Decoding the Duty: Who Absolutely Must File an Income Tax Return?

As the due date for filing Income Tax Returns (ITR) fast approaches, many individuals are left wondering whether they are required to file one. While some diligently file their returns every year, others may question if it is truly mandatory for them. In India, the Income Tax Department has laid down specific criteria to determine who is obligated to file an ITR. Ignoring this obligation can result in penalties and unnecessary hassles. So, who falls under the mandatory ITR filing bracket? Let’s break it down:

A. Income Exceeding the Basic Exemption Limit (For Individuals & HUFs):

This is the most common criterion. If you are an individual (regardless of gender) or a Hindu Undivided Family (HUF) and your total income during the financial year surpasses the tax-free limit based on your age, filing an ITR is a must. Tax Free Limit under the New regime – Rs. 3 lakhs, irrespective of the age of the taxpayer. The current tax-free limits under old regime are:

Important Note: “Total income” here refers to your gross total income after considering certain deductions but before claiming exemptions under various sections.

B. Even Below the Exemption Limit? You Might Still Need to File!

Don’t breathe a sigh of relief just yet if your income falls below the exemption threshold. There are several other scenarios where filing an ITR becomes mandatory:

🔁Seeking a Tax Refund: TDS/TCS deducted or advance tax paid? File ITR to claim a refund.

📉 Carrying Forward of Losses: If you’ve incurred losses under certain heads of income (like business or capital gains) and wish to carry them forward to offset future profits, filing an ITR within the stipulated time is essential.

🌍 Holding Foreign Assets or Being a Signing Authority in a Foreign Account: If you own any financial asset located outside India or have the authority to sign in any account held with a foreign bank, you are obligated to file an ITR, regardless of your income.

🏛 Income from Charitable or Religious Trusts: If you receive income from a property held under a charitable or religious trust, filing an ITR is mandatory.

🎓 Specific Entities: Certain entities like political parties, specified persons (as defined under income tax laws), universities, colleges, other institutions, infrastructure investment trusts, real estate investment trusts, and specified alternative investment funds are required to file ITR irrespective of their income.

🏢Companies and Firms: For all companies (private or public) and partnership firms (including LLPs), filing an ITR is mandatory, irrespective of whether they have made a profit or incurred a loss during the financial year.

C. High-Value Transactions Triggering Mandatory Filing:

The Income Tax Department also keeps a close watch on certain high-value transactions. If you’ve undertaken any of the following during the financial year, you are required to file an ITR:

🏦 Banking Transactions

• Deposited ₹1 crore or more in current accounts (aggregate).
• Deposited ₹50 lakh or more in savings accounts.

🌐 High Spending

• ₹2 lakh or more spent on foreign travel (self or others).
• ₹1 lakh or more spent on electricity consumption.

💸 Significant TDS/TCS Deducted

• TDS or TCS of ₹25,000 or more (₹50,000 for senior citizens).

📊 Business/Professional Thresholds

• Business turnover > ₹60 lakh, or
• Professional gross receipts > ₹10 lakh

D. Other Reportable Transactions:

While not explicitly mentioned in the initial list, keep in mind that the Income Tax Department also tracks certain high-value transactions through various reporting mechanisms. Examples include:

• Cash deposits in savings accounts exceeding ₹ 10 lakh in a year.
• Cash payments for credit card bills exceeding ₹ 1 lakh per annum.
• Non-cash payments for credit card bills above ₹ 10 lakh per annum.
• Investments in mutual funds, bonds, or debentures exceeding ₹ 10 lakh in a financial year.
• Purchase or sale of property worth ₹ 30 lakh or more.
• Donations and luxury spending that are monitored via PAN and payment trails.

📌 These are tracked through Annual Information Statement (AIS) and can lead to notices if your return isn’t filed accordingly.

While these transactions might not directly mandate filing an ITR if your income is below the threshold and none of the other conditions apply, they are under the tax department’s radar and could lead to scrutiny if your income sources don’t justify these transactions.

In Conclusion:

Filing an ITR is not just about paying taxes; it’s a crucial responsibility that contributes to the nation’s development and ensures financial transparency. Even if you are unsure whether you need to file, it’s always advisable to err on the side of caution. Review your income, investments, and expenditures for the financial year against the criteria mentioned above. If any of these conditions apply to you, filing your Income Tax Return within the due date is mandatory.

Ignoring this obligation can lead to penalties, interest charges, and potential legal complications. Stay informed, be responsible, and ensure you comply with the income tax regulations. If you are still uncertain about your filing requirements, it’s always best to consult with a tax professionals.

Need help with filing your ITR?

📩 Connect with our expert team at J B Financial Advisors LLP for a smooth and accurate filing experience