Importance of Filing Business Tax Return
Filing Income tax return is an inseparable part of your business activities. It is as important as paying Income tax. It is a tedious task and businesses file their Income tax returns to comply with the Income tax laws. However, there are several other benefits of filing business tax return which can encourage you to be a regular tax filer.
So let's have a look at the top 5 benefits of filing a tax return.
1) Carry forward loss
If your business has incurred a loss under the head 'Profit and Gains of Business and Profession', you would want to carry forward your loss to the next year. This will enable you to set it off against future income. However, you can do this only if you file your tax return on time. In this way, you can reduce your taxable income and tax liability in the coming years.
2) Apply for a loan
Any business requires capital to grow. The financial conditions may not always be favourable. So a loan can act as life support for the business. However, banks and many other financial institutions ask for a number of documents and Income tax return is one of them. So, it is important to file returns regularly and keep the related documents safely.
3) Avoid penalty and prosecution
Income tax is an important source of revenue for the government. Therefore, there are stringent laws in place to curb tax evasion. If you fail to pay taxes on time, hide your income or do not file your tax return, you will attract penalties mentioned in the Income Tax Act, 1961. In worst cases, you can also be prosecuted.
4) Avail government tenders
Your good tax compliance record is not only important for getting loans but also in availing government tenders. If your business is compliant with the Income tax laws build your reputation in the eyes of the government. As a contractor, you will find it much easier to bag government projects if your tax profile is healthy. Sometimes, the contractors have to go through the scrutiny of their returns to prove their candidacy for a tender. So, it is important to ensure that you have left no loose ends because the tax department can check past 6 years of returns.
5) Claim depreciation
An effective way for businesses to save tax is through claiming depreciation. You can claim depreciation of assets used for the purposes of business or profession as an expense to reduce your taxable income. However, the tax department will only allow you to claim tax benefits of depreciation if you file returns on time. This is especially important when you need to file your business returns in ITR 3 or ITR 4.
These are some of the most common and popular benefits of filing Income tax returns on time. If you file your returns early, your return will be processed early by the tax department. As a result, you will be able to claim all the benefits early.
Read more news: