Many salaried individuals think they don’t need to file an Income Tax Return (ITR) because their employer already deducted tax at source, known as Tax Deducted at Source (TDS). While this system is designed to ensure taxes are paid regularly, there are many situations where you might still need to file an ITR.
In this article, we’ll explain why salaried individuals must file an Income Tax Return (ITR) even if TDS has been deducted, and help you understand the requirements and process in simple terms.
When Do You Need to File an ITR?
You must file an Income Tax Return (ITR) if your total income exceeds the basic exemption limit set by the government.
For the financial year 2023-24 and 2024-25, the exemption limits are:
- ₹2.5 lakh under the old tax regime (for individuals below 60 years of age)
- ₹3 lakh under the new tax regime (for individuals below 60 years of age)
This means if your income is more than these amounts, even if TDS has been deducted, you need to file your Income Tax Return (ITR).
Exceptions: When You Must File an ITR Even If Your Income Is Below the above exemption Limit
There are situations where you must file an ITR, even if your total income is below the basic exemption limit. These exceptions include:
- Annual savings bank deposits over ₹50 lakh
- Business income or deposits above ₹1 crore in one or more current accounts
- Business turnover exceeding ₹60 lakh
- Professional income over ₹10 lakh
- Electricity bills above ₹1 lakh
- TDS/TCS (Tax Collected at Source) deducted more than ₹25,000
- Foreign travel expenses above ₹2 lakh
- Having assets abroad or being a beneficiary of foreign assets
If any of these apply to you, then you are required to file an Income Tax Return (ITR), regardless of your income level.
Even If Your Tax Is Deducted, You May Still Need to File Your ITR
While your employer deducts Tax Deducted at Source (TDS) and provides you with Form 16, which shows the tax already paid on your behalf, this doesn’t mean you can skip filing your Income Tax Return (ITR).
There are several reasons why you might still need to file, even if TDS has been deducted:
- Exceeding the Income Limit: If your income exceeds the basic exemption limit, filing an ITR is mandatory.
- Falling under the Exceptions list: You must file an ITR if you are falling within the exception list even if your income is below the basic exemption limit
- Other Sources of Income: If you have additional income, such as interest from savings, capital gains from selling property or stocks, or rental income, you must report this when filing your ITR. Failing to do so can lead to penalties or notices from the tax authorities.
- Mismatch between TDS and tax liability: Sometimes, the amount of TDS deducted by your employer may not match the actual tax you owe. This can happen if you have multiple jobs, extra income, or if your TDS rate is lower than your applicable tax bracket. In such cases, you may need to pay the difference in taxes when you file your ITR.
- Higher Tax Bracket: If you’re in a higher tax bracket (e.g., 30%) but TDS was deducted at a lower rate (e.g., 10%), you’ll need to pay the balance tax when you file your ITR.
Even if TDS has been deducted, it’s important to file your ITR to ensure all your income is reported and any additional taxes owed are paid, avoiding penalties and interest charges.
How to Calculate Your Gross Total Income for Filing an ITR
Let’s go through the steps to calculate your gross total income for the financial year. If you’re a salaried individual with no business income, here’s a simple breakdown:
1. Income from Salary
You need to calculate your total income from your salary. Here’s how:
- Basic Salary: The fixed amount you earn as part of your salary package.
- Perquisites: Additional benefits such as accommodation, car, or other perks provided by the employer.
- Profit in lieu of salary: Bonuses, commissions, or any other additional payments you receive from your employer.
- Exempt Allowances: These could include house rent allowance (HRA), special allowances, etc. that are exempt from tax.
- Deductions: Any deductions such as professional tax or contributions to your provident fund.
Once you add and subtract these values, you’ll arrive at your total income from salary.
2. Income from House Property
If you own a property and earn rental income, this is considered income from house property. You can subtract municipal taxes, standard deductions, and interest on borrowed capital from your rental income.
3. Income from Capital Gains
This includes profits from selling assets like stocks, mutual funds, or property. Depending on the type of capital gain (long-term or short-term), the tax treatment might differ.
4. Income from Other Sources
This includes income like:
- Interest from savings or fixed deposits
- Dividends from stocks or mutual funds
- Other income such as winnings from lotteries, or any other source.
Once you’ve calculated income from all these sources, you can add them up to get your gross total income.
Sample Gross Total Income Calculation for a Salaried Individual
| Source of Income | Details | Amount |
| 1. Income from Salary | ||
| a) Basic Salary | As per section 17(1) | ₹xxxx |
| b) Add: Perquisites | As per section 17(2) | ₹xxx |
| c) Add: Profit in lieu of salary | Section 17(3) | ₹xxx |
| d) Less: Exempt Allowances | Under section 10 | (₹xxx) |
| e) Less: Deductions | Under section 16 | (₹xxx) |
| Total Income from Salary | ₹xxxx | |
| 2. Income from House Property | ||
| a) Gross Annual Value/Rent Received | Income from property or rent received | ₹xxxx |
| b) Less: Municipal Taxes | Tax paid to local authorities | (₹xxx) |
| c) Net Annual Value | After deducting municipal taxes | ₹xxx |
| d) Less: Standard Deduction | Under section 24(a) | (₹xxx) |
| e) Less: Interest on Borrowed Capital | Under section 24(b) | (₹xxx) |
| Total Income from House Property | ₹xxxx | |
| 3. Income from Capital Gains | ₹xxxx | |
| 4. Income from Other Sources | ₹xxx | |
| Gross Total Income | Total of all income sources | ₹xxxxx |
This table summarizes the calculation of a salaried individual’s gross total income from various sources, such as salary, house property, capital gains, and other income sources.
Add up all these sources to calculate your gross total income. This is the income you report before tax deduction when filing your income tax return (ITR).
Conclusion: Filing Your ITR on Time
Filing an Income Tax Return is not just a legal requirement but also helps ensure that you’re paying the correct amount of tax. If your gross total income exceeds the exemption limit, or if you have income from other sources, you should file your ITR.
Even if TDS has been deducted, it’s important to report all your income, pay any additional taxes, and file your return on time to avoid penalties. By following the steps outlined above, you can file your Income Tax Return correctly and stay compliant with tax laws.
Remember: filing your income tax return (ITR) is an important step in ensuring that your taxes are paid accurately and that you’re in good standing with the tax authorities.
