It is critically important to understand the requirement for filing income tax return. Many still think that filing of income tax return is required only if the income is taxable, which is not correct.
Filing of income tax return is mandatory for following situations or circumstances:
1. Gross Income over 250,000:
If Gross Total Income before claiming certain exemptions or deduction exceeds the maximum exemption limit (250,000), income tax return is to be filed even if tax is payable only on income after deduction and exemption exceeding 500,000.
2. Sales/ Receipts:
If the turnover from business or the gross receipts from the profession is over Rs 60 lakh or Rs. 10 lakhs, respectively, the person needs to file income tax return.
3. Deposits / Credits in Bank:
A person depositing in one or more saving account of Rs 50 lakh or more or in or current bank accounts of Rs 1 crore or more in a year is required to file income tax return.
4. Foreign Assets or claiming DTAA benefit:
If a person holding any asset outside India or having signing authority in any account located outside India needs to mandatorily file income tax return. Filing of income tax return is also required for claiming DTAA benefits.
5. Tax:
If total of tax deducted (TDS) and tax collected (TCS) is Rs 25,000 or more (Rs 50,000 for resident senior citizen), filing of income tax return is mandatory. Also, if anyone wants to get refund of taxes deducted or paid, income tax return is required to be filed.
6. Foreign Travel:
A person spending more than Rs 2 lakh on foreign travel is required to file income tax return.
7. Electricity Expenses:
A person paying electricity bills of more than Rs 1 lakh needs to file the income tax return.
In addition, even if you are not required to file tax return, we recommend that you file the return for following situations / circumstances as with IT (Information Technology), IT (Income Tax) department is getting a lot of information and is issuing notices inquiring about compliance.
1. Sale of immovable property during the year
2. Trade in crypto currency
3. Multiple transactions of purchase and sale of securities, even if net gain is not over 250,000.
4. Tax is deducted or collected (TDS / TCS) and is included in the form 26AS
a. If a part payment on sale of any asset is received but sale is not complete or deed not registered and TDS is deducted
b. If TDS and income is to be clubbed to spouse or from spouse (both spouses to file tax return)
c. Any amount of TDS / TCS as it may invite a system driven inquiry if return is not filed
5. Any loss in business or asset is to be carried forward
6. If any plan to travel abroad as tax returns may be required for VISA or migration purposes
7. If any plan to apply for a business or personal loan, credit card or for better credit rating
Filing tax return could significantly help you in familiarizing with taxes, learning financial discipline planning tax strategies and ultimately simplifying financial life (no inquiry or notice).
