You are exempted from income tax if your income does not exceed Rs 2.5 lakh. However, this exemption is only for individuals under 60 years of age. If you are between ages 60 and 80, you are exempted from income tax with an income of up to Rs 3 lakh. For individuals aged 80 years and above, the limit is enhanced to Rs 5 Lakh.
Here are five benefits to filing your tax returns.
1. You can get your capital gains or losses adjusted: If you are investing in the equity market and have been buying or selling shares, filing an income tax return may be beneficial for you. As long as your total income is below the exemption limit, there is no compulsion to file an ITR. But you can get your short term capital losses adjusted against capital gains. Whatâ€™s more, this adjustment can be carried forward for eight years as and when you submit your ITR for the respective year.
2. You will need ITR to claim any tax refunds: Once tax is deducted, any tax refund is facilitated only when you submit your income tax return for that year. So any TDS on rent payments for NRIs, or TDS deduction by banks on your fixed deposits will be refunded only once you file your tax returns and claim the desired tax deduction. You will need to file for tax refunds online once you file your ITR for that year.
3. ITR is required when you are applying for loans: Since your ITR is not just a financial document but also indicates your annual earnings, banks and NBFCs seek copies of your ITR when you approach them for a loan. Filing your returns despite having no taxable income will increase your chances of getting a loan approved as compared to someone with the same earnings but no ITR filings.
4. ITR is needed to claim any tax deductions: The Rs 2.5 lakh exemption limit is on your gross income. So, if your income is higher than Rs. 2.5 lakh, and you are seeking various tax exemptions to bring your income below that level, you will need to file your income tax returns. Even when there is no tax liability, filing of your ITR is mandatory in order to seek any tax deduction under various sections of the I-T Act.
5. ITR is mandatory if you own foreign assets: As an Indian resident, if you own any foreign assets, you are required to file your income tax returns as per law. This includes having movable or non-movable foreign assets including a bank account overseas. Failure to disclose your foreign holdings can lead to a possible fine and is considered to be an economic offence.
Can you claim excess tax refund?
The excess tax can be claimed as refund by filing your income tax return (ITR). After your return is processed and provided the tax department accepts your refund claim, the amount claimed as refund would l be credited back to your bank account through Electronic Clearance Service (ECS) transfer.
What does tax credit cover?
The tax credit will cover TDS, TCS and tax paid by the taxpayer in other forms like advance tax, self-assessment tax, etc. The I-T Department will generally allow a taxpayer to claim the credit of taxes as reflected in his Form 26AS.
What is a return of income?
â€‹ITR stands for Income Tax Returnâ€‹. It is a prescribed form through which the particulars of income earned by a person in a financial year and taxes paid on such income are communicated to the Income-tax Department. It also allows carry -forward of loss and claim refund from income tax department.â€‹Different forms of returns of income are prescribed for filing of returns for different Status and Nature of income.
ITR - 1 Also known as SAHAJ is applicable to an individual having salary or pension income or income from one house property
ITR - 2 It is applicable to an individual or an Hindu Undivided Family not having income chargeable to income-tax under the head â€œProfits or gains of business or professionâ€
ITR - 3 It is applicable to an individual or a Hindu Undivided Family who has any income chargeable to tax under the head business or profession
ITR - 4 Also known as SUGAM is applicable to individuals or Hindu Undivided Family or partnership firm who have opted for the presumptive taxation scheme of section 44AD/ 44ADA/44AE.â€‹
ITR - 5 This Form can be used by a person being a firm, LLP, AOP, BOI, artificial juridical person referred to in section 2(31)(vii), cooperative society and local authority.
ITR - 6 It is applicable to a company, other than a company claiming exemption under section 11 (exemption under section 11 can be claimed by charitable/religious trust).
ITR - 7 It is applicable to a persons including companies i.e., trusts, political parties, institutions, colleges
ITR - V It is the acknowâ€‹ledgement of filing the return of income.