clerl.tax

Tag: ITR Filing

  • Advantages of Filing a Nil ITR

    In the realm of personal finance, the act of filing a Nil Income Tax Return (ITR) often goes undervalued. While it may seem unnecessary for those earning below the taxable limit, the benefits extend far beyond compliance. Filing a Nil ITR can unlock significant advantages, from easing travel visa approvals and securing scholarships to simplifying loan processes and managing future tax liabilities.

    This article sets the stage for exploring six key benefits of filing a Nil ITR. With expert insights and practical examples, we aim to demonstrate how this simple act can enhance financial credibility, offer proof of income, and provide strategic tax planning opportunities. Discover how a Nil ITR can be a powerful tool in your financial toolkit, paving the way for greater financial stability and opportunities.

    Unlocking Travel Visa Approvals with Ease

    Filing an ITR can be a game-changer for securing travel visas. Many embassies demand the last three years of ITRs to assess an applicant’s financial stability and history. This not only demonstrates ongoing financial commitments but also enhances your credibility as a law-abiding citizen, significantly boosting your chances of visa approval. Swapnil Bhaskar, Chief of Strategy at Niyo, emphasizes, “A consistent ITR filing record strongly indicates ongoing financial responsibilities and ties to India, suggesting a lower risk of the applicant overstaying their visa.

    Boosting Scholarship Applications

    Filing an ITR can be crucial for scholarship applications, especially when proving a family’s income below a certain threshold. For instance, the Kanyashree Prakalpa in West Bengal mandates that the family income must be less than Rs 1.2 lakh per annum for eligibility. Alay Razvi, Partner at Accord Juris, notes, “ITRs serve as proof of your income, which can help you apply for scholarships.”

    Carrying Forward Losses for Future Gains

    One of the significant advantages of filing an ITR, even a nil one, is the ability to carry forward losses to offset future income. Chartered accountant Ankit Jain explains, “Capital losses can be carried forward for up to eight years to be set off against future capital gains, which can be a valuable tax planning tool.” This strategy can effectively reduce future tax liabilities.

    Validating Gifts and Assets Received

    An ITR serves as official proof of income or assets received during the year. Advocate Razvi highlights, “Some income, like gifts from relatives, is exempt from income tax but needs to be declared in the ITR to avoid future disputes.” This declaration ensures transparency and avoids complications related to bank or property transfers.

    Securing Loans with Confidence

    Regularly filed ITRs play a critical role in loan assessments, especially for significant loans like home loans. Bhaskar states, “Regularly filed ITRs indicate stable income and financial discipline, crucial for lending decisions.” For self-employed individuals, ITRs provide a reliable, government-verified source of income assessment.

    Claiming TDS Refunds Efficiently

    TDS deductions occur in various transactions, such as interest from bank FDs or high-value monthly house rents. To reclaim these deductions, filing an ITR is essential. Without this step, eligible refunds remain unclaimed, leaving your money with the tax authorities.

    The Bottom Line: Why Filing a Nil ITR is a Smart Move

    Filing a Nil ITR, even when not legally required, opens doors to numerous benefits. From simplifying visa applications to securing loans, scholarships, and even managing future tax liabilities, the advantages are substantial and multifaceted. In the complex landscape of personal finance, a proactive approach to ITR filing can offer peace of mind and tangible benefits.

  • ITR Filing Deadline Must Be Permanently Extended beyond 31 July

    Here’s Why 45 Days Isn’t Enough for Salaried Individuals

    The current deadline to file income tax returns (ITR) for FY 2023-24 (AY 2024-25) is set for July 31, 2024. This timeframe, while applicable to taxpayers whose accounts do not require auditing – including salaried individuals and certain self-employed professionals – remains insufficient. Here, we delve into why this deadline is unreasonable and advocate for a permanent extension.

    1. Inadequate Time Post TDS Certificate Issuance

    Despite the income tax department releasing ITR forms at the financial year’s start, many salaried individuals are hindered by the delayed availability of critical TDS certificates such as Form 16 and Form 16A. These documents, essential for accurate tax filing, are typically issued by June 15. This effectively compresses the filing window to a mere 45 days, from June 15 to July 31, a duration glaringly inadequate for thorough tax preparation.

    2. Timing of AIS and Form 26AS Updates

    The Annual Information Statement (AIS) and Form 26AS are pivotal for taxpayers, reflecting income and tax deductions respectively. These are fully updated by May 31, as entities responsible for filing the Statement of Financial Transactions (SFT) and TDS returns must do so by this date. Consequently, taxpayers require sufficient time beyond June 15 to reconcile these documents with their financial records, underscoring the necessity for a deadline extension.

    3. Complexities of Collecting Supporting Documents

    The process of collating additional documents such as capital gains statements from mutual funds, interest certificates from banks and the RBI, and income details from post office schemes, is intricate and time-consuming. Given that some interest income may not appear in the AIS, taxpayers must diligently verify and report all income sources to avoid discrepancies and potential tax notices.

    4. Switching Tax Regimes

    Taxpayers may opt to switch between the new and old tax regimes during the ITR filing process. This switch entails meticulous recalculations of taxable income, accounting for deductions and exemptions applicable under each regime. Such detailed financial planning cannot be satisfactorily completed within the constrained timeframe currently provided.

    Expert Opinions on Extending the ITR Filing Deadline

    Sujit Bangar, a former IRS officer and founder of TaxBuddy.com, emphasizes the impracticality of the current deadline. He suggests a three-month period from the issuance of TDS certificates, proposing September 15 as an ideal deadline for non-audit cases. Similarly, Suresh Surana, founder of RSM India, advocates for a permanent extension, highlighting the disproportionate pressure on taxpayers to compile financial data and file returns within just 45 days.

    In conclusion, extending the ITR filing deadline beyond July 31 to a more reasonable date, such as September 15 or even August 31, is imperative. This adjustment will ensure that taxpayers have adequate time to accurately prepare and file their returns, ultimately fostering compliance and reducing undue stress. The call for a permanent extension is not just a matter of convenience but a necessary reform for fair and efficient tax administration.