Attention! You might have to file your income tax returns even if it’s below the taxable limit

According to section 139(1) of the Income Tax Act, an assessee needs to file an Income Tax Return (ITR) on or before the due date of filing ITR, when the total annual income exceeds the maximum amount, which is not chargeable to income tax. Anybody who is less than 60 years of age and has an annual income of more than Rs 2.5 lakhs has to file income tax returns. For senior citizens, the cut-off is Rs 3 lakhs, and for those who are more than 80 years old, the cut off is Rs 5 lakhs.

However, Finance (No. 2) Act, 2019 has inserted a new seventh provision to section 139(1) to provide for mandatory filing of return of income for undertaking certain high-value transactions even though the person is otherwise not required to file a return of income due to the fact that total income is below the basic exemption limit. The intent behind adding this proviso is to collect information about taxpayers whose income declared and expenses incurred have huge variances.

Under the seventh proviso to Section 139(1) of the Income Tax Act, 1961, even if the income is below the exempted limit, a person will have to file ITR in case he or she meets any one of the following criteria:

( i)  has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or

(ii) has incurred an expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or

(iii) has incurred an expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or

(iv)  fulfills such other conditions as may be prescribed,

A brief discussion of the above-mentioned criteria is as follows:

Deposit of Rs. 1 crore or more in current accounts :

This covers all types of deposits whether in cash or by cheque or through online transfer. Also, the deposits taken into consideration are the ones made in CURRENT accounts only. Savings accounts and other accounts are outside the purview of this provision.

Expenditure for Foreign Travel for more than Rs. 2 lakhs:

An exception has been added for this criteria; foreign travel does not include travel to neighboring countries or places of pilgrimage, as may be notified by the tax department. Hence, such foreign travel does not fulfill the criteria for filing an ITR. It covers all the expenditure incurred by a person to travel to a foreign country for himself or any other person. Hence, the person who incurs the expenditure may or may not travel to a foreign country.

Expenditure on the consumption of electricity for more than Rs. 1 Lakh:

The expenditure on the consumption of electricity is only covered under this provision. Expenses incurred for getting the electricity connection or deposits made with electricity authority are not covered. Also, if the person has more than one electric connection, all the expenses will be aggregated to determine the threshold limit of Rs. 1 Lakh.

Other prescribed conditions:

CBDT is empowered to prescribe other conditions or high-value transactions under this seventh proviso. To date, no such conditions have been prescribed.

Note:

• It is not necessary that all the conditions have to be fulfilled. Fulfilling any one of the above-mentioned conditions is sufficient to file a return of income. These amendments will take effect from 1st April 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent years. The notified ITR Forms ITR-1 to ITR-5 for the assessment year 2020-21 contains information on the seventh proviso to section 139(1). These changes have been incorporated in the ITR forms for AY 2020-21./span>
• Previously, any person who claimed the benefit of exemption from capital gains tax was not required to file ITR provided his or her total income did not exceed the basic exemption limit after claiming such capital gains exemption under Sections 54 to 54GB of the Income-tax Act. However, post the Finance Act, 2019, an amendment to the sixth proviso to Section 139(1) of the Act now requires every person to calculate the threshold limit or basic exemption limit without giving effect to the exemption benefit under Sections 54 to 54GB. So, if your income before claiming exemption under Sections 54 to 54GB is more than the basic exempted limit, you will have to file ITR.