What is Income Tax Return?
A tax return is a form or forms which are filed with a tax authority that reports the income, expenses, and other relevant tax information. Tax returns also allow taxpayers to calculate their tax liability, scheduling for tax payments, or request for refunds for the over payment of taxes.
Importance of filing Tax Returns
Can claim tax deductions
The Income Tax Act allows a taxpayer for claiming several deductions under various sections to reduce an individual’s tax outgo. However, in order to claim these deductions under various sections of the Income Tax Act, it is very important to file the Income Tax returns every year by the stipulated date.
Helps in claiming tax refunds
When the Tax Deducted at Source (TDS), gets subtracted on an individual’s income, one is eligible for refund from the Income Tax department if the total tax paid is less than the tax amount deducted. This is only possible when the income tax returns are filed by the due date.
Helps in Compensation of losses for the next financial year
According to the income tax law, individuals are not allowed to carry forward the losses and set them off against future years’ income if the returns are not filed within the stipulated time.
An important document for easy processing of bank loans
Almost all banks and NBFCs ask for ITR receipts of the latest three years when an individual applies for high-value loans like home and car loans. Many of the lenders consider ITR as the most authentic and important document supporting an individual’s income. Hence, one should regularly file income tax return if one is planning to avail any home or car loans in the future.
Helps to avoid extra interest
If one does not file an ITR, the delayed return could lead to an extra interest at 1 percent per month for the remaining tax payable. For claiming a refund of tax which is deducted by the bank (if any) on the interest income, a tax return would be required to be filed irrespective of the taxable income.
Important: Please note that the information on this page / site is provided as general information for better understanding for the user and does not constitute tax, legal, or other professional advice and must not be used as such. Please consult your professional adviser(s) if you have any questions / doubts regarding the above.