Benefits of Filing ITR (Income Tax Return)

  • Author :
  • TATA AIG Team
  • Published on :
  • 03/01/2024

An income tax is a legal document that taxpayers file declaring their income deductions and tax liability. The information provided in ITR helps tax authorities verify the accuracy of your income, ensuring it goes with tax laws and regulations.

Filing an ITR is a legal process in India for eligible taxpayers for several reasons, but the main one is it serves as proof of your financial credibility while TDS deductions.

In this blog, we will cover income tax returns in more detail while giving an overview of the advantages and disadvantages of income tax return filing.

Why Should We File ITR?

Income tax return filing is a proactive step toward financial empowerment while contributing to the growth of the nation. The taxes collected are used for funding infrastructure development and various Governmental welfare programs.

By filing ITR, individuals comply with all tax regulations, contribute to the national revenue as well as establish their financial credibility for various purposes related to investments. It is considered as the taxpayer’s financial responsibility to ensure that they meets all the tax laws.

Types of ITR

There are various forms of income tax return in India. Each has its specific role catering to different types of income and financial circumstances.

Here is the list of ITR forms -

ITR 1- Applicable for people with income from salary, pension, agriculture or house property. The total income is up to ₹5000.

ITR 2- Suitable for those who are counted in Hindu undivided families. HUFs are not allowed to file ITR 1, but having an income beyond the house property, or foreign assets.

ITR 3- ITR 3 is applicable for both individuals and Hindu undivided families, who are earning from a family business, or paternal firms.

ITR 4- For individuals, HUF and firms having an income up to ₹50 lakhs from a well-settled business or profession.

ITR 5- The ITR 5 is applicable for firms, Limited Liability Partnerships, associations of persons, and some of local authorities.

ITR 6- Applicable for companies other than those who are claiming exemption under Section 11 which states income from property or charitable purposes.

ITR 7- It is for companies required to furnish returns under Sections 139(4A), 139(4B), 139(4C), or 139(4D)

It is important to choose the appropriate ITR based on your income sources, business activities and other relevant factors.

Benefits of Filing Income Tax Return in India

Filing an income tax return in India comes with various advantages, look through some of them listed below -

Easy loan approvals-

Financial institutions often require ITR as a critical document when evaluating your loan applications, in order to ensure your financial stability and repayment capacity.

Proof of income-

Income Tax Return serves as an official document verifying your income. This proof becomes necessary in situations such as property transactions, visa applications, or even when you are applying for jobs that require a detailed financial background statement.

Free from legal obligations-

Filing an income tax return ensures that you are on the right side of the tax law, protecting you from various legal complications.

TDS claims-

ITR provides a comprehensive and detailed overview of your income and deductions. Submitting an ITR will help you get enhanced and easy TDS deductions.

Health Insurance Deductions-

Under section 80D of the Income Tax Act, individuals can claim deductions on the premium paid for a health insurance policy in India.

Avoiding penalties-

Timely filing an income tax return helps you avoid penalties and interest charges that may be forced with late submission.

Disadvantages of Not Filing Income Tax Return

Not filing an income tax return can have significant financial and legal consequences leading to -

Loss of tax benefits

Leaves impact on your financial reputation

Visa and immigration issues

Penalties

Legal consequences

Less business startup opportunities

How to File an Income Tax Return

The ITR filing process involves several steps such as -

Visit the official income tax department website. Open the e-filing portal, click on the ITR return file online.

Select your ITR type.

Download the appropriate form.

Fill in the required information.

Cross verify all the details entered.

Calculate your tax liability based on your provided income details and applicable TSD.

Save the filled form.

Upload the saved file.

Submit the ITR

You will receive a verified acknowledgement on your Adhar-linked contact number or email address.

Required Document for Filing ITR

Documents required for filing income tax returns can vary on the taxpayer’s source of income, however, here is a general list of documents commonly needed -

Identity proof - Includes, PAN card and Adhar card.

Income proof - Includes, Form 16, salary slips, and rent proof.

Bank account details - including account number, bank statement and passbook.

Foreign income proof ( if applicable)

Detail of capital gains from the sale or purchase of property or investments.

Tax deduction proofs - Such as medical insurance premium receipts claimed under Section 80D.

Form 26 AS - This statement shows the TDS deducted by the bank, the TDS deducted by the employer, and the TDS deducted by the organisation.

Note - If you encounter any difficulties while filling or submitting the ITR, it is recommended to seek assistance from a tax professional.

Who Can File an ITR?

Filing an income tax return is optional for every individual, it depends upon some specific circumstances such as income, age, and residence.

If anyone’s annual income exceeds the tax limit must file an income tax return. The tax limit slab is set by the Government only. There are three categories in which the income tax slab is generated -

Individuals under the age of 59.

Senior citizens between the ages of 60 to 80.

Super senior citizens aged 80 or above.

Here is a table chart for your better understanding-

Income Range Applicable Tax rates for less than 60 years Applicable Tax rates for between 60 to 80 years Applicable Tax rates for 80 years or above
₹ 5,00,001 to ₹ 7,50,000 0.1 0.1 0.1
₹ 7,50,001 to ₹ 10,00,000 0.15 0.15 0.15
₹ 10,00,001 to ₹. 12,50,000 0.2 0.2 0.2
₹ 12,50,001 to ₹15, 00,000 0.25 0.25 0.25
Exceeding ₹ 15,00,001 0.3 0.3 0.3

Is it Necessary to File Income Tax Return

It is legally mandatory to file an income tax return in India for everyone if their total income exceeds the tax slab.

Whereas, even if you do not fall into any age or income category, the benefits of filing ITR even when not compulsory remain tremendous. For example, you can seek advantages for your startup funds, loan approvals, and many more.

Take a look at some of these points telling why it is necessary even if not compulsory -

A filed income tax return serves as proof of income

Filing ITR by preference can be beneficial when applying for loans or taking other financial services.

Regularly filing income tax returns, even if not mandatory, contributes to building a strong financial history stating your financial credibility.

Bottomline

The importance of filing an ITR is comprehensive, it serves as a vital tool in tax finance management, providing transparency with a structured and well-designed approach to tax planning.

Hence, the ITR process also contributes to nation building by funding the public services. Enhancing the importance, filing an income tax return is a strategic move towards financial responsibility and unlocking some great opportunities.

Income Tax Exemptions with Tata AIG Health Insurance Plans

Tata AIG offers medical insurance online and offline policies that align with Section 80D under Income Tax Act provisions. These policies cover a range of medical expenses including pre and post-hospitalisation, expenses, or even preventive health checkups, where you can choose to buy a health insurance plan altering your requirements.

While filing an ITR, make sure to put the details of your medical insurance to get these health insurance deductions in Income tax.. This way, you can get ITR benefits from the deductions available under section 80D. This policy can only be used for self, dependent children, dependent parents and spouses.

FAQS

Why should we file an ITR?

Filing an income tax return is a legal obligation in India, mandated by Income tax authorities.

What is the benefit of e-filing?

E-filing ITR provides a faster and quicker and more accessible method of filling an income tax return by cutting down the need for physical paperwork.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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