Why you Should File ITR Before the Deadline

If you are an individual whose accounts need not be audited under the Income Tax Act, 1961, you must file your income tax returns (ITRs) by July 31 of the relevant assessment year. For example, for the financial year 2022-23, you must complete the ITR filing process by July 31, 2023. Failing to comply with this regulation can lead to various disadvantages like penalties and cancellation of tax benefits.

Conversely, when you file your returns on time, you can experience the various benefits of filing ITRs within the due date. Let’s take a closer look at the key reasons you must file your ITR on time.

5 Reasons to File ITR Before the Deadline

As mentioned above, the due date for ITR filing is July 31 of every assessment year. However, occasionally, the government may extend this date if it deems the postponement necessary. So, keep an eye on the news and remain up-to-date about the latest developments with regard to ITR filing.

This will allow you to avoid the disadvantages of delayed submission of tax returns and enjoy the benefits of filing ITRs, as outlined below.

1. To Avoid the Penalty for Delayed ITR Filing

By completing your ITR filing on time, you can avoid the penalty levied u/s 234F of the Income Tax Act for delayed filing of tax returns. The penalty levied depends on your total income and can go up to ₹5,000, as outlined below.

ITR Filing Date	Penalty if Total Income Does Not Exceed ₹5 Lakhs	Penalty if Total Income Exceeds ₹5 Lakhs
On or before July 31 of the assessment year	Nil	Nil
Between August 1 and March 31 of the assessment year	₹1,000	₹5,000

If you file your income tax returns within the due date specified for the relevant assessment year, you need not pay this penalty. Additionally, in case you have any pending tax dues, you will also be liable to pay interest at 1% of the outstanding tax amount u/s 234A. By filing your ITR on time, you can also avoid this interest, since you can only submit your tax returns after paying all your tax dues.

2. To Carry Forward and Set Off Eligible Losses

Some losses such as capital losses or losses under the head ‘Profits and Gains of Business or Profession’ can be carried forward to other assessment years. The Income Tax Act specifies the number of assessment years for which these losses can be carried forward.

They can then be set off against specified gains or profits in those other assessment years. Consequently, this reduces your tax liability in those years. This is one of the many benefits of filing ITRs on time, because you can only carry forward and set off your eligible losses if you file your income tax returns on time.

3. To Claim Tax Deductions

There are many investments and expenses that are tax deductible as per the Income Tax Act. You can claim these amounts as deductions from your total income, thus reducing your total taxable income and your tax liability. To get the benefit of these deductions, you need to include them in your ITR and file your tax returns within the due date.

4. To Obtain Income Tax Refunds

If the amount of income tax you have paid exceeds your total tax liability, you will be eligible for a tax refund. However, the Income Tax Department can only verify and process your tax refund if you file your income tax returns on time. This is because all the details of the taxes you have paid and your actual income tax liability are submitted to the Income Tax Department through your ITR.

5. To Make Other Processes Easier

ITRs act as proof of income for various other processes such as opening a bank account, availing of a loan, applying for a credit card or even applying for a travel visa. By filing your income tax returns promptly within the due date, you can have the latest ITRs ready for submission as proof of income. This will, in turn, make all the processes mentioned above smoother and more hassle-free.

Conclusion

Now that you know what the many benefits of filing ITRs are, you need to find the right income tax return for your tax profile. Then, you must fill in the details accurately and completely, and submit the return on time. In case you have any doubts or queries about the ITR filing process, you can always approach a financial advisor or a tax professional for expert assistance.

Keep in mind that in case you file a tax return with any errors, you must rectify it and file a revised return. By ensuring that your income tax returns are accurately filled and promptly filed, you can experience all the benefits outlined above.