Many young earners often perceive that in case their salaries are below the taxable category, they should not file their Income Tax Returns or ITR. However, nothing could be farther from the truth. You should start filing your ITR once you take up a job and start earning money. The ITR is the proof of your income and the taxes paid. As a result, one should always file tax returns even when the current taxable income is lower than the basic exemption limit.
This is currently Rs. 2.5 lakhs in case of all individuals and Rs. 3 lakhs for senior citizens. For super senior citizens the exemption limit is Rs. 5 lakhs. It is mandatory to file tax returns for getting necessary deductions with regard to investments like the employee contribution under Section 80C to the Provident Fund. This also helps when it comes to getting exemptions for long-term capital gains which are eligible.
In case the total income prior to getting deductions for eligible investments and exemptions of eligible capital gains exceeds the basic exemption limit, one should file income tax returns. The ITR is highly essential and can be used as an address proof as well. It also helps you get loans sanctioned more easily. Banks can verify your income easily and usually seek ITR copies for the last 2-3 years while applying.
Until you file your income tax return, you cannot get compensation for losses or expenditure incurred in the earlier financial year. In case the ITR is not filed in a timely manner, losses which are unadjusted cannot be taken forward to future years’ returns. As a result, to carry forward losses more easily for adjustment in the future, one should file the ITR. Filing the ITR helps in avoiding the additional interest of 1% per month for the tax that is payable.
From the Financial Year 2017-18, a penalty of Rs. 10, 000 will be imposed by the Income Tax Department for not filing the ITR. Credit card applications may be rejected as well in case the ITR has not been filed. The ITR is also essential for smooth visa application processes. This helps as well when it comes to purchasing insurance policies with higher coverage. The ITR also keeps things smooth for people who work independently or as freelancers. This is the only document that they possess for proving that the ITR has been filed. Without the ITR, there are issues with transactions and funding.