Your tax refund has to be filed on time, i.e. before the 31st of July each year pertaining to the income of the previous year. In case, you do not have any tax outstanding you can file the returns before the completion of the assessment year. However, this will entail a penalty of Rs.5000 and also put you into a lot of other hassles. Let us understand some of the benefits of filing ITR on time. In the past, ITR could be filed within 2 years subsequent to the financial year for which returns are filed. For example, if you are filing for the financial year 2016-17, then you can file the returns by March 31st 2019. However, this has not been shifted to just one year i.e. it the returns for the FY 2016-17 will have to be filed before March 31st 2018. Even this leeway comes with a lot of costs. Let us understand the benefits of filing the ITR on time despite the time limit for filing ITR offered by the IT department.
It is much easier to claim refund on your tax paid
You may be entitled to receive a tax refund for a variety of reasons. You may have filed your proofs of investment late so excess tax may have been deducted by the employer. You may not have claimed certain benefits at the time of tax payment. Some payments may have come late in the year where you may have paid higher advance tax. In all these cases, you can claim refund from the income tax department. There are two things to note here. When you file your ITR online within the stipulated time limit then the refunds are processed very quickly. However, in case of delayed filing of returns, the refunds will only be processed in the next fiscal year. Also, when you file returns on time, you are entitled to receive interest on any delay in payment of refund. In the event of late filling of returns, no interest will be paid irrespective of the delay in payment of refund.
Tax returns are an important document of income proof
The tax returns are a very important document of income proof for various purposes. You need to provide proof of income at various places. When you apply for loan or credit card, you are required to furnish proof of income. When you apply for a visa to countries like the US, UK or Schengen countries, you need to submit copies of your income in the form of your last 2 year ITRs. Also, these returns are a must when you are opening a trading account and want to trade in derivatives. In all these cases, your ITR will be taken as the veritable proof of your total income and if you file your returns on time then it will be an added advantage.
Gives you sufficient time to verify and cross check documents
Your tax returns entails extensive documentation like Form 16, Form 26AS, P&L statement, capital gains statement, statement of assets etc. When you file your returns on time you have the leeway to get your documents in place and also make necessary verification as required. You can cross check with the Form 26AS and also with the Form 16 to ensure that the government tax records are updated. When all your numbers are verified, you stand a better chance of getting your refunds processed much faster.
Start your tax planning for the next year sooner
It happens to most of us. We don’t start our tax planning for the next year till the current year filing is completed. So, delay in filing returns this year means you are delaying your tax planning for the next year. Ideally, tax planning should be spread through the year rather than clustered in the last quarter. This can be achieved by filing your previous year returns well on time.
Above all, late returns means you cannot carry forward losses
This is perhaps the most important reason to file your ITR on time. When you file late ITR, then you are not allowed to carry forward the losses for that year to subsequent years. When you incur capital losses or business losses, you can carry forward these losses for a period of 8 years for set off (4 years of in case of speculative losses). When you file returns after the stipulated date, you lose the advantage of carrying forward the current year losses to future years. That means you also lose the tax shields. So make it a point to file your ITR on time.