Who Should File ITR even when Income is Below Exemption Limit?

Arjuna (Fictional Character): Krishna, the due date for filing of Income Tax Returns for Individuals is 31st July, however still many people around the nation have not filed their Income Tax Returns. Why do you think some people fail to file their ITR even when they are mandatorily required by Law?

Krishna (Fictional Character): Arjuna, to give you a comparative view, as of 13th July, there are 12.25 Crore individual registered users, but only 2.54 Crore returns have been filed for AY 2024-25. Common beliefs such as "My TDS is already deducted, so I don't need to file ITR" and "My income is below the exemption limit" are widespread. In reality, the Income Tax Act requires everyone within its specified conditions to file ITR, even if their total income does not exceed the basic exemption limit.

Arjuna (Fictional Character): Krishna, who are required to file their ITR mandatorily?

Krishna (Fictional Character): Arjuna, according to Sec. 139 of the Act, every individual whose total income exceeds the basic exemption limit must file their ITR. Additionally, there are specific scenarios where individuals must file their Income Tax Return even if their income does not exceed the basic exemption limit, to avoid the "rain" of Income Tax Notices:

1. If they have deposited Rs. 1 Crore or more in a current account or Rs. 50 Lakhs in a savings account during the year.

2. If total sales/turnover/gross receipts in business exceed Rs 60 lakh during the previous year.

3. If gross receipts in the profession exceed Rs 10 lakh during the previous year.

4. If aggregate TDS/TCS of Rs 25,000 or more is deducted/collected during the year. (For senior citizens aged 60 years & above, the limit is Rs 50,000).

5. If expenditure exceeding Rs. 2 Lakhs is incurred on foreign travel.

6. If an amount exceeding Rs. 1 Lakh is paid for electricity consumption.

Individuals should also verify their AIS for any significant transactions entered during the financial year, such as the purchase or sale of immovable property, for which filing ITR is advisable.

Arjuna (Fictional Character): Krishna, what is the basic exemption limit under the Income Tax Act?

Krishna (Fictional Character): Arjuna, under the old tax regime, the basic exemption limit is:

1. Rs. 2.5 Lakhs for individuals below 60 years.

2. Rs. 3 Lakhs for Senior Citizens (individuals between 60-80 years old).

3. Rs. 5 Lakhs for Super Senior Citizens (individuals above 80 years).

Under the new tax regime, there is only one basic exemption limit of Rs. 3 Lakhs for all individuals.

Arjuna (Fictional Character): Krishna, why should one file their Income Tax Return?

Krishna (Fictional Character): Arjuna, there are several benefits to filing an Income Tax Return, much like being prepared for the monsoon:

1. Taxpayers can avail refunds of excess TDS that have been deducted.

2. Banks and Financial Institutions require ITR submissions for advancing credit.

3. Filing Income Tax Returns is mandatory for taxpayers to carry forward their loss.

Arjuna (Fictional Character): Krishna, what should one learn from this?

Krishna (Fictional Character): Arjuna, individuals should assess their obligation to file an Income Tax Return and fulfill their duty towards the nation by paying taxes and submitting their returns promptly. Just as preparation is key to enjoying the monsoon season without getting drenched, awareness and timely action can prevent the "rain" of Income Tax Notices. Surprisingly, less than 5% of the population, out of over 1.4 billion people, actually pay Income Tax. Misconceptions and lack of awareness contribute to this significant disparity. However, there has been a steady increase in the number of people filing returns, which is a positive sign for the economy and the general public.