Filing tax returns in India isn’t just for those who earn above the taxable threshold. Filing ITR even if your income is below the taxable limit in India offers significant advantages under the Income Tax Act, 1961. This practice strengthens financial discipline. Why should you file ITR when exempt, and how does it help? Let’s break it down.
Claim Tax Refunds and TDS Deductions:
If any Tax Deducted at Source (TDS) was applied to your income—say from a bank FD or part-time contract work—you won’t get it back unless you file an ITR. Moreover, some investments may have taxes deducted automatically. Filing ensures that you recover what’s rightfully yours.
For example, banks deduct 10% TDS if your interest exceeds ₹40,000 in a financial year. So, if your total income is below ₹2.5 lakh but TDS was deducted, filing lets you claim that refund.
Build Financial Credibility:
Filed ITRs act as proof of income, even for those who are self-employed or freelancers. Banks and NBFCs often ask for the past 2–3 years of ITRs when processing home loans, Car loans, Business Loans. Even visa applications (especially for countries like the UK, USA, or Canada) may require your ITR copies. Having this financial document builds trust with both lenders and consular officers. This is particularly useful for gig workers or entrepreneurs who don’t receive Form 16 from an employer.
Carry Forward Losses and File Future-Proof Records:
Under Sections 70 and 71 of the Income Tax Act, you can carry forward losses from capital gains or business only if you file your return on time—even with zero tax liability. This means you can offset future gains with past losses, reducing your tax outgo. Miss the deadline, and you lose this benefit.
In addition, regular ITR filing keeps your records clean with the Income Tax Department, which can be helpful if you’re ever investigated or audited.
Unlock Eligibility for Government Schemes and Investments:
Certain government schemes and high-value investments require proof of income. For instance:
- Startup funding, subsidies, or MSME registration
- High-value investments in mutual funds or IPOs
- Buying property or insurance policies above certain thresholds
In many of these cases, ITR documents serve as essential income proof. Additionally, according to IBEF, digital financial inclusion is a key policy focus. As more Indians transact online, income documentation like ITRs is becoming a crucial part of your financial identity
Essential for Visa Applications and Government Services:
Embassy officials often require proof of income or tax compliance for visa processing, especially for countries like the USA, UK, or Canada. An ITR acts as a credible document showing financial stability, increasing your chances of visa approval.
Moreover, ITRs are mandatory for availing some government subsidies, high-value insurance policies, and for becoming a director in a company under MCA (Ministry of Corporate Affairs) guidelines.
Conclusion:
Even if you earn below the taxable limit, filing returns in India offers advantages that go beyond tax. From refunds and legal compliance to better loan access and long-term financial credibility—it’s a smart move. Ready to file your ITR? Explore more financial insights now!
– Ketaki Dandekar (Team Arthology)
Read more about Benefits of Filing Returns Below Taxable Limit here – https://cleartax.in/tax-return