Benefits of Filing Income Tax Return
Helps the bank loan documentation process easier
Being a diligent income tax filer makes it easier for banks to assess your source of income when you apply for loans like an auto loan, home loan, personal loan etc.
Banks usually ask for copies of tax returns filed for previous 2-3 years at the time of applying for the loan to ascertain income capacity of the individual. Hence, to apply for loans a tax return would be required to be filed.
For a hassle-free visa application procedure
At times visa authorities ask for copies of past tax returns, hence to apply for a visa a tax return would be required to be filed. Embassies, especially those of US, UK, Canada etc. when processing your foreign visa application, are particular about your tax-compliance.
Compensate losses in the next financial year
Unless you file the ITR, you cannot recompense your expenses/losses in the previous financial year to the current. As per the income-tax provisions, if tax returns are not filed on time, unadjusted losses (with some exceptions) cannot be carried forward to future years. Hence, to ensure that the losses are carried forward for future adjustment, a tax return would be required to be filed.
When employed, your employer will deduct TDS on your income. However, if you have made investments that are tax deductibles, it reduces your taxable income. So, the TDS deducted can be refunded, but only if you file your return. The same holds true for TDS deducted by any other sources.
For example, banks would deduct tax from interest on fixed deposits exceeding a certain threshold. To claim a refund of tax deducted by the bank (if any) on the interest income, a tax return would be required to be filed regardless of the taxable income.
To buy an insurance policy with a higher cover
If insurance companies have reasons (non-compliance) to believe that you are a tax-evader, they will not give you policies with more cover.
Makes life easier for freelancers and independent professionals
Freelancer or self-employed people don’t have Form 16. ITR acknowledgement is the only document they have to show that he has filed the ITR. Without this, they can face funding issues and transactional problems.
Experts say that if one plans to start their business and need to fill a government tender for that they will need to show their tax return receipts of the previous five years. This again, is to show your financial status and whether you can support the payment obligation or not.
However, this is no strict rule. It may vary depending on the internal rules of the government department. Even the number of years ITR required can vary.
Credit Card Processing
Banks can reject your credit card application if you haven’t filed your ITR.
Helps to avoid extra interest & Penalties
If you don’t file ITR, the belated return could lead to extra interest at 1% per month for the remaining tax payable by you. From FY 2017-18, up to INR 10,000 would be levied for non-filing of ITR and this black mark will remain for years to come.