An income tax return is a form that taxpayers use to report their income, expenses, deductions, and credits to calculate the amount of tax they owe or the refund they are entitled to receive from the government.

This blog post aims to provide a comprehensive explanation of Income Tax Returns and their importance, in order to highlight the benefits of filing such returns and address any concerns that taxpayers may have. We will cover all aspects of ITR benefits, including who is required to file them and the consequences of failing to do so. Without any more delay, let’s begin!

Meaning of Income Tax Return

Income Tax Return (ITR) refers to a document that taxpayers are required to file with the tax authorities in their country, declaring their income, deductions, exemptions, and tax liabilities for a specific financial year. This document serves as proof of income for individuals and businesses, and enables the government to determine the amount of tax owed or the refund that may be due.

Income can be earned from various sources such as employment salary, profits from a business, real estate rental income, dividends, interest payments, or other means. Individuals or businesses are obligated to submit their tax returns by a specified deadline, and failure to do so may result in penalties that the taxpayer is required to pay.

Who is Eligible to File Income Tax Return?

According to the Income Tax Act, individuals or businesses are obligated to pay income tax only if their income falls within certain predetermined ranges. The following entities or businesses are required to fully comply and submit their Income Tax Returns (ITRs) in India:

  • Individuals who are below the age of 59 and earn more than ₹2.5 lakh in a year are liable to pay income tax. The threshold for senior citizens (aged 60 to 79) is higher, at ₹3 lakh, while for super senior citizens (aged 80 and above), it is ₹5 lakh. It is important to note that the income amount must be calculated before factoring in any deductions under Sections 80C through 80U and other exemptions listed under Section 10
  • In addition, businesses that are registered and generate income, regardless of whether or not they have made a profit during the year, are obligated to file their Income Tax Returns (ITRs). Similarly, individuals who seek a refund for any excess income tax deducted must also file their ITRs.
  • Individuals who have financial interests or assets in entities located outside of India are also eligible to file their Income Tax Returns (ITRs), as are non-resident Indians (NRIs) who earn more than ₹2.5 lakh in income or accruals in a fiscal year. In addition, foreign businesses that benefit from treaty benefits on transactions conducted in India are also required to file their ITRs.
  • Filing an Income Tax Return (ITR) is not mandatory for everyone in India. It is only necessary if an individual’s taxable income for a fiscal year exceeds the exemption threshold of ₹2.5 lakh. If an individual’s gross income is below this limit, they are not required to file a NIL tax return. However, it is still recommended to file a tax return even if the income is below the minimum threshold for several reasons. If an individual has received any income from any source during the fiscal year, it is always advisable to file a tax return.

The advantages of filing an Income Tax Return (ITR) are listed in the section below.

Top Benefits of Filing Income Tax Return in India

Excess TDS Claim

Even if your income is not taxable, taxes can be deducted from sources such as your salary, Fixed Deposit, or any other income. For example, if your total income is below ₹2.5 Lakhs but you received ₹1 Lakh from a bank’s FD, the bank is obligated to deduct 10% tax from that amount. In such cases, the tax deducted can be claimed back by filing an ITR. In simple terms, to claim any TDS that was deducted at the source, a person must file a tax return.

VISA Application

Submitting ITR documentation along with a visa application can reduce the chances of the application being rejected or identified as problematic. The tax return serves as evidence of the applicant’s civic responsibility. Many countries now require ITR documentation for visa applications due to increased security concerns. For example, when applying for a Schengen Visa, even if you had no income during the past three years, you must still provide tax returns for the previous three years.

A Reliable Proof of Address

The Income Tax Return serves as a valid address proof and can even be used to obtain an Aadhaar Card. Documents such as Aadhaar Cards, licenses, and passports require address proofs, and sometimes common forms of identification like ID cards are not accepted. In such cases, your Income Tax Return can be used as an alternative address proof.

Authentic Evidence of Your Earnings

Employers usually provide Form 16 to their staff as income verification. However, for self-employed individuals or independent contractors, the ITR Filing form is the actual proof of income. This document provides a detailed breakdown of a person’s income and expenses for the entire fiscal year.

A Crucial Document for Loan Application

When applying for a loan to purchase something such as a car or a new home for your family or business, the bank will require certain documents from you. These documents may include Aadhaar Cards, PAN Cards, licences, photo identification, and income proof. Banks typically request ITR for the previous three years to determine if you can repay the loan based on your past and current financial status. Your tax returns can also be beneficial when applying for a credit card since credit card companies often require your prior earnings and tax returns before issuing a credit card.

Establishing Losses

To carry forward a loss from the previous year’s stock market, you must submit a return, even if it is a NIL return. If you want to offset those capital losses, you should file an ITR, regardless of whether or not you earned a profit. Additionally, people who hold foreign stocks must comply with income tax regulations by filing an ITR.

Benefits for Independent Contractors & Professionals

Individuals who work for themselves or work as independent contractors do not receive Form 16. As a result, their ITR is frequently the sole document that indicates they have paid income taxes. Without this evidence, they may face financing and transactional difficulties.

Funding for Startup Ventures

If you are looking to start a new business or expand an existing one, you may need financial support from external sources such as venture capitalists or seed investors. These investors may ask for details about your Income Tax Return (ITR) to assess your business’s financial stability and profitability. They may also use your ITR forms to verify the information in the audited report.


In conclusion, filing an Income Tax Return (ITR) in India offers numerous benefits. It helps individuals comply with legal requirements, claim refunds, and avoid penalties for non-compliance. Additionally, it serves as proof of income for various purposes, including obtaining loans, applying for visas, and addressing verification. It is also necessary for carrying over capital losses and can be used as actual income verification for self-employed individuals. By filing an ITR, individuals can establish their financial credibility and show their civic responsibility. Overall, it is essential to file an ITR, even if one’s income falls below the taxable threshold, to avail of the many benefits it offers.

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