Advantages and Disadvantages of Income Tax Return Filing

Well, if you haven’t started your professional career, or you haven’t started earning yet, then you probably don’t know what ITR means. Or it could be that you just heard about it recently, and now it has piqued your interest. So, let’s see what it is exactly. Return ITR, also known as Income Tax return filing, is the process of submitting a tax return to the government, in which one reveals his/her yearly income. It is a simple form that is filled out by informing the tax department regarding the money that was earned during the year, how much tax has been already paid, and if more tax should be paid or money you should receive. All in all, it is more like a tool or a way to ensure compliance with tax regulations in the country, so that you don’t get into legal trouble later on. Now let’s find out the pro and cons of ITR filing:

Advantages of Income Tax Returns Filing

1. Get Loans Approved Even Faster

When you confirm the submission of your ITR, it automatically becomes a crucial factor in loan qualification, be it you are interested in buying a home, a car, or personal loans that need funds, you know? And yes, your ITR is kinda like proof that you have enough credit score for a stable income, which in turn makes lenders be convinced that they will approve your loan as fast as possible.

2. Claim Back Extra Tax

It is possible that, according to your account statements, the total tax deducted from your income throughout the year is higher than the actual tax liability. And for sure, you can apply for a tax refund when you file your ITR to recover this surplus amount. It could be like in your particular way of making a living, you are double taxed, and if you know about how the tax code works, then you don’t need to worry about that because you can mention that in your ITR and claim that extra tax.

3. Proof of Income and Address

Your ITR isn’t only about the amount of taxes you pay, but it can also be considered a legal document that can be proof of how much you earn and what your residential address is, in case you need to show these things anywhere, like a bank or any other institution. Just so you know, this feature can be very beneficial, especially when you apply for loans, credit cards, and visas.

4. You Can Carry Forward Losses

Let’s say you have made some losses in trading in the stock markets, the proper filing of your ITR gives you an opportunity to carry those losses along to the next year. That means that in the future when you make a profit, you can utilize those losses to lower your taxes. But to get these benefits out of ITR filing, you’d have to be careful about the timelines because you don’t want to get late in filing these losses, or else, it’ll all be for nothing.

5. Smooth Visa Processing

If you are thinking about going overseas, especially to places like the USA, the UK, or Australia, getting your ITR documents ready can help you with a simple visa process. See, it is true that, if you are paying your taxes, it means you are financially responsible, which leads to a stronger probability of the approval of your visa.

6. Winning Government Contracts

If you are into business, the first thing you will need to do to be able to apply for tenders and contracts from the government is to file an ITR and have it as a record by your side. Simply put, the more consistent you are in filing your ITR, the more options you will have for your business to get involved in government projects and to grow.

7. Stay Stress-Free and Compliant

After you pay your tax return each year, do you feel that a HUGE burden is lifted from your shoulders and your mind is finally free? Right? All in all, by complying with the law, you are securing your future as a taxpayer.

Disadvantages of Income Tax Returns Filing

1. It’s a Time-Consuming Task

When it comes to filing tax returns, it is undoubtedly a complicated and time-consuming process. In order to do this, you would have to sit on the Internet and gather all your financial statements, organize them by sorting out the details, and calculate the total amount of income, deductions, and tax liabilities. All in all, it’s a headache, that’s for sure.

2. Disclosing Your Finances

Another important thing that you need to understand is that when you file your tax return, you have to disclose very sensitive financial information, like how much money you earn and what investments you make, as well as the expenses that you have. And if you want to keep things private, especially about your income, this can be a huge pain.

3. Unexpected Tax Bills

It is a possibility that when you file tax returns, some tax liabilities that you were not aware of may be revealed. When you have a reasonable amount of income or when you have few allowable deductions, your tax burden could be more than you expected, and that’s not good news.

4. Risk of Mistakes

See, errors created by the faulty reporting of income, deductions, or some other details can be hard to correct and may take a lot of time. Therefore, care should be taken, and the whole phase should be double-checked, which can sometimes increase the degree of difficulty.

5. Professional Help Costs

Especially in India, we don’t know why exactly there is a need to make the overall ITR filing process so difficult that you always have to hire some professional to help you with it. This is just a thing that adds more expense.

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