Why file ITR even if you are outside tax bracket

Many youngsters who earn less than Rs 2.50 lakh per annum think that they need not file income tax return (ITR) as they do not come under the tax bracket and they do not pay any income tax. But it is not desirable to avoid filing ITR just because the person does not become liable to pay tax. One should start filing ITR the moment one becomes employed and starts earning. There are many advantages of filing an ITR as the ITR comes in handy as an authentic document which the individual can submit for various purposes as a citizen. Let us examine the various uses of ITR.

Firstly, the ITR is a proof of income that one can submit for the purpose of getting a loan from a bank or financial institution or while buying a house, car or any other household gadget on instalments.

 Secondly, the ITR is a proof of residence as the full address of the person filing the ITR is mentioned on the ITR form and the IT department too can send the ITR receipt on the residential address.

Thirdly, if a person is applying for a credit card, banks may ask the applicant to submit a copy of the ITR for the previous financial year. If the applicant fails to submit a copy of the ITR, the application for credit card is liable to be rejected.

Fourthly, a person cannot ask for recompense of any expenses or losses incurred in the previous financial year if the tax return for that year has not been filed. This is because the unadjusted expenses or losses cannot be carried forward into future years if no ITR is filed.

Fifthly, independent professionals and self-employed persons do not have Form 16 to show that they have paid income tax, hence ITR is the only document that can serve as a proof of their income and payment of income tax thereon.

Lastly, if a person wishes to go abroad, the visa authorities may ask for a copy of the ITR for previous years to assess the level of tax compliance.