1.Carry forward your Losses
By filing your return within the original due date, you can carry forward losses to subsequent years. These losses can be offset against the income of future years, thereby reducing your tax liability. Without filing an income tax return, this benefit would not be possible.
2. Claim Refund of Excess Tax Payments
Even if your income is below the taxable threshold, taxes may still be deducted from sources such as your salary, fixed deposit (FD), or other income. For example, if your total income is less than Rs. 2.5 lakhs, but you received Rs. 1 lakh from an FD, the bank is required to deduct 10% tax on this amount. In such cases, individuals can claim a refund for the tax deducted by filing an Income Tax Return (ITR). In simple terms, filing a tax return allows individuals to recover any tax deducted at the source.
3.Avoid Penalty
If you are required to file your tax returns according to the income tax act but fail to do so, the tax officer has the right to impose a penalty of up to Rs. 5,000.