With the last date for filing income tax returns (ITR) fast approaching, most tax payers are probably in the midst of doing so. But, what if your income is below the taxable limit of Rs 2.5 lakh per annum? Should you still file returns? You should, under a few circumstances. Some of these are mandatory, while some are advisable as there are benefits of filing. The biggest benefit is that it helps when you apply for a loan in future or when you apply for a visa, say tax experts. For any home loan, vehicle loan, car loan, etc, most lenders ask for proof of tax returns of the previous three years. So, if you have just entered the work force and at Rs 20,000 a month, your annual salary is below the taxable limit of Rs 2.5 lakh, you are not required to file returns. But, it is useful to do so because you can build proof of your finances. Even if you are applying for a loan as a co-borrower, the return will serve as proof of your income. Similarly, if you are planning to travel abroad, tax returns are required while applying for a Visa. Since 2012, any individual holding a foreign asset has to mandatorily file returns, even if there is no income from that asset, says Sanjeev Gokhale, a Mumbai-based chartered accountant. “It could be a foreign bank account, immovable property, partnership in a firm, etc. But, they may still continue to hold foreign assets.
In such cases, they have to file returns,’’ he points out. ALSO READ: What happens if you delay filing tax returns? Gokhale cites the example of a client who is a retired senior citizen. She earned Rs 7 lakh interest-free income from tax-free bonds and her taxable income was only Rs 14,000. “While there was no need for her to file returns, I advised her to because it is proof that she has income, even if it is not taxable. There is a column in the ITR form where you can show your non-taxable income,’’ he adds.A reason why you have to mandatorily file returns is to claim tax refund or set off losses. For instance, if you have suffered losses from stock market transactions and you want to carry it forward to the next year, you must file for a refund, even if your annual income is below the taxable limit, says Divakar Vijayasarathy, co-founder of Meeturpro.com, an online marketplace for tax, legal and regulatory services. Or it could happen that despite your income being below the taxable limit, your employer has cut TDS (tax deducted at source). Or you earned some money through freelance work and the company deducted TDS at 10 per cent. But since your income is lower than the taxable limit, you are entitled for a refund. For claiming this refund, you have to file a return.