The myth is common and you’ve most certainly heard of it - You need not file ITR when your income is below the exemption limit!
This myth percolates the minds of everyone ranging from self-employed individuals, freelancers, home tutors, and teachers in coachings to professionals, salaried employees, and business men and women.
The law of India doesn’t require you to file Income tax returns if your gross total income (GTI) is below the exempted limit of Rs. 2.5 lakh. As for individuals between 60 to 80 years of age, this exemption limit is Rs. 3 lakh. Finally, for individuals above 80 years of age, the exemption limit is Rs. 5 lakh.
Here’s a table for better understanding of the same -
Having said that, today, I am here to tell you otherwise. The law has not made it mandatory for you to file ITR but that doesn’t mean you shouldn’t. Why? The reason is simple - Filing ITR comes with a gamut of benefits and you definitely don’t want to miss out on them.
Here are the benefits (See for yourself!) -
TDS refund - There’s a possibility that when you get your payments there has been a tax deducted at source (TDS) from the total amount. Filing ITR helps you claim a refund of that TDS.
In the case of freelancers, for example, there’s a 10% deduction from the total amount if the invoice amount is more than Rs. 30000/- annually.
Processing of Documents - Income tax return serve as a clear and detailed picture of your total income earned during a year and taxes paid on it.
If you’re applying for a loan, you need to submit the last 3 years’ ITR to the respective institution.
In the case you’re a salaried individual, you can provide Form 16 but to prove your credibility you’ll need an Income Tax Return.
Also, you can get the benefit of housing loan amount deduction from your return through ITR filing.
Carry forward of losses - In case you have incurred losses in any given year, you must file an ITR. Here’s why - As prescribed by the Income Tax laws, you’re allowed to carry-forward losses to set them off against capital gains. But this is possible only when you file ITR in the relevant assessment year.
For processing a VISA - In some countries such as the UK, you need to submit income tax returns as proof of legal income along with bank statements. It is required by the foreign embassy to confirm your source of income before allowing your departure. In India too, documents such as ITR facilitate the processing of your VISA.
Establishing income proof in compensation cases - To calculate the compensation in case of accidents that result in death or disability, the income of the person in context needs to be established. And an ITR can serve as a valid income proof in such cases (especially of self-employed individuals).
Penalties- You get an option to revise your return after the due date to escape from the penalty as per your income slab. But if you did not file the return, you have to pay the penalty after the due date.
Keeps you in the good books- Lastly, being a little more aware and abiding by the laws of the country doesn’t really hurt. Filing an ITR will not only keep you in the good books of law but also keep the income tax department informed about your income and taxability. This in itself is a great advantage given the stringent laws of the country.
Concluding notes- ITR is a kind of investment for the future to keep yourself updated with compliances and ultimately benefit from that.
Filing of income tax returns is always a win-win situation for every individual. Now you know how!