Filing income tax returns every year is an essential responsibility of every citizen. It is the process of reporting all the income earned during the financial year to the government and paying the tax on it. While some individuals may try to avoid this responsibility, filing income tax returns regularly has several benefits. On this page, we will discuss why you should fill out income tax returns every year.
- Compliance with the law: Filing income tax returns every year is mandatory under the Income Tax Act, of 1961. Non-compliance with this requirement can lead to legal penalties, including fines and imprisonment. By filing your tax returns regularly, you avoid getting into any legal issues, and it also helps you to keep a good track record with the government.
- Loan Approval: If you’re planning to take a loan in the future, regular tax filing can be advantageous. Banks and other financial institutions often ask for income tax returns as proof of income. This information helps them in determining your loan eligibility and the amount of loan they can offer to you. By regularly filing your tax returns, you can have a better chance of getting your loan application approved.
- Claim Refunds: When you file your income tax returns, you declare all the income earned during the financial year and pay the tax on it. However, you may also have made investments or incurred expenses that are eligible for tax deductions. Filing your tax return enables you to claim these deductions, which can reduce your overall tax liability. If you have paid more tax than what was required, you can also claim a refund for the excess amount. Refunds are processed only when you file your tax returns, so it is crucial to file your returns even if you do not have any taxable income.
- Building Financial History: Filing your tax returns regularly can also help you build a good financial history. When you file your returns, you provide evidence of your income, savings, investments, and other financial details to the government. This information can be useful when you apply for a loan, credit card, or any other financial product. It shows that you are financially responsible and have a steady source of income, which can be helpful in establishing trust with financial institutions.
- Avail Government Benefits: Filing income tax returns can also make you eligible for various government benefits. For instance, you may be eligible for certain tax credits, which can reduce your tax liability. Additionally, some government schemes require you to have filed your tax returns to be eligible for benefits. These benefits include subsidies for housing, education, and health care, among others.
- Avoid Scrutiny from Tax Authorities: Filing your tax returns regularly can help you avoid any scrutiny from the tax authorities. Tax authorities monitor individuals who do not file their tax returns regularly, as it can be an indication of tax evasion. By filing your tax returns every year, you can show that you are complying with the law and reduce your chances of being scrutinized.
In conclusion, filing income tax returns every year is not only a legal obligation but also has several benefits. It can help you avoid legal penalties, get your loan application approved, claim refunds, build a good financial history, and avail government benefits. Regular tax filing can also help you avoid scrutiny from the tax authorities. Therefore, it is essential to file your tax returns every year and stay compliant with the law. If you face any difficulties in filing your returns, you can seek the help of a tax professional or use online tax filing services to make the process easier.