“...but in this world nothing can be said to be certain, except death and taxes.”
The above quote is by Benjamin Franklin, a great American statesman and diplomat. And as the quote suggests, taxation is an unavoidable fact of life. It was relevant in Franklin’s time, is relevant now, and will continue to remain relevant to your finances for times to come. Where there’s income, there are taxes. And where there are taxes, there need to be tax returns. If you’re in two minds about filing your returns this year, here are some thoughts to help you make up your mind.
The New Tax Slabs
Income tax slabs garner the most attention during the annual Union Budget presentation. Taxpayers wait with bated breath for the announcements on income tax rules which can help them save more money. While the complete budget in July after the general elections didn’t announce any change in the slabs, the interim budget presented in February had announced that individuals with a taxable income of up to Rs. 5 lakh will not have to pay tax for FY 2019-20.
This particular announcement created confusion among the taxpayers as many took it as a redrawing of slabs. However, it simply meant that if your taxable income, which is income after necessary deductions, is up to Rs. 5 lakh, you will pay zero tax. But the norms for who needs to file their tax returns remain the same.
Here is a lowdown on who needs to file income tax returns and how tax filing is beneficial for everyone, even for people whose income is below Rs. 2.5 lakh.
Who Needs To File ITRs
It is mandatory to file income tax returns (ITRs) for all Indians who have an income of over Rs. 2.5 lakh after necessary deductions and are below 60 years of age. Citizens aged above 60, and those above 80, will have to file their ITR if their income is Rs. 3 lakh and Rs. 5 lakh, respectively. Filing income tax return is not mandatory for individuals who have income below the threshold of Rs. 2.5 lakh or have zero tax to pay. However, it is wise to file ITRs for record-keeping and for a variety of necessities. Take a look at a few benefits of filing ITR even if your income is not taxable.
ITR Helps You Get Loans EASILY…
For many, especially the salaried class, taking a loan is unavoidable as it helps achieve life goals that may not be achieved via regular income. Getting a loan these days is easy, yet you need to meet the eligibility criteria of the lender. Lenders while evaluating your creditworthiness seek copies of your income tax returns typically for the past 1-2 years. So if you are planning to apply for a loan or credit card in future, ensure you file your returns to make your loan processing easier. Don’t let non-filing of your tax returns be a reason for the rejection of your loan application.
… And Visas
ITR statements also play a role in visa processing as they act as proofs of your income and past employment. This is to satisfy the consulate that you’re capable of taking care of your expenses while travelling to their country. Countries like the UK, US, Canada and some European ones may seek your recent ITRs.
Helps In Carrying Forward Capital Losses
Incurring losses in a financial year doesn't mean that you have to skip filing your returns since it has brought down your taxable income. As per the income tax rule, you can carry forward your losses and set them off against future incomes. Do remember you can only use this provision and carry forward your losses if you file your income tax returns before the deadline.
Helps In Claiming A Tax refund
It is possible that you may have paid the excess tax deducted at source (TDS) on some of your income. There is also a possibility that TDS has been deducted on the investment made by you. The I-T Act allows you to seek a refund for the extra tax paid only if you file your income tax returns in a timely manner. Therefore, file your returns to seek a refund.
Helps You in Buying A Higher Life Insurance Cover
The ITR statements work as a record of your income when you approach an insurance company to buy a higher life insurance cover worth Rs. 50 lakh or more. So if your future life risks nudge you towards higher coverage, ensure you file your returns before the July 31 deadline.
Even if your income is not taxable, file your income tax returns to establish yourself as a law-abiding citizen, who wants to keep the Income Tax Department aware of your incomes and any taxes paid. Filing ITR also makes life easier for independent professionals and freelancers as it becomes a handy substitute for anyone who doesn’t get Form 16.
With the July 31 deadline to file income tax returns nearing, ensure you file your return to enjoy these various benefits. Filing your returns after the deadline will attract penalty ranging from Rs. 1,000 to 10,000, and you will also miss out on these benefits.
The writer is CEO,