In India, filing an Income Tax Return (ITR) is mandatory under certain conditions. In this article, we will be discussing key scenarios when an individual must file an income tax return (ITR) in India.
Even if your income is below the basic exemption limit and you may not be liable to pay tax, filing an Income Tax Return (ITR) can still be important and sometimes mandatory in certain situations.
Here are key scenarios where income tax filing in India is a must.
Income exceeds basic exemption limit
The basic exemption limit refers to the threshold income level up to which an individual is not required to pay income tax. In India, this limit varies based on age and the type of taxpayer.
If your total income exceeds the basic exemption limit for the financial year, you must file an ITR.
For individuals below 60 years, the limit is 2.5 lakh rupees; for senior citizens (60 years and above), it is 3 lakh rupees; and for super senior citizens (80 years and above), it is 5 lakh rupees.
Please note, the basic exemption limit is calculated based on your gross total income before any deductions are applied.
Gross total income includes all sources of income such as salary, business income, rental income, interest income, etc. Once you’ve calculated your gross total income, you can apply deductions under various sections of the Income Tax Act (like Section 80C, 80D, etc.) to arrive at your net taxable income.
Income from specific sources and high value items
In certain cases the government has made it mandatory to file a tax return irrespective of income and type of taxpayer.
If your electricity consumption is 1 lakh rupees or more during the financial year, you must file an ITR.
An individual with business turnover exceeding 60 lakhs rupees in the previous year is required to file an ITR.
A professional is required to file ITR when gross receipts during the previous year exceed 10 lakhs rupees.
If the annual savings bank deposit of an individual in one or more accounts exceeds 50 lakhs rupees, then, such individual must file ITR.
If an individual deposits 1 crore rupees or more in one or more current accounts during the financial year, then he/she must file an ITR.
When aggregate TDS and TCS deducted exceeding 25,000 rupees in the previous year. However, this threshold is Rs 50,000 for senior citizens.
The person is required to file ITR when the aggregate deposits in all savings bank accounts exceed 50 lakhs rupees during the previous year.
If TDS has been deducted on your income, you must file an ITR to claim a refund if the TDS amount exceeds your actual tax liability.
Foreign Income and travel
If you have foreign income or assets, you are required to file an ITR, regardless of your income level.
If you own assets such as shares, bonds of foreign companies, or a house located outside India, you must file an ITR.
If you receive income from dividends, interest, or rent from foreign countries, ITR filing is compulsory.
If your foreign travel expenses exceed 2 lakh rupees during the financial year, ITR filing becomes necessary.
In India, if you’re considered a resident for tax purposes and have any overseas assets or interests, filing an ITR becomes mandatory. This includes assets you directly own or those you benefit from as a beneficiary owner.
Carry Forward Losses
If you wish to carry forward losses (like business or capital losses) to future years, you need to file your return within the due date.
In case return is not filed or it’s submitted after the due date, then carry forward benefits will not be available.
To carry forward losses you must make sure that income tax return is filed within the due date as applicable to you for the financial year.
Assets and Liabilities
If your total income is less than the exemption limit but you own assets such as foreign assets, bank accounts, or properties outside India, you may still need to file.
If you deposit 1 crore rupees or more in one or more current accounts maintained with a bank during the previous year, you need to file your return.
Assessing Authority Requirement
Sometimes, the income tax department may issue a notice requiring you to file an ITR, which must be complied with.
Filing an ITR not only helps in compliance but also facilitates obtaining loans, visas, and government subsidies.
If you’re unsure about your filing requirements, consulting a tax professional is a good idea.
Frequently Asked Questions (FAQs)
What if I fail to file my ITR?
If you fail to file an ITR by the due date, there can be various consequences. Given below is a list of the consequences.
If the ITR is not filed by the due date of filing, late filing fees may be levied under Section 234F for late filing.
The penalties can vary depending on your annual income.
If your total income exceeds 5 lakh rupees during the financial year then late fee is Rs 5,000.
In cases where total income is below 5 lakhs rupees, the late fee to be paid is Rs 1,000.
If income is below the basic exemption limit, then late filing fee is Nil.
If you owe tax and fail to file on time, you may also have to pay interest on the outstanding amount under Section 234A. This is charged at 1% per month or part of the month on the unpaid tax.
In addition to section 234A, you may be liable to pay penal interest under section 234B and 234C if advance tax provisions are applicable.
If you don’t file your ITR, you won’t be able to claim certain deductions or carry forward losses to future years.
Continued failure to file can lead to scrutiny and legal action by the Income Tax Department, including penalties or prosecution in severe cases.
I am 40 years old, is it mandatory for me to file ITR for an annual income of Rs 4.99 lakhs?
The annual income of Rs 4.99 lakhs is more than the basic exemption limit.
Even if the net tax liability is ‘0’, you are required to file your ITR and report income in it.
Who is exempted from ITR filing in India under section 194P?
Under Section 194P of the Income Tax Act, certain categories of individuals are exempted from filing an Income Tax Return (ITR) in India.
The exemption is specifically for individuals aged 75 years and above.
Here are the conditions to get this exemption:
- The individual must be resident and should be aged 75 years and above.
- The individual must have only interest and pension income. The interest income earned should be from the same bank in which he/she is receiving pension income.
- The senior citizen must provide their bank details to the pension disbursing authority.
- The senior citizen has to file a declaration stating some details with the specified bank.
Such banks will deduct the TDS of senior citizens after considering the deductions and rebates.
If a senior citizen meets these criteria, they are not required to file an ITR for that financial year.
What are the Benefits of ITR Filing?
Filing your Income Tax Return (ITR) in India offers several benefits, including:
- Ensure compliance with the Income Tax Act.
- Allows you to claim refunds for any excess tax paid.
- Enables you to carry forward losses (e.g., capital or business losses) to set off against future income.
- Helps while applying for loans or credit, making it easier to secure funding.
- Helps in the visa application process to verify your financial stability.
- Allow you to claim tax refund when tax deducted (TDS) even if your income falls below the basic exemption limit or the TDS deducted exceeds your actual tax liability.
- Acts as Income and Address Proof.
- Helps in buying term insurance.
What is the last date to file ITR for salaried individuals for FY 2023-24 and 2024-25?
The last date to file ITR for salaried individuals is 31st July every year.
However, if such salaried individuals miss the ITR filing due date, they can file a belated return before 31st December.
Therefore, the ITR filing deadline for FY 23-24 is 31st July 2024 and for the financial year 2024-25, its 31st July 2025.
If a salaried individual misses the income tax return filing deadline of 31st July 2024, they can still file your ITR on or before 31st December 2024.
Similarly, if the salaried individual misses the income tax filing deadline of 31st July 2025 for the financial year 2024-25, then they will have a chance to file ITR on or before 31st December 2025.
Missing deadlines attracts penalties and interest under the income tax act,1961.
