If you earn an income that falls below the government’s tax exemption threshold and TDS is deducted, you should file your income tax return to reclaim that deducted TDS. Many people get mixed up about Income Tax Returns (ITR). Some believe that if their salary doesn’t fall into any tax bracket, they don’t need to file a return. That’s not true! Even if you don’t fall into a taxable category and are employed, it’s still important to file your ITR every year. Doing so can bring you 10 advantages, and there are often concessions available too.

 

For instance, if you earn a salary that doesn’t hit the tax slab but invest in mutual funds, stocks, fixed deposits, or other schemes, and your earnings from those exceed the tax exemption limit, you must file your ITR.

 

Here are 7 benefits of filing your ITR:

 

1. Claiming tax refunds: You need to file your ITR to get any tax refunds. When you submit your return, the Income Tax Department reviews it, and if you’re owed a refund, it will be directly deposited into your bank account.

 

2. Easier bank loans: Your ITR serves as solid proof of your income. Both government and private banks, as well as financial institutions, accept it as valid income documentation. When applying for a loan, banks typically request income proof, often looking for ITR receipts from the past three years. If you’ve been filing your ITR regularly, you’ll have no trouble providing this proof, making it easier to secure a loan.

 

3. Starting your own business: If you’re looking to leave your job and launch your own business or startup, having your ITR on hand will be beneficial. If you want to secure contracts with any government department, you’ll need to present your ITR. In such cases, you’ll need to provide ITR records for the last five years.

 

4. Visa applications: Many countries require 3 to 5 years of ITR documentation when issuing visas. Visa authorities use this information to assess the financial background of applicants, ensuring they have the necessary financial stability.

 

5. For larger policy coverage: A lot of life insurance and other policy providers require your Income Tax Return (ITR) records if you’re looking for a higher coverage amount. For instance, if you want a term plan with a coverage of Rs 1 crore, they’ll ask for your ITR filings to confirm that you can afford to pay the premiums regularly.

 

6. Income verification: Your ITR serves as proof of your income source. Your employer provides you with a document called Form 16, which outlines your tax details and TDS. This form verifies your annual income. You’ll also need Form 16 when applying for a loan.

 

7. Acts as address verification: The ITR receipt can also serve as proof of your address. This receipt is sent to you via email or to your registered address by the Income Tax department. So, it can be used to verify both your income and your address.

 

Now, income up to 12 lakhs is tax-exempt.

On February 1, 2025, Finance Minister Nirmala Sitharaman unveiled the second budget of the Modi government’s third term. This budget brings significant relief for taxpayers. Salaried individuals can now earn up to Rs 12.75 lakh annually without paying any tax if they opt for the new tax regime.

 

Under this new system, the government will eliminate 5% tax on income between Rs 4-8 lakh and 10% tax on income from Rs 8-12 lakh under section 87A. Additionally, there will be a standard deduction of Rs 75,000. This means that the total income of Rs 12.75 lakh for salaried individuals will be tax-free.