Recently, the Government has introduced an ‘Annual Information Statement’ that summarizes all financial transactions, including bank interest, share market transactions, and real estate transactions, in a single document. This statement captures all transactions that have come to the Government’s attention, making it advisable for NRIs who conduct financial transactions in India to file their tax returns annually to prove their ‘non-resident’ status in India for each tax year.
Income Tax Law mandates that every individual must file an income tax return in India if their total income exceeds the basic exemption limit. For NRIs, submitting an income tax return in India is only mandatory if their total income for the previous year has exceeded the maximum amount not chargeable to tax. The threshold limit for Financial Years 2020-21 and 2021-22 for individual tax slab exemption is INR 250,000.
The benefit of carrying forward losses (capital loss, business loss, etc.) for set off against future income will only be available to individuals who have filed ITRs within the prescribed due dates.
Eligibility for availing loans, credit cards, and term insurance policies is often determined by a multitude of factors, among which previously filed tax returns are often mandatory as they are considered proof of the quantum and source of income.
Benefits of Filing Income Tax Returns on Time in India
For Startup Funding
Financial institutions may need several years of returns before supporting your firm. Your business income tax return can help financial institutions and investors determine your business’s scalability, profitability, and other cost characteristics to guarantee their investment is well-placed. It also certifies tax-paying citizenship.
Getting Government Tenders
Contractors may have a solid track record of winning significant service or works contracts, but if they don’t file tax returns on time or at all, they may face serious consequences. It may hurt their business.
Contractors must file these returns on schedule, properly, and audited if necessary. When applying for a government tender, this is crucial. The tender scrutiny committee may inspect this work, and the last five to seven years’ ITR is usually checked.
Prevent Sanctions:
Businesses and individuals can avoid large fines by filing ITRs on time. After the deadline, you may be penalized INR 5,000 for filing your ITR late. It supplements other Act interests. You may also have to pay penalty interest.
Credit Card Request
Almost everyone wants a credit card, regardless of their career. If additional income proofs are missing, an income tax return is essential. Through CIBIL, ITR helps determine a taxpayer’s credit history.
Visa Application
Most countries require ITR for visas. This informs Visa processors about your finances and income. The embassy will check the applicant’s income and ability to pay. Foreign consulates often request three years or the current year’s income tax returns. If you want to visit, invest, or work in the US, UK, Canada, Europe, or South East Asia, you must return.
Loan Application Eligibility
Regular ITR filing shows stable income and timely tax payments. Financial organizations use applicants’ prior year ITRs to approve loans, overdrafts, bank credit cards, cash credits, and bill discounting alternatives. The lender/bank may reject your house loan application if you cannot provide required papers, including ITR.
Losses carry forward
To carry forward losses from capital asset sales, business losses, etc., taxpayers must file a tax return before the due date. You can balance a profit from selling mutual funds or stock with losses from past years by filing tax returns on time.
If tax returns are late, unadjusted losses (with limited exceptions) cannot be carried over. Thus, a tax return is needed to carry forward and modify losses.
Protecting against Black Money
The Indian government has taken many initiatives to combat black money and prevent money outflows in recent years. The government required taxpayers to disclose foreign assets in their 2011-12 income tax filings to achieve this goal. Even if you don’t own overseas assets and file your income tax return on time, the IT department won’t consider your savings black money because any income not declared is black money.
Buying High-Coverage Insurance
Life insurance policies costing Rs 50 lakh or Rs 1 crore are common. Life insurance firms, primarily LIC, require ITR receipts for term policies over Rs 50 lakh. Term policies’ amounts are decided by numerous factors, including the insurer’s income.
Growth of Nation
Tax returns can greatly affect a nation’s development. More money entering the country implies more government revenue, which means more infrastructure improvements. The Indian government collected 9.60 lakh crore in direct taxes in FY2022. Infrastructure and national development projects benefited from this money.
Accidental Claim
Filing ITRs for yourself or your spouse will aid you in case of an accident. Income verification is used by insurance firms to compute claims. Because the court takes ITR as the only evidence, missing returns, especially from the recent three years, may diminish or deny the claim.
The government must also reimburse the relatives of a three-year income tax filer who dies in a traffic accident. Compensation can reach three times the deceased’s typical income.
To log in to e-filing in India, you will need to follow these steps:
- Go to the e-filing website at https://eportal.incometax.gov.in/.
- Click on the “Login” button in the top right corner of the screen.
- Enter your PAN in the “Enter your User ID” textbox and click Continue.
- Confirm your Secure Access Message. Enter your password and click Continue. On successful validation, the e-Filing Dashboard is displayed.
If you have forgotten your password, you can click on the “Forgot Password?” link on the login page. You will then be asked to enter your PAN and email address. The system will then send you an email with a link to reset your password.
Conclusion
The process of navigating the environment of taxes may appear to be intimidating, but it is a responsibility that every taxpayer must fulfill. The filing of your income tax return is not only a legal requirement; it is also a proactive move toward achieving financial transparency, which can unleash a world of benefits that can improve your overall financial well-being. Reach out to us for any questions or concerns you may have regarding the filing of your income tax return.
Our experienced team of tax professionals can help you navigate the complexities of tax filing and ensure that you are compliant with all applicable regulations. We will work closely with you to understand your unique financial situation and develop a customized tax filing plan that maximizes your deductions and minimizes your tax liability.
Are you looking for a professional e-filing service provider? If so, you’ve come to the right place. We are one of the leading e-filing service providers, and we have served over 10,000 valuable clients in various industries across the globe. We are always ready to provide you with the professional support you need.
