All you need to know about Income Tax Return!

An Income tax return (ITR) is a form used to file information about your income and tax to the Income Tax Department. The tax liability of a taxpayer is calculated based on his or her income.

In case the return shows that excess tax has been paid during a year, then the individual will be eligible to receive an Income tax refund from the Income Tax Department.

Income Tax Return (ITR) is a form in which the taxpayers file information about his income earned and tax applicable to the income tax department. The department has notified 7 various forms i.e. ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 & ITR 7 till date. Every taxpayer should file his ITR on or before the specified due date. The applicability of ITR forms varies depending on the sources of income of the taxpayer, the amount of the income earned and the category the taxpayer belongs to like individuals, HUF, company, etc.

Why you should file tax returns every year??

There are several reasons why you should file your income tax returns. We take a look at some of the reasons why is it important to indulge on this exercise without fail.

• You can claim tax deductions

The Income Tax Act allows a taxpayer to claim multiple deductions under several sections to reduce one’s tax outgo. However, to claim these deductions under various sections of the Income Tax Act, it is important to file your Income Tax returns every year by the due date.

• You can claim tax refunds

In many cases, when Tax Deducted at Source (TDS), gets subtracted on your income, you are eligible for refund from the Income Tax department if the total taxes you are eligible to pay is less than the tax amount deducted. You can claim refunds only if you file income tax returns by the due date. “Filing your income tax returns helps you get back refunds on your excess tax payments,” confirmed Dasari.

• Helps adjusting your capital gains and losses

If you invest in equities, you will most likely incur capital gains and losses. According to the Income Tax laws, capital losses can be adjusted against capital gains. But for that, filing income tax returns is mandatory. Also, if you have any capital loss, you can carry it forward for the next 8 consecutive financial years, if you file your Income Tax returns regularly.

• Avail a loan or opt for a credit card

When you apply for a loan or a credit card, banks will check how you fare when it comes to your finances. If you have filed your Income Tax returns regularly, it stands as proof that you have a regular income and have paid appropriate taxes on it. Financial institutions would ask to see your IT returns for the last few years before approving your home loan, a car loan or a credit card. Insurance companies may also ask for IT receipts when you are buying term insurance of a higher amount.