Meaning of ITR
The Income Tax Department of India requires that Income Tax Return (ITR) forms be submitted. It includes details on the person’s income and the taxes that must be paid on it during the year. The data submitted with the ITR must pertain to a certain fiscal year that runs from April 1 through March 31 of the following year.
1. It facilitates loan processing.
Assume you want to apply for a loan (not a mortgage) or a loan for your property. An income verification would typically be required by a lender before approving a loan. As part of the procedure, you will be needed to submit your income tax returns from the past two or three financial years.
2. It assists you in claiming any carried forward losses.
If you have incurred losses under the headings “Capital Gains” or “Profits and Gains from Business or Profession” and wish to carry such losses forward to the next fiscal year, you must file your income tax return.
3. It helps you to obtain TDS refunds.
You can deduct it by filing your income tax return for the year before the deadline (July 31 or as declared for the following year), if your employee withholds tax at source or if your contract permits TDS. The income tax agency determines your net tax due in this situation after subtracting TDS. Filling out an ITR will allow you to receive a refund if you do not have to pay tax. By monitoring the progress of your income tax return, you can keep track of your refund.
4. Benefits of a Scholarship
Various authorities (both government and private) regard an ITR as a source of income documentation. For example, you can use an ITR to apply for specific institute and/or university scholarships. The ITR is used to determine an incoming student’s capacity to substantiate their income, and insurance companies recognize it as acceptable paperwork.
5. It helps to establish the nation.
Every tax you pay aids in the growth of your nation. It substantially contributes to the inflow of funds for the government. 9.45 lakh crore in direct taxes were collected by the government in FY19. The government could utilize the funds to upgrade the infrastructure or for other types of development.
6. It helps you in applying for a visa or a credit card.
If you apply for a visa for an international trip or a credit card, the issuer will need verification of your income. In most circumstances, you must submit your income tax returns for the previous three years. It will assist the other party in determining whether you are eligible for a visa or a credit card. If you plan to go to the United States, Canada, or Europe, you must submit your ITRs during the verification procedure.
7. For Purchasing Comprehensive Insurance
More people are buying life insurance plans worth more than 50 lakhs. Insurance companies, on the other hand, would not accept it until you show them your ITR documents, which show your yearly income. The amount of coverage you receive is determined by your working income, and ITR shows the insurance provider that you make a lot of money.
8. Benefits for Independent Contractors and Professionals
Independent contractors and self-employed people do not receive Form 16. The only proof that they have filed income taxes is frequently their ITR. They could encounter financial and transactional issues in the absence of this proof.
9. Evidence of Net Worth
The ITR is the most trustworthy proof of your net worth or income. The salaried class benefits from Form 16, which is issued by their employer and acts as proof of income. Self-employed individuals, on the other hand, can utilize the ITR filing form as proof of income. It includes a detailed summary of these individuals’ revenue and expenses for each fiscal year.
It can be utilized for a variety of objectives, including obtaining loans, obtaining insurance coverage, purchasing real estate and other valuable assets, and so forth. If you are obliged to provide proof of your income or net worth, ITR is your only option.
10. Security against black money
The government has taken many initiatives in recent years to combat black money and prevent money outflows from India. In order to achieve this goal, the government made revealing foreign assets owned by taxpayers in their annual income tax returns mandatory in fiscal year 2011-12. Furthermore, even if you do not own foreign assets and file your income tax return on time, the IT department will never consider your savings to be black money, as any income not reported to the department is deemed black money.
11. Obtaining Tenders from the Government
Contractors may have a solid track record of acquiring significant projects in their field of business, whether it’s a service or works contract, but if they fail to file tax returns on time or at all, they may face serious consequences. It may be harmful to their business.
For contractors, these returns must be submitted on time, with extreme accuracy, and subject to an audit. This is particularly crucial if you want to get a government contract. This work may occasionally be examined by the tender scrutiny committee, and it is customary to look back five to seven years’ worth of ITR records.
The above article has been written by Mr. Sachin Vishwakarma (CA Aspirant) and reviewed by Mr. Suyash Tripathi (Chartered Accountant) and they can be reached at firstname.lastname@example.org and email@example.com .