Why it is necessary to file your ITR even if you have no tax liability

Why it is necessary to file your ITR even if you have no tax liability

When we talk about personal finance, one often associates tax returns with the burdensome task of calculating and paying taxes.

However, a common misconception exists that filing an Income Tax Return (ITR) is only necessary for those with a tax liability. In reality, regardless of whether you owe any taxes or not, filing your ITR carries a range of hidden benefits.

Here are the reasons why you should file ITR even if you have no tax liability

Income tax refund: An individual might have paid taxes even if he/she does not have any tax liability in the form of TDS and advance tax. Such a person is eligible to claim a tax refund. However, it is necessary to file an ITR if you want to claim a refund of the excess tax paid. By filing your ITR, you provide the necessary documentation to claim these refunds, ensuring that you receive any rightful reimbursements promptly.

Also read: I-T dept flags 68,000 cases for mismatch in 2019-20 income tax returns

Paves way for visa: Whenever you want to travel abroad for education, job, or travel purposes, you need to get a visa. Many countries have made providing an ITR of 2-3 years to apply for a visa compulsory. Therefore, you must file an ITR even if you have zero tax liability, as it speeds up the visa approval process.

Loan applications: The income tax returns act as proof of income and help banks determine an individual’s loan eligibility. To ensure security, banks require you to submit the ITR of at least 2 years while submitting your loan application. Having an ITR while applying for a loan increases the chances of getting it approved.

Carrying forward losses: If you are someone whose tax liability is zero but invest in capital assets such as shares and stocks, filing ITR can help you carry forward your losses for almost 8 consecutive years. So, if your tax liability increases in the future, you can claim the previous year’s carried-forward capital losses as a deduction.

Proof of income: ITR acts as official proof of your income during the year and other financial activities, including investments. Many financial institutions and authorities ask for ITR for various purposes, including approval of loans and credit cards.

International regulations: If you have financial dealings from abroad, you need to make sure to file ITR. Many countries have agreements to avoid tax evasion. Not filing ITR can lead to scrutiny and result in penalties and legal consequences, especially if you hold assets in foreign countries. If you have foreign assets, you can either file your ITR on your own or hire online CA-assisted ITR filing services.

Also read: How to check your Income Tax refund status online

While filing tax returns may seem cumbersome, the importance of filing your ITR, even with no tax liability, cannot be understated. By fulfilling your legal obligations, you can avoid penalties, enhance your financial reputation, and unlock hidden benefits. Remember, filing your ITR is not just about taxes but also about future planning and contributing to a transparent and equitable society. Now that you know why ITR filing is important, hurry and file your ITR.

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