Income Tax Return
ITR stands for Income Tax Return. It is a prescribed form through which the particulars of income earned by a person in a financial year and taxes paid on such income are communicated to the Income-tax Department. ITR helps you claim deductions and thereby determines your annual tax liability. Filing your tax returns is mandatory when you earn an amount that qualifies as taxable as per the income tax slabs determined by the government. However, you can also file your returns voluntarily if your income is below the threshold as it helps you qualify for loans and partake in other similar transactions.
Let us take a look at some of the reasons and understand why filing of tax returns is important to an individual:
- The main reason to file ITR in India is because the government mandates it beyond a certain income. As a responsible citizen of the country, you must understand your tax obligations and comply with set of rules in a timely and lawful manner.
- Producing proof of tax returns, even voluntarily, helps with availing certain financial products and services. Typically, for loans and other credit options, you are required to show tax returns of the past three years in order to qualify.
- Losses incurred in previous years cannot be shown for exemption at a later stage, it helps to have them on record via income tax returns filing. Doing so allows you to reduce your tax liability against in the subsequent years.
- Financial stability is known to be a prerequisite for visa approval for certain countries. The consulates of countries like US, UK, Canada among others require copies of your tax returns for the past few years for processing your visa application. Hence, do not forget to file your tax returns on a regular basis.
- Filing returns adds to your credibility and trustworthiness. In contrast, the consequences of not filing your return on time can be unfavourable.
Eligibility to file ITR
As per the Income Tax Act of 1961 following categories of individual can file ITR: