Do You Have to File an ITR? Find Out with This Comprehensive Guide

Filing an Income Tax Return (ITR) is not just about fulfilling a statutory requirement; it serves as a formal declaration to the government and tax authorities regarding your income for a particular financial year. It also acts as proof of your income, which can be crucial in various financial transactions and legal matters.

Do You Need to File an ITR?

Whether you need to file an ITR depends on whether your income, expenditure, or investments exceed a certain threshold limit. These limits vary between the Old Tax Regime and the New Tax Regime.

Threshold Limits for Filing ITR

Do You Have to File an ITR? Find Out with This Comprehensive Guide
DO-I-NEED-TO-FILE-INCOME-TAX-RETURN

 

Under the Old Tax Regime:

  • The requirement to file an ITR is based on your income slab and age group.
  • The regime allows for various deductions and exemptions but has higher income tax slab rates.

Under the New Tax Regime:

  • There is no distinction based on age.
  • The regime offers lower tax rates but does not allow most exemptions and deductions.

Cases Where You Must File ITR Even If Below Threshold

Even if your gross income is below the threshold limit, you may still be required to file an ITR in certain scenarios:

  1. Foreign Travel Expenditure: If you or any other person spends more than Rs 2 lakh on foreign travel.
  2. Large Deposits in Current Accounts: If you deposit more than Rs 1 crore in one or more current accounts.
  3. Large Savings Account Deposits: If you deposit Rs 50 lakh or more in a savings account.
  4. Business Turnover: If your business turnover exceeds Rs 60 lakh in a financial year.
  5. Professional Receipts: If your professional receipts exceed Rs 10 lakh in a financial year.
  6. High TDS/TCS Amount: If the total TDS/TCS is Rs 25,000 or more.
  7. High Electricity Bills: If you pay electricity bills exceeding Rs 1 lakh on an aggregate basis during the financial year.
  8. Foreign Income or Assets: If you are an ordinarily resident individual with income from foreign countries, assets abroad, or signing authority in any foreign account.
  9. Capital Gains Exemptions: If your gross total income exceeds the exemption limit before claiming tax exemption on capital gains under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB.

Additional Mandatory ITR Filing Cases

Several other situations mandate the filing of an ITR:

  • Company or Firm: Every company or firm must file an ITR regardless of income or loss.
  • Income Tax Refund Claims: If you need to claim an income tax refund.
  • Carry Forward Losses: If you want to carry forward a loss under any head of income.
  • Foreign Assets or Interests: If you are a resident individual with assets or financial interests in entities outside India, or if you have a signing authority in a foreign account (excluding NRIs or RNORs).
  • Income from Property Held in Trust: If you receive income from property held under a trust for charitable or religious purposes, political parties, research associations, news agencies, educational or medical institutions, trade unions, not-for-profit universities or educational institutions, hospitals, infrastructure debt funds, or any authority, body, or trust.
  • Foreign Company Treaty Benefits: If you are a foreign company claiming treaty benefits on transactions in India.
  • Loan or Visa Applications: Proof of return filing may be necessary when applying for a loan or visa.

Penalties for Late Filing of ITR

Failing to file your ITR on time can lead to several penalties:

  • Late Filing Fee: Under Section 271F of the Income Tax Act, a late fee of Rs 5,000 is applicable for Assessment Year (AY) 2021-22 if the return is filed beyond the due date specified under Section 139(1). However, if the total income of the taxpayer is up to Rs 5,00,000, the late fee is reduced to Rs 1,000.
  • Interest on Unpaid Tax: An additional interest of 1% per month or part of the month under Section 234A is applicable for the amount of tax remaining unpaid.
  • Loss of Deductions and Carry Forward of Losses: Late filing can result in the loss of certain deductions and the inability to set off and carry forward losses (other than house property loss) as per Section 139(1).

Conclusion

Filing your ITR is a crucial responsibility that comes with numerous benefits and legal requirements. Understanding the thresholds and special cases that necessitate filing can ensure compliance and help avoid penalties. Always stay informed about the latest tax laws and consider consulting a tax professional for personalized advice.

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