What is a Tax refund?
Tax Refund is the amount that the Government gives back to the Taxpayers who pay excess taxes. It is usually issued after the income tax returns ITR is filed. The date of filing Income Tax Returns is usually 31st July of every year unless it extends. Getting an Income Tax Refund usually means you overpaid your taxes a year before. Salaried employees can avoid Tax Refund by correctly filling W-4 form while Businessmen can avoid it by estimating their deductions accurately. To find the amount of Income Tax Refund you should calculate the tax liability. You receive a refund of the extra amount in your bank account or by cheque if you pay more than your liability. The easiest way to file your Income Tax Refund is by declaring your investments in Form 16.
Tax is a source of revenue to the Government. It is utilized for Social welfare expenses of the Nation. There are two types of Taxes, Direct Taxes and Indirect Taxes. Direct Taxes are collected on the Wealth or income of a taxpayer. Indirect Taxes are paid on the purchase of goods or services. For Example GST, Custom Duty. Taxes are utilized on Defense of the Nation like the purchase of arms, ammunition, welfare and salary of the Soldiers. They also use Taxes paid by people on Social Welfare causes. Construction of roads, Water supply, Electricity etc.
Emergency Fund is like a lifeguard that keeps you afloat at the time of crisis without having to rely on high-interest loans or credit cards. It’s better to have Emergency Funds when you are in Debt. This helps to avoid borrowing money from someone else. You can save up to half a month of expenses or the right amount depends on your financial circumstances.
The most preferred Emergency Fund saving is when you save every month. For example, if you lose your job you could use your emergency funds to pay for necessities till you find a new job. It helps during unseen future emergencies like a sudden medical emergency or any personal emergency. You can put your emergency fund in a saving account with a high-interest rate with easy access so that an emergency you can have easy access to your money. It is important to have a separate account for emergency funds so that we do not use that for unnecessary things. If you are an employee and have fixed monthly income, the money can easily be transferred in your emergency fund once you get paid.
Tax Refund Benefits
Apart from receiving money at the end of the Tax year, there are many other benefits of filing ITR.
~ Loan approvals become easy when you have a copy of Tax Returns.
When you apply for high-value loans you need to submit ITR receipts of last 3 years. Bankers consider ITR as an important proof of income.
~ It is a proof of your address and Income
You receive the ITR receipt at your address which serves as an address proof.
~ At the time of visa application consulates and embassies require you to provide copies of your Tax Refund of past years.
While applying for a visa application, you need to show your ITR receipts of the past 3 years. It helps to establish your financial status for the country you are visiting before granting you a visa.
~ It is a proof of payment of you Taxes
~ If the income is below tax limit you will get a refund of TDS after the deductions as per the Income Tax Returns department.
Having ITR receipts as proof of proper income helps to get higher Life cover insurance whenever required.
~ Compensate losses in the coming Financial Year
You cannot recompense your losses of the last financial year to the current financial year unless you file ITR. Unadjusted losses cannot be carried forward to the future years if tax returns are not filed on time.
~ Credit Cards
Credit cards applications face rejection by Banks if ITR is not filed.
~ If you start a new business and need to file a government tender, tax refunds of previous years are important as they serve a proof of income and tax payments.
These are some of the Benefits of the Income Tax refunds.