As per the Income Tax rule, if an Indian citizen has an income more than the exemption limit, it is mandatory to file an income tax return. However, when the income is not more than the exemption limit, it is not required to file the return. But it is beneficial to file income tax returns regularly despite having zero taxable income during a financial year to avail of benefits in certain conditions.
Says Hitesh Jain, associate partner, Direct Taxation, N.A. Shah Associates: “It is advisable to file return of income even if the income is below the basic exemption limit. There are certain benefits entailed on filing return.”
Let us look at these benefits:
Claiming The TDS Refund: If a person’s income is less than the taxable income threshold, return filing is not required. But if TDS is deducted on interest from fixed deposits, etc., then to claim the TDS, one is required to file the return. Without filing the ITR, the refund cannot be processed.
Getting A Loan: Many times lenders ask for an ITR copy to check the borrower’s profile and repayment capacity. It is a pre-condition while getting a loan, and in the absence of return filing, it would create an unnecessary hassle to secure a loan.
Carry Forward Of Loss: If a person has incurred capital loss from selling property, shares, etc., one should report it in the return filing to carry it forward and adjust it with the profits in coming years. If not reported in ITR, it cannot be carried forward.
Avoid Notices From The Tax Department: Says Jain, “Normally, an individual does not receive notice if he does not file income tax return for a year and files income tax return for a subsequent year when there is a taxable income. However, if there is TDS on income, then the Income Tax Department may issue notice asking for reasons for non-filing of return.”
In addition, the ITR is required while applying for visa and getting an insurance of higher amount, according to Jain. Besides these cases, where return filing is beneficial but not mandatory, there are some cases when the person must file the return even if the income is not falling into the taxable category. With effect from AY2020-21, it is mandatory to file the return of income under the following conditions.
Bank Account Deposit Exceeds Rs 1 Crore:
If the money is deposited in one or more current account in a bank or cooperative bank exceeds Rs 1 crore during a financial year, tax return filing is mandatory ‘for every person (other than a company or firm)’, according to the income tax rules.
Spending On Foreign Travel:
One who spends money in excess of Rs 2 lakh on oneself or any other person for travelling to a foreign country is required to file a tax return to meet this condition even if the total income is below the exemption limit.
Electricity Bill Of More Than Rs 1 Lakh:
In case, the person paid an electricity bill exceeding Rs 1 lakh in one bill or on an aggregate basis during the year, it necessitates income tax return filing even if the income remains below the exemption limit.
Income From Foreign Assets: If a person holds any asset (including any financial interest in any entity) located outside India or has signing authority in any account located outside India; or is a beneficiary of any asset (including financial assets) outside India, is liable to file the return, says Jain.
There are a few additional conditions, notified by the Central Board of Direct Taxes (CBDT) under the seventh proviso to section 139(1), where return filing is mandatory.
Sales Exceed Rs 60 Lakh: As per the income tax rule, if a person’s annual total sales turnover or gross receipts reach over Rs 60 lakh, income tax return filing is mandatory.
Professional Income Above Rs 10 lakh: When an individual’s gross professional income is over Rs 10 lakh during the previous financial year, one has to file a tax return.
Tax Deducted At Source (TDS) or Tax Collected At Source (TCS): When the TDS or TCS is Rs 25,000 or more for a person, return filing is mandatory. For senior citizens, the threshold limit of TDS or TCS is Rs 50,000 to determine the liability of filing the tax return.
Savings Account Deposit Of Rs 50 lakh: If a person deposits Rs 50 lakh or more during the previous year in one or more savings bank accounts, it becomes necessary for the person to file the return.
