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Do I Still Need To File My Tax Returns, If It Is Less Than Rs. 2.5 Lakhs?

A 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 big misunderstanding; under some circumstances filing ITR is mandatory even if you earn less than Rs. 2.5 Lakhs. Furthermore, filing ITR is also beneficial in the longer run.

Why should I fill ITR if my income is not taxable?

The advantages that come with filing ITR, even on zero tax liability, are:

  1. Loans

When you apply for loans, all the banks ask for a copy of your tax returns. They even ask for your salary slip showing all your deductions, TDS certificate, and then a copy of your Income Tax Return for the last two years. In addition, submitting a copy of your ITR receipts comes in handy if your application is on the verge of rejection or the loan amount is not what you wanted.

  1. Claim Refund(s)

If you have any refunds due from the Income Tax Department, filing returns becomes necessary. Without it, you will have to forgo your refund amount. Many times, if you have any investments through fixed deposits, you get taxed based on TDS. By filing ITR, you can claim a refund on the whole amount charged if you fall under the threshold of zero tax liability.

  1. Carrying Forward Losses

The advantage of filing ITR is that you can carry forward capital losses to eight successive years immediately following your losses (in that particular year.) This way, every time you have capital gains, you can adjust the amount, and you won't have to pay taxes in the year you had capital losses. Unless ITR is filed, losses for the year cannot be carried forward.

  1. Visa Processing

During interviews for your visa, foreign consulates verify your ITR receipts from the last couple of years. ITR receipts are necessary if you are planning on traveling to UK, USA, Europe, and 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 traveling to foreign countries, experts suggest that one must always carry ITR receipts.

  1. Purchasing a High Life-Cover

More and more people are purchasing life insurance policies exceeding 50 lakh. 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 dependent on the earning income, and with ITR, you show the insurance provider that you have a high income.

Suggested Read: How to File ITR?

To conclude, being on the right side of the law is more important than anything else. Keeping the income tax department informed about your income and taxability is also recommended. ITR filing is the only way to make this kind of communication possible.

It is of utmost importance to follow the law as a law-abiding citizen.

References:

1.https://cleartax.in/s/income-tax-slabs

2.https://economictimes.indiatimes.com/wealth/tax/benefits-of-filing-itr-even-when-income-is-below-exemption-limit/articleshow/65160942.cms?from=mdr

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