For many people, there is a certain unease when it comes to filing their income taxes. After all, how often do you see people queueing up for something like advance tax filing? Also, since there is always a chance that the deadline may be extended, you might get the opportunity to inflate your returns. This is especially true for business owners, who can use the cash for business a little longer and subsequently make earnings.
However, filing income tax returns can actually offer you several advantages, especially if you do it correctly. Filing your taxes is not just beneficial for the nation as a whole, it also saves you from the risk of various fines and penalties. In India, the tax filing process has been simplified and streamlined, with easy-to-understand tax slabs and a user-friendly online filing process.
Moreover, an online income tax calculator eases the process further by helping you estimate the exact amount you might need to pay as tax.
Here are some of the other benefits you can reap when you file your income tax returns.
1. Visa and Loan Processing
Whether you’re planning an overseas trip or applying for a loan, you will need to submit your income tax returns for the past few years. Without this important proof of regular tax payment, banks and embassies will be unable to process your application. Your income tax records provide them with a better understanding of your financial situation so that they can make an informed decision.
2. Get a High-Cover Life Insurance Policy
Did you know that the premiums you pay towards your life insurance policy are tax-deductible? Under the Income Tax Act of 1961, you can deduct up to ₹1.5 lakhs from your taxable income based on the premium you pay for life cover. So, go ahead and save on taxes while securing the financial future of your family. What’s more, by providing proof of life insurance payments, you might even qualify for a lower income tax bracket. This means – even more savings.
3. Carrying Losses Forward
In today’s tough times, many businesses have taken a beating in revenue. In case your business has incurred losses in a specific financial year, the income tax laws in India allow you to carry the capital loss forward and make an adjustment according to the applicable tax slab. This will alleviate your tax burden in future filings. However, make sure to check the various types of ITR that you can file, and choose the right one to carry your capital loss forward. Keep an online income tax calculator bookmarked to make the calculations simpler.
4. To Start Your Own Business
If you want to start your own business, one of the very first things you will need to do is register it with the Ministry of Corporate Affairs. For this, you will need to supply various documents, including proof of income tax returns for the past 5 years. So, it is best to start filing your returns as early as possible.
5. Encouragement For Worthy Causes
Donations to charities and NGOs are also tax-deductible under Section 80C of the Income Tax Act. So, go ahead and support a worthy cause and get rewarded for your contributions via tax savings. So, whether it is an environment-friendly initiative, or a school for disenfranchised children, you can make a positive impact on the community without financially straining yourself. Plus, when you pay your taxes regularly, the government is able to fulfil its duties of keeping roads, hospitals, and other amenities inoptimal condition.
Of course, there are other benefits as well, such as the peace of mind that comes from knowing that you won’t need to face any penalty. The key is to have a good financial plan and consider income tax returns well in time to make the right investments, such as life insurance, for dual benefits of tax savings and financial security. Remember to keep track of deadlines and file your income tax well before time.