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Know All About the Benefits of Filing Income Tax Returns

Jul 05, 2018 | 2 years ago | Read Time: 4 minutes | By iKnowledge Team

Many of us often wait until the end before filing for our Income Tax Returns. However, today filing income tax returns is easy and convenient, thanks to the Government’s digital portals. All you must do is understand how and where to file your tax returns, and you are good to go.

This FY 2020-21, July 31st is an important day- as it is the last day for filing Income Tax Returns (ITR) for Individuals unless formally extended by the government. While for businesses, it is 30th September 2020. Filing ITR has now been simplified for salaried individuals through the ITR Form 1.

So, whether you received your first pay check or are unaware of the benefits of filing for tax returns, our easy guide on filing income tax returns will help you here.

If you are employed it is vital to know if you come under the Income-tax slab, as per the Budget 2020. In a revolutionary move by the Finance Ministry, it introduced an alternative tax regime in Union Budget 2020. This tax regime postulates a new tax slab system with lower tax rates. As per the latest announcement by Nirmala Sitharaman, two tax regimes would exist simultaneously. Individual taxpayers can choose under which regime they would prefer to file their income tax returns.

According to the latest tax system, individuals who conform to the new regime will be able to reduce their tax liability due to lower tax rates. However, they would not be eligible to claim 70 out of 100 tax exemptions and deductions under different sections which include Section 80C, Section 80G, etc. Individuals who will file their income tax under the old regime will be eligible to claim all the existing tax exemptions; however, have to pay taxes at a higher rate.

Income Tax Slab for FY 2020-21

The different slabs and their corresponding tax rates under the two tax regimes are mentioned in the table below.

Total Income (in Rs.)Tax rates as per the new slab structureTax rates as per the existing slab structure
Up to Rs. 2,50,000NilNil
Rs. 2,50,000 to Rs. 5,00,000Nil5%
Rs. 5,00,001 to Rs. 7,50,00010%20%
Rs. 7,50,001 to Rs. 10,00,00015%20%
Rs. 10,00,001 to Rs. 12,50,00020%30%
Rs. 12,50,001 to Rs. 15,00,00025%30%
Rs. 15,00,000 and above30%30%

The above-outlined table is for individuals, there is separate income tax slab for senior citizens with varied tax rates for senior citizens in the 60-80 years and above 80 years bracket.

Below are some of the benefits of filing Income Tax Returns:

Visa Processing

Everyone loves to travel! Whether you are planning to travel abroad now or in the future, your tax returns are required for visa processing. While traveling to UK, USA, Europe, and Canada, you need to submit your tax returns for the past few years to the country’s embassy.

Loan Processing

Generally, income tax returns of last three years are required for any bank loan. Banks request to furnish tax returns for the past years to understand one’s financial situation. Your tax returns can speed up your loan processing and ensure hassle-free processing.

Carry Forward Losses

As per the income tax laws, if you fall into the taxable income bracket, you can carry forward and adjust your capital loss. This means business loss, and other such losses can be included against your future taxable income by filing your tax return in time.

Get a Refund

As a salaried person, your employer will deduct tax deducted at source (TDS) on your income. If you have investments that are tax deductibles, it decreases your taxable income. This TDS deducted can be refunded only if you file your taxes. This process applies for TDS deducted by other sources as well.

Buying a High Life Cover

When you buy a life cover of Rs 50 lakhs or Rs 1 crore, you need to submit your ITR documents to verify your annual income. Life insurance companies often ask for income tax returns’ receipts, if you plan to buy term plans. For instance, if you are planning to buy an iTerm plan from Aegon Life, with sum insured of Rs 50 lakh or more, your ITR receipt will come handy to verify your income.

Freelancers and Independent Professionals

Freelancer and self-employed people don’t retain Form 16. This makes Income Tax Returns receipt the only document to prove that they have filed their return and to stay away from funding issues and transactional problems.

Required To Fill a Government Tender

If you plan to start a business, you need to fill a government tender and submit tax return receipts of the previous five years. This is to display your financial stability and assurance of payment. But, this process and the number of ITRs required depends on the internal rules of the government department.

The Bottom-line

If you have failed to file tax returns, you will receive a notice from the tax department. This does not happen immediately but you will eventually receive one and might end up paying Rs 10, 000 as per FY 2017-18. In addition to this, you will face interest payment under Section 234A.

While in the past you must have avoided filing taxes but after knowing these many benefits, you can file your tax returns and enjoy the benefits early on. In case, you are wondering how to calculate your income tax, you can use our income tax calculator and plan your savings. To know about Aegon Life’s life insurance products like term insurance and other products, visit our home page.

Advt. no.: IA/Jun 2018/4109


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