Many people believe that filing tax returns is a voluntary thing and is more of a hassle. Whereas filing income returns is an annual activity that is a part of our moral and social duties. From availing of a business loan to claiming deductions, ITR helps you with your everyday financial accounting.
The increasing awareness about ITR has led to a sharp rise of 5% in income tax filers in 2020 compared to the year 2019. Thanks to the ease and convenience of online income tax filing, tax filing has become a self-dependent process where you won’t rely heavily on a tax practitioner.
Here is a brief on the importance, process, eligibility criteria, ITR for business loans, etc., required for income tax filing.
Why Should You File an Income Tax Return Regularly?
- You can claim deductions: Under the Income Tax Act, you can claim more than one deduction categorized under various sections. However, these deductions can be claimed under specific sections and due dates each year.
- You can claim refunds: You can claim the refunds deducted in the form of Tax Deducted at Source (TDS). The Income Tax Department of India has stated that those individuals are eligible for refunds whose deducted taxes were much higher than they are eligible to pay.
- Helps adjust your capital gains and losses: Filing an income tax return can be a great way of adjusting your gains and losses incurred by investing in inequities. The Income Tax lets you carry forward the losses for the next 8 consecutive financial years if you file your income tax returns regularly.
- Helps you avail loan or credit card: Opting for a loan such as a working capital loan, banks usually check your financial flow. Regular income tax filing records stand as solid proof of a steady income, and you have been paying your taxes without fail.
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Steps to File an Income Tax Return
- Step 1: Log in to the official website incometaxindia.gov.in by registering with your credentials. Here your PAN number works as your user ID.
- Step 2: Find the ‘Download’ section and look out for the appropriate Income Tax Return (ITR) form, also known as Form 16. If you are a salaried employee, you can also download ITR-1’s (Sahaj) return preparation software.
- Step 3: Fill in the necessary details in form 16.
- Step 4: Compute and enter all your tax-related details like Tax payable, challan details, etc. Skip this step if you don’t have any tax liability.
- Step 5: An XML file will be generated once you confirm and save your details. On the official website, find the ‘Submit return’ section and upload this filled XML file.
- Step 6: Whenever prompted, you can digitally sign the file.
- Step 7: You will receive a confirmation message flashing on the screen. For verification purposes, download the acknowledgment form-ITR generated right then and mailed to your registered ID.
- Step 8: The final step is called E-verification, which you can do with any of the following modes:
- Aadhar OTP
- Bank ATM
- Bank Ac Number
- Demat Ac Number
- Registered mobile number and email ID
Who All Can File for an Income Tax Return?
As per the current laws by the Income Tax Department of India, filing for an income tax return is mandatory for individuals whose total income during the financial year is exceeding the basic exemption limit, depending upon the age bracket.
- For below 60 years of age – Rs. 2,50,000
- Senior citizens (Between 60 and 80 years of age) – Rs. 3,00,000
- Super Citizens (80 years and above) – 5,00,000
- In case if your annual income does not exceed the basic expectation limit, you might be still mandated to file the ITR if:
- If you have spent an aggregate amount exceeding Rs 2 lakh for travel to a foreign country.
- If you have deposited an aggregate amount exceeding Rs 1 crore in one or more accounts associated with a bank or co-operative bank.
- If you have paid a single or aggregate of electricity bills exceeding 1 lakh per financial year.
- Suppose you are an Indian resident but have bank accounts or income from foreign countries. This applies to any assets owned by you outside India.
- If your total gross income has exceeded the exemption limit before claiming any tax exemption on capital gains under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB.
Is ITR Required for a Business Loan?
In most cases, ITR documents are not mandatory while applying for a business loan. Especially if you are a small-scale business, getting a business loan is relatively easy without having ITR proof. There can be various reasons when an individual try to avail the loan without an ITR document, such as:
- A new start-up or a business might have little to no experience in a filing.
- High chances of lack of documents.
- Maybe the business is set up after a long gap of unemployment. That’s why it is unjustified to assume that a newly started business might not generate enough profits to repay the business or working capital loan.
Thus, most small businesses are allowed to opt for a business loan without ITR proof with some limitations:
- The tenure to repay the loan would be much shorter.
- The interest rate can be higher than with a business loan with an ITR.
- Strong bank statements might become mandatory.
With income tax return filing made easy, it is high time to complete our part by filing our IT returns regularly. No doubt, ITR comes in handy whether you are applying for a business loan or planning an international trip. It is the duty of a responsible citizen that benefits both the user and the government making it a win-win situation.
Frequently Asked Questions
If you are over 80 years of age, you are allowed to file ITR manually.
1) Go to e-Filing website.
2) Login to e-Filing website.
3) Choose the right income tax form.
4) Check your personal details.
5) Fill in your income details.
6) Check the total taxes you are due or your tax return.
7) Declare, sign and send.
Following are the documents required for ITR:
1) Copy for PAN Card
2) Copy of the Aadhar Card
3) Bank Statement / Bank passbook
4) Income Tax Login ID & password
Every individual has to file the return of income if his total income (including income of any other person in respect of which he is assessable) without giving effect to the provisions of section 10(38), 10A, 10B or 10BA or 154 or 54B or 54D or 54EC or 54F or 54G or 54GA or 54GB.
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