Income Tax Return
Filing FY 2023-24: If your income is below Rs 7 lakh, then you may be wondering if you need to file your Income Tax Return. The first important point to note is that
filing ITR
is very different from paying income tax. 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 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). Apart from income, there are additional factors that make filing ITR mandatory.
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
).
The maximum tax rebate available is Rs 12,500 under the old tax regime and Rs 25,000 under the new tax regime. As a result, if your income falls within the specified levels, you are not obligated to pay any income tax. Nevertheless, even if your tax liability becomes zero due to the tax rebate, filing an ITR is still necessary, according to an ET report.
“Generally, taxpayers have a mis-understanding that if tax is not payable then filing of ITR is also not mandatory,” says Sudhir Kaushik, Co-founder and CEO, Taxspanner.com was quoted as saying.
According to Kaushik, filing ITR is obligatory if your
gross total income
, before deductions under Chapter VI (Sections 80C, 80D, etc.), is more than the basic exemption limit.
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For FY 2023-24 (AY 2024-25), the basic exemption limits under the old tax regime are:
* Rs 2.5 lakh for individuals below 60 years of age
* Rs 3.0 lakh for individuals above 60 years but below 80 years of age
* Rs 5.0 lakh for individuals above 80 years of age
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 irrespective of income level?
According to Neeraj Agarwala, Partner at Nangia Andersen India, there are certain situations where individuals must file an ITR regardless of their gross total income:
* If an individual’s annual bank deposits in one or more savings accounts surpass Rs 50 lakh, they are obligated to file an ITR.
* Individuals whose electricity bill exceeds Rs 1 lakh during the year must file an ITR.
* Those who own 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 during a financial year are required to file an ITR.
* If a person’s TDS/TCS is 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 are required to file an ITR.
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To better understand these requirements, consider the following examples:
* Example 1: Consider 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, you need to file ITR.
* Example 2: If your net taxable income is Rs 4.25 lakh, which is 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 must still 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: As a salaried individual with a gross taxable income of Rs 7.5 lakh and a standard deduction of Rs 50,000, you may not owe any income tax after deductions and rebates. Nevertheless, filing an ITR is still mandatory.
Agarwala states, “Individuals are mandatorily required to file an income tax return if their total income, excluding deductions under Chapter VI-A, exceeds the basic exemption limit. In this case, the total income excluding gross deductions under section 80C will be Rs 3,90,000 (Rs 5.5 lakh-Rs 50,000-Rs 1.1 lakh) (assuming the other deductions are not under Chapter VI-A), and they will be mandatorily required to file their ITR.”
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What are the consequences of not filing ITR, even if you are mandated to?
If you are obligated to file an ITR but fail to do so by the deadline of July 31, 2024, you have the option to file a belated ITR. However, if you choose not to file at all, you may face several consequences, says Agarwala.
Firstly, under Section 234A, if you don’t pay your taxes on time, you will be subject to penal interest at a rate of 1% per month on the outstanding tax amount. Additionally, if there is a delay in the payment of advance tax, interest will be levied under Section 234B.
Moreover, according to Section 234F, failing to file your ITR within the due date will result in a late fee of Rs 5,000. However, if your annual income is below Rs 5 lakhs, the late fee will be limited to Rs 1,000. If your gross income falls below the basic exemption limit, no penalty will be charged.
It’s important to note that when filing a belated ITR, you forfeit the ability to carry forward losses from stocks, future and options (F&O), and other sources. However, you can still carry forward losses from house property.
Furthermore, filing an ITR is a prerequisite for receiving any tax refund. If you file a belated ITR, you will not be entitled to any interest on the tax refund.
In the event that you don’t file an ITR, the income tax assessing officer has the authority to conduct a Best Judgment Assessment. This means that the tax officer may estimate your income and tax liability based on the information available to them.
Lastly, if you fail to file your ITR and do not opt for the old tax regime by submitting Form 10-IEA, your income tax will be calculated under the new tax regime by default. As a result, you may miss out on claiming gross deductions that would have been applicable to you.
