Yes, it is compulsory to file income tax returns (ITRs). As per the tax provisions, filing income tax returns is mandatory where the gross total income of an individual is more than Rs 2,50,000. Not filing income tax returns will not only attract penalties but can also hamper your chances of getting a loan, or a visa for travel purposes or property registration. As per the Income Tax Act, below are entities or firms that require mandatory filing of ITRs in India:
Persons whose gross total income (before allowing any deductions under section 80C to 80U) exceeds Rs 2.5 lakh. This limit is Rs 3 lakh for senior citizens (aged above 60 but less than 80) and Rs 5 lakh for super senior citizens (aged above 80).
However, sometimes some people wonder if a person is also required to file his/her return of income if the income does not exceed the taxable limit? i.e. 2,50,000 or as the case may be. And, if yes, then in what circumstances?
As per the tax provisions, filing of income tax returns is mandatory where the gross total income of an individual is more than Rs 2,50,000. “One needs to take cognizance of the fact that the reference here is made to the gross total income which would mean the income before any deductions under chapter VI-A. Thus, a person having his gross total income above Rs 250,000 needs to file a tax return even if ultimately he may not have any tax payable or may even have a refund.
As per the income tax law an individual who may not have taxable income is also mandated to file a tax return if he meets any of the below conditions:
- The individual has deposited an aggregate amount exceeding Rs 1 crore in one or more current bank accounts with any bank during the financial year; or
- The individual has incurred expenditure of an aggregate amount exceeding Rs 2 lakh for himself or any other person for travel to a foreign country; or
- The individual has incurred expenditure of an amount or aggregate of the amounts exceeding Rs 1 lakh towards consumption of electricity.
- Companies or firms irrespective of whether they have income or loss during the financial year.
- Those who want to claim an income tax refund.
- Those who want to carry forward a loss under any head of income.
- Resident individuals who have an asset or financial interest in an entity located outside of India. This is however not applicable to NRIs or RNORs (Resident but not Ordinary Resident).
- Residents and signing authorities in a foreign account. Again, this is not applicable to NRIs or RNORs.
- Those who derive income from property held under a trust for charitable or religious purposes or a political party or a research association, news agency, educational or medical institution, trade union, a not for profit university or educational institution, a hospital, infrastructure debt fund, any authority, body or trust.
- Foreign companies taking treaty benefit on a transaction in India.
- Even NRIs, who have income that exceeds Rs. 2.5 lakh which is earned or accrued in India, are required to file the income tax return in India.
