Know! Why It Is Beneficial To File Tax Returns of Business?
ITR filing is an indispensable activity of one’s life, be it an individual or a business or a professional as ITRs are tax forms to file income tax with the government in a predefined format. Law has made it mandatory for every individual and business to file an Income Tax return every year for the income received during the financial year. The income may be from wages, dividends, capital gains, interests or any other sources.
Apart from income, the ITR also reflects the taxes paid on the income. So, if the tax liability paid by an assessee surpasses his actual tax liability then he shall become eligible for tax refunds claims. Thus apart from being in the good books of government and eligible for tax refunds, there are many other benefits of filing tax returns of businesses.
Let us Have a Pointwise Deeper Dive Into it. Here We Go:
Presumptive Taxation Scheme Availment — Under the Presumptive Taxation Scheme, the small businessmen and professionals are allowed to pay taxes on a certain portion of their entire income, instead of on the whole income u/s 44AD. This scheme was launched by the Government of India to abbreviate the tax burden on small taxpayers. The scheme can be availed by professionals & businessmen with annual income below Rs 50 Lakhs and Rs 2 Crores, respectively. However, the benefits under the scheme can be availed when the taxpayer files his income tax returns in Form ITR4. So, filing an ITR can benefit you highly, in this way.
For example, if you are a professional with an annual income of less than Rs 50 Lakhs and you file Income tax return 4, you can register yourself under the Presumptive Taxation Scheme. The scheme will allow you to pay taxes only on 50% of your income. Similarly, if you are a businessman with an annual income of less than Rs 2 crores and you file ITR 4, you can register yourself under the Presumptive Taxation Scheme. The scheme will allow you to pay taxes only on the 8% of your income.
Defends from prosecution — Since the ITR filing is mandatory by the law, so filing an ITR keeps you in tune with your duties towards law. This is quite an obvious benefit of filing an ITR. However, apart from this, an ITR is evidence of your income and tax liabilities executed by you. So in cases of any prosecution consequenced out of any circumstances, you have your evidence ready in the form of ITR.
Depreciation Claim — Income tax law allows a businessman to claim depreciation on the assets in his name. For the businessmen under the presumptive taxation scheme, the total taxable income is calculated after deducting all expenditures & depreciation u/s 32 of the income tax act. In this way, filing an income tax return allows a taxpayer to bolster his profit by using deductions such as depreciation.
Eases Loan Availment — A business or an individual may need a loan at any point in time. An ITR is a certain document asked by officers engaged in loan processing because an ITR is an evidence of the status of your business and that you are backed with a particular amount of money to pay back the loan. So, if you duly fill your ITR every year on time, you can avail of the loan easily from any bank. Just like defaults come with punishments & penalties, and in the timely filing of tax returns comes with many benefits to your business. Apart from adding stars to the image of your business entity, it also ensures to keep you in adherence to the tax-related rules & regulations.
Carry Forward of Losses — Profit and loss is a part of the business. when the losses are incurred, it can be adjusted against the income under the head “profits and gains of business and profession”. Carry forward of losses is a strategic advantage for all businesses. However, the losses can be carried forward for some time, only when an assessee files an income tax return. Without filing an annual ITR, an assessee can not carry forward the losses.
Filing an ITR will allow an assessee to carry forward the past loses against the earning and thus reduce your tax liability.
The in-time filing of ITR is very important and highly beneficial. If you are not knowledgeable enough to file an ITR or if you have time-deficiency than the statutory compliances can be outsourced these days. Some companies like SAG Infotech, TalentPro have experienced and efficient staff to cater to such services to make you compliant with statutory regulations.
If you are looking for an easy and quick way to file Income tax returns, download free Gen IT Software, which makes income tax return filing and validation a breeze for individuals and businesses.
