Answer By law4u team
In India, it is not always mandatory for individuals to file Income Tax Returns (ITR) if their income is below the taxable limit. However, there are certain conditions where filing ITR may still be beneficial or required even if your income is lower than the taxable threshold.
Situations When Filing ITR Is Not Mandatory:
Income Below the Taxable Limit:
If your total income is below the basic exemption limit, then you are generally not required to file an ITR. The exemption limit is based on your age and the category you fall under (individual, senior citizen, etc.):
- For individuals below 60 years: ₹2.5 lakh
- For senior citizens (60 years or above): ₹3 lakh
- For super senior citizens (80 years or above): ₹5 lakh
If your total annual income is below these thresholds and you have no other taxable income or capital gains, filing ITR is not mandatory.
No Other Income Sources:
If your only source of income is from salary, pension, or interest from a savings account, and it falls below the exemption limit, you are not required to file an ITR.
No Deductions or Claims:
If you are not availing any deductions under sections like 80C, 80D, etc., or claiming refunds for taxes already paid, and your income is below the taxable limit, filing an ITR is not necessary.
Situations When Filing ITR Is Still Beneficial or Required:
Claiming Refund:
Even if your income is below the taxable limit, if excess tax has been deducted at source (TDS) or you have made advance tax payments, you should file an ITR to claim a refund of the excess tax paid. Many people don’t realize that filing an ITR is the only way to get a refund for excess taxes deducted.
Example:
If ₹5,000 tax was deducted from your salary and your total income is below the taxable limit, filing an ITR will allow you to get this ₹5,000 back.
Carrying Forward Losses:
If you have a capital loss (from the sale of assets like stocks or property), business loss, or house property loss, you will need to file your ITR to carry forward these losses and set them off against future income. This helps you reduce taxes in future years.
Loan and Visa Applications:
Filing an ITR may be required when applying for a loan or visa, even if your income is below the taxable limit. Financial institutions and embassies often require ITR receipts to assess your financial situation, as they might not recognize income under the taxable limit as being significant.
Income from Foreign Sources:
If you have any income from foreign sources or have assets outside of India, you must file an ITR, irrespective of the income level. The Indian government mandates reporting foreign assets and income, and non-filing may lead to penalties.
Voluntary Filing:
Filing an ITR can be a good practice for maintaining a record of your income and financial transactions. It also helps build a good financial history and is useful when you want to prove your income for future financial or legal matters.
Filing Under Section 44AD (Presumptive Taxation Scheme):
If you are a small business owner or a freelancer with income below the taxable limit, filing under the presumptive taxation scheme (Section 44AD) may be beneficial for easier compliance with tax laws.
Example:
Let’s say Mr. Ravi is a salaried individual, and his total income for the year is ₹2.3 lakh. The basic exemption limit is ₹2.5 lakh (for individuals below 60 years), so technically, he is not required to file an ITR because his income is below the taxable threshold.
However, if Mr. Ravi had TDS of ₹2,000 deducted from his salary, he can file an ITR to claim a refund of that ₹2,000, as he does not owe any taxes.
Consequences of Not Filing ITR:
Loss of Refund:
If tax is deducted but you do not file your ITR, you will lose the refund.
Inability to Carry Forward Losses:
You will not be able to carry forward any capital or business losses to offset future income.
Impact on Loans and Visas:
Not filing ITR may complicate loan or visa applications, as banks and embassies may require ITRs as proof of income.
Conclusion:
Filing an income tax return is not mandatory if your income is below the taxable limit, but there are cases when filing an ITR is still advisable or required. Filing your ITR can help you claim refunds, carry forward losses, and maintain a clean financial record, which can be useful for future financial needs. If you are unsure, it is always a good idea to file an ITR voluntarily to avoid complications later.
