INCOME TAX RETURN : “Do I need to file an Income Tax Return if my income is below Rs 7 lakh?”
If your income is below Rs 7 lakh, you may be wondering if you need to file your Income Tax Return for FY 2023-24. Filing an income tax return (ITR) is compulsory if your gross taxable income surpasses the basic exemption limit or if you have carried out specific transactions. However, this does not always imply that you are required to pay income tax. The first important point to note is that filing ITR is very different from paying income tax.
“Generally, taxpayers have a misunderstanding that if tax is not payable then filing of ITR is also not mandatory,” says Sudhir Kaushik, Co-founder and CEO, Taxspanner.com, according to an ET report. Under section 87A of the Income Tax Act, 1961, you are eligible for a tax rebate if your net taxable income is within Rs 5 lakh (old tax regime) or Rs 7 lakh (new tax regime). Apart from income, there are additional factors that make filing ITR mandatory. Nevertheless, even if your tax liability becomes zero due to the tax rebate, filing an ITR is still necessary. The deadline for filing ITR for the current assessment year is July 31, 2024, for individuals who are not required to undergo an income tax audit for FY 2023-24 (AY 2024-25).
Kaushik emphasizes that filing an ITR is mandatory when your gross total income, before deductions under Chapter VI (Sections 80C, 80D, etc.), exceeds the basic exemption limit.
For FY 2023-24 (AY 2024-25), the basic exemption limits for individuals under the old tax regime are:
* Rs 2.5 lakh for those below 60 years of age
* Rs 3.0 lakh for individuals aged 60 years and above but below 80 years
* Rs 5.0 lakh for individuals aged 80 years and above
In contrast, under the new tax regime, the basic exemption limit for all categories of taxpayers is Rs 3 lakh for FY 2023-24 (AY 2024-25).
When is ITR filing mandatory regardless of income level?
According to Neeraj Agarwala, Partner at Nangia Andersen India, there are specific circumstances where individuals are required to file an ITR irrespective of their gross total income:
* Individuals with annual bank deposits exceeding Rs 50 lakh across one or more savings accounts must file an ITR.
* Those whose electricity bills exceed Rs 1 lakh during the year are obligated to file an ITR.
* Individuals who possess assets in a foreign country, are beneficiaries of such assets, or have signing authority in any overseas account must file an ITR.
* Professionals earning more than Rs 10 lakh in a financial year are required to file an ITR.
* If a person’s TDS/TCS amounts to more than Rs 25,000 (or Rs 50,000 for senior citizens), filing an ITR is compulsory.
* Individuals who spend Rs 2 lakh or more on foreign travel for themselves or others during the financial year must file an ITR.
Also Read | ITR filing FY 2023-24: Why is Form 16 crucial for salaried individuals when filing income tax return?
To illustrate these requirements further, consider the following example:
* Example 1: Imagine a salaried individual with a gross taxable income of Rs 5.5 lakh, eligible for a standard deduction of Rs 50,000, 80C deduction of Rs 1.5 lakh, and other deductions totaling Rs 1,10,000. In this scenario, filing an ITR is necessary.
* Example 2: If your net taxable income is Rs 4.25 lakh, which falls below the Rs 5 lakh or Rs 7 lakh threshold (depending on the tax regime), you are exempt from paying income tax due to the rebate under section 87A. However, you are still required to file an ITR because your gross total income exceeds Rs 2.5 lakh (old tax regime) or Rs 3 lakh (new tax regime).
* Example 3: Even as a salaried individual with a gross taxable income of Rs 7.5 lakh and a standard deduction of Rs 50,000, resulting in no income tax liability after deductions and rebates, filing an ITR remains mandatory.
Agarwala emphasizes, “Individuals must file an income tax return if their total income, excluding deductions under Chapter VI-A, surpasses the basic exemption limit. For instance, if their total income excluding gross deductions under section 80C amounts to Rs 3,90,000 (Rs 5.5 lakh – Rs 50,000 – Rs 1.1 lakh), assuming other deductions are not under Chapter VI-A, filing their ITR becomes mandatory.”
If you are required to file an ITR but fail to do so by the deadline of July 31, 2024, you can opt for a belated ITR. However, choosing not to file at all may lead to several consequences, according to Agarwala.
Firstly, under Section 234A, failing to pay taxes on time attracts penal interest at a rate of 1% per month on the outstanding tax amount. Additionally, delay in paying advance tax incurs interest under Section 234B.
Moreover, Section 234F imposes a late fee for not filing your ITR within the due date, which is Rs 5,000. However, if your annual income is below Rs 5 lakhs, the late fee is limited to Rs 1,000. No penalty is charged if your gross income falls below the basic exemption limit.
It’s crucial to note that filing a belated ITR forfeits the ability to carry forward losses from stocks, futures and options (F&O), and other sources, although losses from house property can still be carried forward.
Furthermore, filing an ITR is necessary to receive any tax refund. If you file a belated ITR, you will not receive any interest on the tax refund.
If you fail to file an ITR, the income tax assessing officer may conduct a Best Judgment Assessment, estimating your income and tax liability based on available information.
Lastly, not filing your ITR and failing to opt for the old tax regime by submitting Form 10-IEA means your income tax will be calculated under the new tax regime by default, potentially causing you to miss out on claiming applicable gross deductions.
