Many salaried as well as retired individuals are under the impression that they do not have to file their Income-tax Return (ITR) as tax has been deducted from their income. Filing of an ITR is a distinct and different responsibility than payment of taxes on your income. Both have to be discharged separately. So, in order to clear doubts around this subject, let us discuss as to who is required to file an ITR? This discussion is restricted to the law as applicable to individuals only.
Income criteria for Liability to file ITR
As per the income tax laws, you have to file your ITR if the aggregate of all your income: called gross total income, exceeds the basic exemption limit before various deductions available for various investments and expenses under Chapter VIA, which comprises mainly Section 80C, 80 CCD, 80D, 80TTA, 80 TTB, etc. These deductions relate mainly to life insurance premium and health insurance premium, contribution towards EPF, PPF and NPS accounts, interest from banks, tuition fee for children, repayment of home loan, etc.
For all individuals, who are below 60 years, this exemption limit is Rs2.50 lakhs, whereas for those who are resident for tax purposes and are over 60, but below 80, it is Rs3 lakhs and for those tax residents, who have already crossed 80 years, it is Rs5 lakhs per year.
For example, in some of the cases the gross total income may exceed the basic exemption limit, making you liable for filing of ITR, but due to various deductions, the taxable income may come down below Rs2.50 lakh and thus no liability to pay any tax.
Likewise in case taxable income is above Rs2.50 lakhs, but below Rs5 lakhs and by virtue of rebate under section 87A, you may not have to pay any tax still you will have to file your ITR. While arriving at the figure of taxable income you have to include certain exempt incomes like, exemption from long term capital gains under Section 54, 54EC, 54F, etc.
Even for assessment year 2019-2020, for which the last date of filing the ITR has been extended till November 30, 2020, during which year the long term-capital gains on sale of listed equity shares and equity oriented units were tax free under Section 10(38), you will still have to file the ITR even if you entire income comprised such long-term capital gains which were fully exempt under Section 10(38) till assessment year 2019-2020 provided the aggregate of such capital gains exceeded the basis exemption limits.
Non income criteria for Requirement to file ITR
In addition to the level of income, the tax laws also prescribe certain situation, under which you have to file an ITR even if you do not have any taxable income for the year. First such condition relates to having interest in any asset outside India or having signing authority in respect of any account outside India by a resident tax payer. The asset need not necessarily be immovable. So, even if you have a bank outside India irrespective of balance in the account, you have to file an ITR here in India provided you are a resident of India for tax purposes. So, in case you have invested in shares, bonds or mutual fund units of foreign companies, you are covered here. For example you have been allotted EOPS of a foreign company as your compensation package, which may be holding company or a subsidiary company of your employer; you are caught in this net. Even the NRIs, who have come back to India to spend rest of their life in India, will have to file ITR here even if they do not have any income here in India in case they have assets/investments left outside India, once they have become resident by reason for having spent the minimum days in India.
Three more conditions have become applicable from the current financial year 2019-2020. The first such condition is that in case you have deposited more than Rs 1 crore in one or more current bank account during the year. The deposit need not necessarily be in cash, so even if the deposits which have come through banking channel exceed Rs1 crore for all your current accounts taken together, you have to file an ITR. The second additional condition is about payment of more than Rs2 lakhs for foreign travel for anyone. Please note that even if you pay for foreign travel for a person who is not your family members, you are covered here. And lastly the third condition prescribed is for payment of electricity charges more than Rs 1 lakh in a year. It is not necessary that the electricity connection stands in your name so even if you are using rented premises and have paid more than Rs 1 lakh for electrify charges during the year; you have to file your ITR.
I am sure with the above discussion most of you are clear about whether one has to file his ITR or not. So, get ready to file it by December 31, 2020, in case not already filed.
The writer is a tax and investment expert and can be reached at email@example.com