Advantages of E-Filing Income Tax Returns

What are the ways to file an Income Tax Return?

Let's begin by examining the different ways that returns can be submitted:

 

1. Manual submission:

This is the conventional approach to submitting returns, whereby individuals visit the income tax office and manually file their taxes. ¹

 

2. E-filing Intermediaries:

As a taxpayer if you need help organising your taxes and figuring out how you can avail deductions an agent, chartered accountant, or firm may be able to prepare and submit the returns on taxpayer’s behalf. ¹

 

What are the benefits of E-filing your tax returns?

Some major benefits of e-filing of income tax returns are covered below:

 

1. Convenience

Since one may now file taxes from the comfort of their home or place of business at their own convenience, e-filing has expanded tax filing flexibility and made the process much more convenient. ³

 

2. Enhanced accuracy

E-filing improves the correctness of data records and the tax filing procedure as a whole by preventing transmission errors and similar problems. ³

 

3. Accessing Documents

When returns are filed electronically, the user is prompted to upload the required paperwork, generating a database that may be viewed at any time. ³

 

4. Fast Processing of Visas

Most embassies and consultants request copies of your tax returns from the previous couple of years when you apply for a visa. Since they demonstrate the individual's civic duty, these documents are among the necessary ones. As a result, it is best to file your income tax return as soon as possible. ²

 

5. Carry forward Losses

One may lose money in the stock market, when conducting business, or when renting out a home etc. You can lower your tax obligation by deducting these losses from your future income. You can only carry forward losses to later years if you file your return before the original due date. This benefit would not be available if an income tax return was not filed ².

 

6. Getting Tenders from the Government

Contractors are required to file these returns on schedule, with great accuracy, and to have them audited (if needed). This is particularly important when attempting to win a government contract. This work may occasionally be inspected by the tender scrutiny committee, and it is standard procedure to review the ITR for the previous three to five years. ²

 

7. For Term Insurance Purchases

Insurance companies frequently ask applicants to give their Income Tax Return (ITR) records as evidence of their yearly income in order to accept term insurance plans. The individual's wages determine the coverage amount, and submitting the ITR aids insurance companies in determining the higher income level of the policyholder. ²

 

8. Start-up Venture Funding

Funding from outside sources, such as venture capitalists or seed investors, may be necessary when preparing to start a new business or expand an existing one. In order to assess the company's profitability and financial health, these investors may ask to see the details of your ITR. They could also use your ITR forms to cross-check the data in the audited report. ²

 

Key Takeaways

1. Income Tax returns need to be filed when the taxable income is above the exemption limit.
2. The returns can be filed either manually at the tax office or online through e-filing.
3. The benefits of e-filing of income tax returns include accuracy and easy access to documents anytime.
4. Filing on time helps carry forward business or capital losses for future tax benefits.
5. ITRs are essential for visas, government tenders, and even for buying life insurance plans.
6. Regular filing boosts credibility, useful for getting loans or investor funding

 

Conclusion

There are several benefits of e-filing tax returns, such as convenience, cost and time savings, enhanced accuracy, and better authenticity. It simplifies access to documents, speeds up refunds, and provides essential proof for loans, visas, insurance, and business funding. By ensuring timely filing, taxpayers can also carry forward losses and qualify for government tenders. Overall, e-filing makes tax compliance easier, faster, and more efficient, helping both individuals and businesses.

 

FAQs

 

1. What is e-filing of income tax returns?

E-filing is the process of electronically submitting income tax returns through the Income Tax Department's online system, making the assessment procedure simple and convenient. ¹

 

2. What are the ways to file income tax returns?

Income tax returns can be filed in three ways:

1. Manual filing:

Visiting the income tax office and submitting a physical copy.

1. E-filing intermediaries:

Agents, chartered accountants, or firms file returns on behalf of taxpayers.

1. Self e-filing:

Taxpayers file their returns online. ¹

 

3. How does e-filing help in getting loan approvals?

Banks and financial institutions require proof of income to process loans. Income tax returns serve as official proof of steady earnings, helping in the approval of home, personal, and vehicle loans. ²

 

4. Can I get a tax refund by filing an income tax return?

Yes, if the tax deducted at source (TDS) exceeds your actual tax liability, you must file an income tax return to claim a refund²

 

5. Why is an income tax return needed for visa applications?

Many embassies and consulates require copies of tax returns for the past couple of years as proof of financial stability when processing visa applications. ²

 

6. How does e-filing improve accuracy?

E-filing reduces transmission errors and ensures that tax records are more accurate by eliminating manual data entry issues. ³

 

7. Can business losses be carried forward if returns are not filed?

No, taxpayers can only carry forward business losses, rental losses etc to offset future income if they file their returns before the original due date. ²

 

8. How does e-filing save time and money?

E-filing eliminates the need for paper submissions and manual processing, reducing costs and expediting the filing and refund process. ³

 

9. Why is an income tax return important for term insurance purchases?

Insurance companies require income tax returns as proof of annual income to determine the coverage amount for term insurance  plans. ²

 

10. How does e-filing speed up tax refunds?

With digital filing, the processing of tax returns and refunds is faster ensuring that taxpayers receive their refunds sooner. ¹

 

11. Is e-filing tax returns faster than offline filing?

E--filing is significantly faster and more efficient as it offers quicker acknowledgements, fewer errors, and better tracking. It saves time and reduces the need for manual submissions through post or physical visits.

 

12. Can I correct mistakes easily when I e-file my tax return?

Yes, after filing your return online, you can correct errors by filing a revised return under Section 139(5) if it’s before assessment. Section 154 is applicable if the mistake is found after the revision window closes, This provision allows you to correct factual mistakes and do not require extensive verification or fresh investigation. Section 139(8A) also allows you to correct mistakes within 48 months from the end of the relevant assessment year..

 

13. Can e-filing reduce the chances of errors in tax returns?

E-filing typically lowers the risk of mistakes because it uses automated checks and built-in validations.

 

14. Can e-filing help avoid penalties or late filing issues?

E-filing helps you avoid manual data entry errors and file returns on time. However, on missing deadlines, taxpayers can attract fines of up to ₹5,000 under the Income Tax Act. For small taxpayers (income below ₹5,00,000), the penalty is reduced to ₹1,000.

 

Sources

1. https://cleartax.in/s/income-tax-return-filing-benefits