Why It's Important to File Your ITR On Time: Benefits & Drawbacks

In today’s evolving world, managing our finances efficiently is more crucial than ever. One major aspect of personal finance is filing Income Tax Returns (ITR) on time. But still, there are plenty of individuals who procrastinate or overlook this essential responsibility. 

Hence, In this article, we are going to discuss the importance of filing an ITR on time, the numerous benefits it brings as well as the drawbacks of not filing tax returns on time.

Filing Income Tax Returns (ITR) is a legal obligation for all eligible taxpayers. The government uses ITR data to assess an individual's income and tax liabilities. While some may perceive the process as tedious, it serves as a vital instrument for financial transparency and national progress.

Benefits of Filing Income Tax Returns

Avoiding Penalties

One of the most compelling reasons to file your ITR on time is to avoid penalties and late filing fees imposed by the tax authorities. Failing to meet the deadline can lead to financial consequences, making it essential to adhere to the due date.

Ensuring Financial Transparency

Timely filing of ITR promotes financial transparency. It enables the government to track and analyze income patterns, identify tax evasion, and ensure a fair tax system.

Timely Refunds

For those eligible for tax refunds, filing ITR on time expedites the refund process. Timely refunds provide much-needed financial relief and facilitate better financial planning.

Impact on Loan Applications

Financial institutions consider ITR documents when evaluating loan applications. A timely ITR filing enhances your creditworthiness and increases the chances of securing loans at favorable terms.

Grow Financial Credibility

Filing ITR punctually contributes to building a positive financial reputation. It reflects your responsible financial behavior and reliability as a taxpayer.

Promoting Responsible Financial Behavior

Adhering to ITR deadlines cultivates a sense of financial responsibility. It instills discipline in managing finances and encourages taxpayers to maintain accurate records.

Drawbacks of Not Filing Income Tax Return On Time 

Not filing an Income Tax Return (ITR) on time can have several drawbacks and consequences. Below are some of the major drawbacks:

Penalties and Late Fees: The primary drawback of not filing ITR on time is the imposition of penalties and late fees by the tax authorities. The longer the delay, the higher the penalties, which can significantly increase the tax liability.

Loss of Interest on Refunds: If you are eligible for a tax refund, filing ITR late means you will receive the refund later than expected. This delay results in a loss of interest on the refund amount.

Non-Compliance and Legal Consequences: Non-filing or delayed filing of ITR can lead to non-compliance with tax laws, making you subject to legal actions, including notices and audits by the tax department.

Difficulty in Loan Processing: Financial institutions often require ITR documents as proof of income for loan processing. Delayed ITR filing may hinder loan approvals and affect financial plans.

Delay in Processing Tax Refunds: If you have paid excess taxes and are eligible for a refund, late filing can delay the processing of the refund, causing financial inconvenience.

Limited Access to Financial Opportunities: Many financial opportunities, such as applying for visas or participating in government tenders, may require proof of tax compliance, which can be challenging if ITR is not filed on time.

Impact on Credit Score: Delayed ITR filing may not directly affect your credit score, but it can indirectly impact your creditworthiness as financial institutions consider tax compliance when assessing loan applications.

Loss of Tax Benefits: Certain tax benefits and deductions may have specific deadlines, and not filing ITR on time could result in missing out on those benefits for that financial year.

Thus, it is relay important to file ITR on time to avoid these drawbacks and ensure compliance with tax laws, financial planning, and smooth financial transactions.

How to e-file Income Tax Returns on the Portal?

The foremost thing that taxpayers need to do is to calculate their income tax liability as per the provisions of the income tax laws applicable. When calculating your tax liability, ensure to include the account income from all types of sources such as salary, freelancing, interest from income, etc. However, taxpayers can claim the deductions such as tax-saving investments under section 80C and so on.

In the next step, the taxpayer is required to summarize his TDS amount from the TDS certificates (Form 26AS) received by him all 4 quarters of the assessment year.

Form 26AS is used by taxpayers to declare the amount of TDS and tax paid during the financial year. Thus, use your Form 26AS to summarise your TDS payment.

The third essential step is to choose an applicable income tax form. Determine the category that you fall under on the basis of the information provided by the income tax department & choose an ITR form accordingly.

Following are the steps to e-file your Income Tax Returns

1.  The first step is to visit the official website of income tax department and be redirected to the login page. Fill in relevant your ID & password then click “continue”.

2.  After login on the account, click on tab “e-File” and choose Income tax Returns there and click on “File Income Tax Return”.

3.  Then On the next page, you need to select the relevant Assessment Year and click on Continue.

4.  After this, you need to select the method to file your returns whether online or offline. Make sure you choose for online (Which is also recommended) way to file income tax returns.

6.  You need to select whether you want to file your income tax returns as an individual, Hindu Undivided Family (HUF), or others. Select “Individual”.

7.  After that, choose the applicable income tax returns form to file. For instance, Individuals and HUFs (Hindu Undivided Family) can file ITR (who don't have income from business or profession). Similarly, in case of an individual, they can choose the option ITR-1 or ITR-4. Here you will have to press on tab 'Proceed with ITR1'.

8.  The next step, you need to answer some of the questions related to reason for filing your returns above the basic exempted limit or because of the seventh provision under Section 139(1). According to the section, the person can file their income tax returns if the aggregate amount of an individual is more than Rs.1 crore in one or more current accounts during the same year, exceeds Rs.2 lakh on a foreign trip, or if payment of more than Rs.1 lakh is paid on electricity bills. 

1. On the next page, you need to fill in your bank account. (pre-validate it) If you have already provided the details of your bank account.
2. Then you will be on a new page to file your ITR. This current page will include much information filled (Pre-filed). Make sure all the details mentioned are correct & relevant. Validate the summary of your returns. The last step is to verify your returns and send a hard copy to the Income Tax Department. 

Also Read: Income Tax Department: Using AI I-T Department Targets Tax Fraud by Salaried Employees

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