Taxpayers falling in the bracket of Rs 5 lakh, and earning less than the Rs 10,000 limit have the option of not filing their returns. However there are many reasons why people should file their returns.
For starters, the income tax receipt is more elaborate than the form 16 which is another important document for salaried individual. While form 16 shows the salary of the individual from only one employer, the ITR shows the income of the individual from other sources including investments which may not have been disclosed by the individual.
The ITR helps in a number of ways. Some of them are in the form of:-
• Borrowing: - Most of the banks while applying for home loans make do with the form 16. However in case of not getting a loan or not getting the required amount, handing over the last three years of ITR receipt helps as it gives a sense of the borrower's total income and his/her ability to support the loan repayment.
• International Travel: - While travelling abroad, income related proof should be carried along such as salary slip, form 16, ITR receipt etc. When travelling abroad, consulates ask you to furnish ITR receipt of the last couple of years at the time of the visa interview.
• Government Tender: - If you plan to start a business, and need to fill government tender then you will have to show the tax returns of the last five years. This again, is to show your financial status and whether you can support the payment obligation or not.
• Self Employed: - ITR becomes a must for businessmen, consultants and partners of firms if their income exceeds the exemption limit of Rs1.60 lakh because they do not get form 16. For any financial transaction, their only proof of income and tax payment will be their ITR.
Lastly if you have a refund which is due from the Income Tax Department then you will have to file returns without which you will forego the amount.
Source: http://www.rediff.com/business/slide-show
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