As per income tax laws, you must file an Income Tax Return (ITR) when your income exceeds the basic exemption limit. It is a form used to report your earnings from the previous financial year (April 1st to March 31st). Using it, you can report your income, expenses, deductions, exemptions, and taxes paid.

Be aware that this requirement of filing ITR applies to all earning individuals, whether salaried, in a partnership, or part of a Hindu Undivided Family (HUF).

In this article, let’s see why it is important for you to file an ITR.

• Filing your income taxes makes you accountable for your expenses and helps you maintain a good track record for getting loans.
• Tax filing helps you file revised taxes if it is required in case of any discrepancy.
• By filing ITR, you can claim TDS refunds and offset or carry forward losses.

Accountability

Filing income tax and ITR on time demonstrates your accountability towards the nation and also towards your personal integrity. Not filing income taxes makes you susceptible to fines and other legal consequences. Furthermore, all your future business transactions can be jeopardised if your tax-related papers are not sorted. Filing ITR gives a clear picture of your net financial value and makes your subsequent business transactions transparent.

Record of residence

Even if your income is not taxable because it falls under tax exemption categories, it is a good idea to file your ITR. These tax papers may be later needed as proof when you try to register some immovable property with the government. Therefore, income tax documents are always a good thing to have.

Loans and credit cards

When you apply for a loan, lenders require various documents. These documents help them process your loan request. Be aware that one such important document is your Income Tax Return (ITR).

Lenders use your ITR to check your past income, which helps them assess your ability to repay the loan. It acts as proof that you have had a stable income over time. This makes ITR a mandatory requirement for loan approval, as it helps the bank determine whether you are capable of paying off the loan.

Tax adjustments

If you experience losses in the stock market or from running a business, these losses can be used to reduce your tax burden in future years. This is known as "carrying forward losses". These losses can be carried forward and used to offset profits in future years, which would lower your overall tax liability.

However, to take advantage of this benefit, you must file your Income Tax Return (ITR) within the original deadline. If you miss this deadline, you won’t be allowed to carry forward those losses to offset future income.

Let us take a quick look at some of the major benefits of filing ITR on time.

• Creating a financial record: By regularly paying your taxes and filing ITRs, you can create a financial record, which can be vital for future financial planning.
• Avoiding penalties: Every citizen of the country must file income tax returns. By filing your taxes on time, you can avoid penalties and other interest charges.
• Income proof: Your ITR document acts as valid income proof while applying for loans, visas, or credit cards.
• Tax refunds: Arguably, the most important benefit of filing an ITR is claiming tax refunds. Most of the times, excess tax is deducted at source (TDS). By filing your income tax returns, you can claim refunds from the government.
• Contribute to the nation’s development: When you pay your income tax and file returns, you contribute to the government’s revenue, which is then used for infrastructure development, welfare programs, and improving public services.

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TDS is a compulsory tax that the payer deducts from the payment made to individuals and other entities. The Indian government requires the payer to deduct TDS and deposit it before the due date to avoid penalties. Now that you know what is TDS, you can better adhere to tax laws.