest loss on Refunds
In case the refund amount exceeds the total tax payable amount, then the tax payers are entitled to a 6% annual rate of interest. Such refunds are usually available to individuals who have paid extra tax through advance tax and TDS. If INCOME TAX RETURN is filed on time, then this interest is calculated from 1st April of the Assessment Year to the date on which refund amount is actually processed. But in the case of late filing, interest is calculated only from date of filing till date of refunds processed, thus making you miss out on around 4 months interest.
Time to eliminate errors
Filing your INCOME TAX RETURN on time ensures you don’t miss out on claiming eligible deductions in the last minute haste. Also, you can file a revised return in case of mistakes or revision till the end of the assessment year without being tagged as a “Late Filer”. Hence filing on time will avoid a delay in following procedures too.
Claiming All Applicable Deductions
As per the provisions of Income Tax law, certain deductions and benefits cannot be claimed if the Income Tax Return is not filed on time. Examples of such deductions can be found in sections relating to Transfer Pricing Laws, Sections relating to business entity setups as special deductions (Sec 80 Family), etc.
Carry forward your losses
Timely preparation of INCOME TAX RETURN can enable you to carry forward your losses to set off against your income in the case of profits in the upcoming 8 years. Carry forward of losses is not permissible after due date filing of returns, thus missing out on this benefit. The only loss eligible for Carry Forward after the due date is that of Loss on House Property.
Easy Loan Approval
Banks and NBFCs require income proofs before disbursing a loan to an individual. Hence it is necessary to file your INCOME TAX RETURN on time, to have your loans approved. As per the updated law, one can no longer file even a delayed INCOME TAX RETURN after the end of the assessment year. There are no remedies for non-filing, thus making you lose out on an opportunity for availing a loan of any sorts from the above mentioned institutions.
Income Tax Returns are required as proof in various circumstances
Income Tax Returns are demanded as proof of Income in various institutions and scenarios such as for Visa Purposes, in Legal matters and the Court of Law, in Banks and Financial Institutions for provision of loans and other forms of Credit, etc. Therefore, even if your income is below the required limit, filing of ITR helps you be prepared for any such uses of the return when the time arises.
Proof of Residence
Income Tax Return can also be used as an address proof and a proof of residency when required. Although Aadhar Card, PAN Card, Ration Card, etc. are generally used for the same but Income Tax Return is also a good option to have ready in case need arises.