Therefore, even if an individual's income is below Rs 5 lakh, it is crucial to file their Income Tax Return (ITR) by July 31, 2023, for FY 2022-23 (AY 2023-24), provided they are not required to undergo an income tax audit.
To grasp the significance of this requirement, let's explore some examples:
Example 1: Consider an individual with a net taxable income of Rs 4.25 lakh. While the income falls below the taxable limit of Rs 5 lakh and no tax is payable, it exceeds the basic exemption threshold of Rs 2.5 lakh, making ITR filing mandatory.
Example 2: Another case involves an individual with a gross taxable income of Rs 6.25 lakh. After claiming deductions such as the standard deduction of Rs 50,000 and section 80C deduction of Rs 1 lakh, the net taxable income reduces to Rs 4.75 lakh. Here, ITR filing is mandatory to avail the tax rebate under section 87A.
Example 3: In a different scenario, an individual's gross taxable income is Rs 2.25 lakh, which is below the basic exemption limit of Rs 2.5 lakh. While ITR filing is not mandatory, there are certain benefits in filing a NIL ITR.
In conclusion, it is essential to adhere to the ITR filing requirements, even if one's income is below Rs 5 lakh, as specific circumstances may necessitate the submission for availing benefits or ensuring compliance with tax regulations.
Consequences of Failing to File ITR
In the event that you are required to file an Income Tax Return (ITR) but fail to meet the filing deadline, you can still submit your tax return, but it will be considered a "belated ITR." Nevertheless, filing a belated ITR comes with penalties and the loss of certain benefits.
Penalty Amount: If you file your ITR after the deadline (currently set at July 31, 2023), you will be liable to pay a penalty. The penalty amount is Rs 5,000. However, if your taxable income is below Rs 5 lakh, the penalty will not exceed Rs 1,000. Individuals with net taxable incomes below Rs 5 lakh have no tax liability due to the tax rebate under section 87A. However, for those with income levels exceeding Rs 5 lakh and having a tax liability but not filing the ITR, penal interest under section 234A will be levied at a rate of 1% simple interest per month or part thereof, as explained by CA Sandeep Agrawal, Director of Teamlease Regtech, a regulatory technology company.
Carry Forward of Losses: When filing a belated ITR, it is important to note that you cannot carry forward losses from stocks, futures and options (F&O), and other sources. However, you will still be allowed to carry forward losses from house property. Additionally, filing a belated ITR does not permit you to opt for the new tax regime.
Tax Refund: If you are eligible for an income tax refund, it is essential to file your ITR before the deadline of July 31, 2023. Missing this deadline and filing a belated ITR will result in the loss of interest due on the tax refund. Furthermore, if you fail to file any ITR (either the original or belated), you will not receive the tax refund.
Who Must File ITR Obligatorily?
According to Section 139 of the Income Tax Act, 1961, individuals are required to file their Income Tax Return (ITR) mandatorily under certain circumstances. Firstly, if an individual's income exceeds the basic exemption limit or if they have engaged in specific specified transactions, ITR filing becomes obligatory.
For the fiscal year 2022-23 (Assessment Year 2023-24), the basic exemption limit for individuals below 60 years of age remains Rs 2.5 lakh under both the old and new tax regimes. However, for senior citizens aged between 60 and 80 years, the exemption limit is Rs 3 lakh under the old tax regime and Rs 2.5 lakh under the new tax regime. Similarly, for super senior citizens aged 80 years and above, the exemption limit is Rs 5 lakh under the old tax regime and Rs 2.5 lakh under the new tax regime.
Mihir Tanna, Associate Director (Direct Tax) at S K Patodia & Associates, a CA firm based in Mumbai, has outlined specific scenarios where individuals are required to file their Income Tax Return (ITR) regardless of their income level. These instances include:
- Deposits: If an individual has deposited more than Rs 1 crore or Rs 50 lakh in total across one or more current and savings bank accounts, respectively.
- Foreign Travel Expenditure: If an individual has incurred expenses exceeding Rs 2 lakh for their own or another person's foreign travel.
- Significant Electricity Payments: If an individual has made electricity payments totaling more than Rs 1 lakh during the year.
- Overseas Assets: If an individual is a beneficial owner or beneficiary of any asset located outside India.
- Foreign Bank Account: If an individual is a signatory to a foreign bank account.
- TDS/TCS Deduction: If TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) of Rs 25,000 or more has been deducted during FY 2022-23 (AY 2023-24). For senior citizens, this threshold is Rs 50,000 or more.
- Professionals with Gross Receipts: Professionals whose gross receipts exceed Rs 10 lakh are also required to file their ITR.
In these circumstances, regardless of the individual's total income, filing an Income Tax Return becomes mandatory.
Additional situations warranting the filing of ITR for personal advantages are as follows:
One significant reason to file ITR is to avail specific benefits that necessitate a documented income.
For instance, when applying for a visa, authorities often request proof of previously filed ITRs and other financial documents to assess eligibility. Similarly, for scholarship applications, ITR serves as a credible income proof, supporting your case for securing the scholarship.
.jpg)
