1. Being a responsible citizen: It is mandatory for every individual who earns a specific income and pays income tax on it, to file income tax return before July 31. In addition to this, those who are not eligible to file taxes can still file voluntary returns. When you file returns, you are fulfiling sort of a national duty which brings you into the mainstream as your income gets recorded with the I-T department with applicable tax (if there is any) having been paid. In other words, it's a sign of being a responsible citizen.
2. Helpful during loan applications: Individuals who are planning to apply for home loans or vehicle loans, filing ITR can prove to be very helpful. Almost all major banks ask for a copy of returns, thus keeping a steady record of filing ITRs may make life easier for you in such a situation. ITR can have further significance as an income proof and an individual might be able to use it to get a loan in line with his/her income.
3. Loss adjustment: Losses incurred by an individual both short-term and long-term, speculative as well as non-speculative, capital or any other type of losses, which are not recorded in the tax return, cannot be carried forward or adjusted against the capital gains made in the subsequent years. So, if you do not file a return then you may not be eligible for any exemption against your tax liability in subsequent years.
4. To claim a refund:
There are cases when, after TDS deductions or advance tax filings, an individual ends up paying more than his/her actual tax liability. In that case, that person can claim a refund from the I-T department. However, if there is a delay in filing the return, ,the taxpayer stands to lose the interest payable on the refund amount.
5. Travelling Overseas: During visa processing, foreign consultants may ask you for your ITR records/receipts of previous years in interviews. The reason is to ensure that the person applying for the visa has an income source in India and does not actually intends to leave the country forever. Many major countries in Europe, US and Canada strictly follow this process and thus filing ITR gains further importance.
6. Buying life insurance: These days, ITR receipts are required when one opts to buy a term policy with sum insured of Rs 5 million or more. Life insurance companies like LIC use ITR documents to verify your annual income.
7. Filing of govt tender:
ITR documents also come handy when one need to fill a government tender. Government demands tax return receipts of the previous five years to ensure that the person filing the tender will be able to support the payment obligations.
8. Proof of income and tax payment for the self-employed: Unlike the salaried class, businessmen do not get Form 16. Hence, ITR receipts become an extemely important document for them.
9. Avoid penalties: Filing income tax return is mandatory for individuals whose income falls in the tax bracket. Such individuals might be penalised up to Rs 10,000, besides interest, for not filing ITR on time.
10. An important financial document: Not only while applying for a loan or visa, ITR receipts can be useful in many other ways as it is an important financial document. It is even more detailed than Form 16 as it entails your income and taxation along with revenue from other sources.
Citizens with income below the taxable bracket should also file ITR as most of the above given advantages are also applicable for them.