The imperative of filing an Income Tax Return (ITR) extends beyond the threshold of taxable income exceeding the basic exemption limit. Intricacies within the income tax laws necessitate mandatory ITR submission under specific conditions, irrespective of whether the taxable income falls below this exemption limit.
Suresh Surana, an esteemed chartered accountant, elucidates, “Section 139 enforces the obligatory filing of ITR for individuals under certain scenarios, even when their annual income is beneath the basic exemption threshold. Non-compliance by the July 31 deadline incurs penalties for these taxpayers.”
Situations Mandating ITR Filing Despite Lower Income
1. Ownership of Foreign Assets or Income:
Residents possessing foreign investments such as shares, bonds, or properties, and those earning dividends, interest, or rent from overseas, must file an ITR as per Section 139(1) of the Income-tax Act. This mandate also applies to individuals with signing authority in foreign accounts. Surana highlights, “Even if investments are in a parent’s name with an income below the exemption limit, ITR filing remains mandatory.”
2. Expenditure on Foreign Travel:
An expenditure of Rs 2 lakh or more on international travel, whether for oneself or others, triggers the ITR filing requirement. For instance, if an individual spends Rs 1 lakh on their travel and Rs 1.5 lakh on their parents’ travel, totaling Rs 2.5 lakh, they must file an ITR, regardless of their taxable income.
3. Payment of Electricity Bills:
ITR filing becomes compulsory if an individual’s annual electricity bill payments reach or exceed Rs 1 lakh, either through a single payment or cumulatively.
4. Claiming Capital Gains Tax Exemption:
Surana clarifies, “Individuals whose gross income surpasses the exemption limit before claiming capital gains tax exemptions must file an ITR.” This includes exemptions under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB.
5. Tax Deduction or Collection at Source:
An April 2022 notification mandates ITR filing for individuals if Rs 25,000 or more is deducted or collected as TDS or TCS within the financial year. The same rule applies if professional receipts exceed Rs 10 lakh, business turnover surpasses Rs 60 lakh, or aggregate deposits in savings accounts are Rs 50 lakh or more.
6. Large Deposits in Current Accounts:
Self-employed individuals who deposit Rs 1 crore or more into a current account within a financial year are required to file an ITR.
7. Claiming Income Tax Refunds:
Individuals seeking to reclaim excess tax deducted from income sources like interest or dividends must file an ITR. Post-filing, the income tax department reconciles the filed information with their records, issuing refunds upon verification of accurate details and calculations.
Penalty for Late ITR Filing
Failure to meet the ITR filing deadline results in penalties under Section 234F of the Income-tax Act. Surana explains, “A Rs 1,000 penalty applies for mandatory ITR filings where the income is below the exemption limit, provided the taxable income does not exceed Rs 5 lakh.” Moreover, individuals with incomes above the exemption limit, coupled with criteria such as significant foreign travel expenditure, are obligated to file ITR under Section 139(1).
In summary, adherence to ITR filing requirements is crucial, transcending mere income thresholds and encompassing broader financial activities and statutory obligations.