Why should individuals file income tax return?

A lot of individuals seem to think that filing tax returns is voluntary and therefore dismiss it as unnecessary and burdensome.

Filing tax returns is an annual activity seen as a moral and social duty of every responsible citizen of the country. It is the basis for the government to determine the amount and means of expenditure of the citizens and provides a platform for the assessee to claim refund, among other forms of relief from time to time.

1. Filing returns is a sign you are responsible

The government mandates that individuals who earn a specified amount of annual income must file a tax return within a pre-determined due date. The tax as calculated must be paid by the individual. Failure to pay tax will invite penalties from the Income Tax Department.

Those who earn less than the prescribed level of income can file returns voluntarily.

Filing returns is a sign that you are responsible. Not just that, it also makes it easier for individuals and businesses to enter into subsequent transactions since their income is recorded by the tax department with applicable tax, if any, having been paid

2. Your loan or card company may want to see your return

If you plan to apply for a home loan in future it is a good idea to maintain a steady record of filing returns as the home loan company will most likely insist on it. In fact, you may even consider filing your spouse’s returns if you want to apply for a loan as a co-borrower. Likewise, even credit card companies may insist on proof of return before issuing a card.

Financial institutions may insist on seeing your returns over the past few years before transacting with you. In fact, the government may make it mandatory for them to do so, thereby indirectly attract individuals to file returns regularly even when it’s voluntary.

3. Avoid Penalty & Prosecution Notices

If you are required by the law to file your return, then non-filing can lead to the bombardment of income tax notices from the tax department.

Moreover, if you have deposited any amount in your bank account during the demonetization period or have entered into the high-value transaction, then you must file your Income Tax Return, as the income tax department has launched ‘operation clean money’ and many people who have done such transactions are being questioned.The best way to avoid this situation is to file your income tax return before 31st March 2018 and “Come Clean” in front of the tax department.

4. If you want to claim adjustment against past losses, a return is necessary

Filing returns on time has many advantages regardless of whether you draw the prescribed level of income necessary to file returns.

Various losses incurred by an individual or a business, both speculative as well as non-speculative, short term as well as long term capital losses and various other types of losses not recorded in the tax return in a financial year, cannot be shown for exemption in subsequent years for the purpose of tax calculation. So it’s best to file returns regularly, because you never know when you may want to claim an adjustment against past losses.

5. Claiming refund:

There could be a possibility that there has been tax deducted at source (TDS) on some investment made in the name of the individual. "If TDS has been cut, one will have to file the ITR to claim refund of the same

6. For VISA Processing

In case you are planning on travelling abroad, be advised , foreign consulates ask for upto last three years ITR with your visa application

The Middle East and South East Asian countries are not so stringent, but Europe, Canada, and the US are quite strict about this document.

ITR receipts are proof that the person wishing to travel overseas has an income source in India and does not wish to settle abroad and would return back.

Indian and many foreign consulates recommend that you should carry some of your income proofs such as ITR receipts, Form 16, salary slips, etc. for your overseas travel.

7.ITR is Compulsory if you Own Foreign Assets

As a citizen of India if you own any foreign assets then you are bound to file ITR as per law. This includes overseas bank account. In case you fail to file ITR then it can possibly lead to the fine and is also considered to be an economical offense.

8. Filing returns is mandatory in some cases

·   Even if your income level does not qualify for mandatory filing of returns, it may still be a good idea to voluntarily file returns. In most states, registration of immovable properties requires advancing as proof the tax returns of last three years. Filing returns makes it easier to register the transaction.

·      All of us want our loved ones to be happy even after our death. So, we always want to take as high cover policy.But, these days many insurance companies are adamant about checking your income tax return before providing high life cover in order to verify your annual income.