If my income is less than 2.5 lakhs, do I still need to file my tax returns?
Majority of people think that if their income is less than Rs. 2.5 Lakhs, they are not liable to file Income Tax Returns (ITR). However, this is a major misconception, under some circumstances filing ITR is mandatory even if you earn less than Rs. 2.5 Lakhs. Furthermore, filing ITS is also beneficial in the longer run.
The array of advantages that come with filing ITR, even on zero tax liability are:
• Loans: When you apply for loans, all the major banks ask for a copy of tax returns. They even ask for your salary slip showing all your deductions, TDS certificate and finally a copy of Income Tax Return for the last two years. In addition, showing a copy of your ITR receipts comes in handy if your application is on the verge of rejection or you are not getting as much as you want.
• To Claim Refund: If you have any refunds due from the Income Tax Department, filing returns is necessary as without it you will have to forgo your refund amount. Many times, if you have any investments through fixed deposits, you get taxed on the basis of TDS. By filing ITR, you can claim a refund on the complete amount that has been charged if you fall under the threshold of zero tax liability.
• To Carry Forward Losses: If you do not file ITR, you won’t be able to carry forward any losses that you had to face in the financial year. By filling ITR, you can carry forward these capital loses to eight consecutive years immediately after the year in which losses were incurred. So that whenever there are capital gains the amount would be adjusted, and you will not be liable to pay taxes in the year where you had to face capital loses.
• Visa Processing: When you travel overseas, foreign consulates check your ITR receipts of the last couple of years during visa interviews. ITR receipts are necessary if you are planning on travelling to UK, USA, Europe, Canada. By showing ITR receipts, you confirm that you have a legitimate source of income in India and are not planning to leave the country for good. Thus, while travelling to foreign countries, experts suggest that one must always carry ITR receipts.
• Purchasing a High Life-Cover: Purchasing a life cover of more than Rs. 50 Lakh has now become common. However, insurance companies only allow you to opt for it if you show them your ITR documents to verify your annual income. The amount of cover is largely dependent on the income that you are earning, and with ITR you show the insurance provider that you have a high income.