5 reasons to file an ITR even if your income is not taxable:
It is a common misconception that you are not required to file an ITR if you have zero tax liability. As a result many people are oblivious to the benefits of filing ITRs and ultimately end up facing consequences that they could have avoided in the first place.
If your total gross income was more than the taxable limit mentioned below, you need to file your income tax returns:
Less than 60 years of age – Rs 2.5 lakhs
Between 60 and 80 years – Rs 3 Lakhs
Above 80 years – Rs 5 lakhs
ITR receipt is an important document:
An ITR receipt entails your income, taxation and revenue from other sources and is more detailed than Form 16. Self-employed people and freelancers don't have Form 16 and the only proof that they have filed for an ITR is the receipt. Without the receipt, they could face transactional issues or funding problems.
To claim refund:
Even if your annual income is below the tax limit, you might have been taxed on it and the only way to claim a refund on this is to file an ITR. Employers deduct tax from salaries; banks deduct tax from FDs etc. Tax Deducted at Source (TDS) is now mandatory across many payments. Hence, it is highly plausible that you could have paid extra tax through TDS. If you don't file for an ITR, you could miss out a possible refund.
The refunds can be filed through TDS or self-assessment in the same financial year.
To apply for loans:
You will be required to provide ITRs of the recent years if you apply for any type of loan. ITR is the utmost valid proof of your income and it helps your lender to assess your repayment capacity. In case you haven't filed an ITR, you will be required to provide other proofs of your earnings and repayment capacity like a collateral or co-applicant. ITRs ease the process of buying a loan.
To apply for a visa:
If you wish to pursue opportunities abroad, esp. UK and USA, you will be required to submit copies of your ITRs for the recent assessment years to process your visa application.
To carry forward capital losses:
Whether or not your income is taxable, you might incur capital losses along the way. The Income Tax Act allows you to carry forward these losses for up to eight consecutive years and equalize them against your future gains. To avail this benefit, you should have filed an ITR showing these losses every year without fail. Hence, it is mandatory that you file an ITR even if your income is non-taxable, so that you can carry forward your losses.
- ~Since ITR receipts are sent to your residential address, they can be used as proof of residence.
- ~Banks do not accept applications for credit cards if you haven't filed for ITRs.
- ~Insurance companies will not provide policies with better cover if you don't provide them proof about your tax payments.