Filing income tax returns (ITR) is a critical obligation for Indian citizens and individuals earning income under the Indian government’s tax jurisdiction. As per Section 139 (1) of the Income Tax Act, certain individuals and entities must file their income tax returns. This article provides a comprehensive guide on who needs to file ITR for FY 2023-24, along with the conditions and exceptions for ITR filing.
Who Must File Income Tax Returns?
- Individuals with Gross Income Over Rs. 2.5 Lakhs:
Any individual whose gross annual income exceeds Rs. 2.5 lakh, after applying deductions under various sections of the Income Tax Act, is required to file an income tax return. - Businesses:
All companies and firms, regardless of profits or losses during the financial year, must file income tax returns. - Individuals Seeking Tax Refund:
If an individual seeks a refund from the income tax department, they must file an ITR. - Carrying Forward a Loss:
To carry forward a loss under a specific head of income, filing an ITR is mandatory. - LTCG Over Rs. 2.5 Lakhs:
If an individual has earned income exempt from Long Term Capital Gains (LTCG), such as from the sale of equities, equity mutual funds, or business units, and it exceeds Rs. 2.5 lakh, they must file an ITR. - Business Interest in Another Country:
Resident Indians with assets or business interests in a foreign country must file income tax returns. This is not applicable to Non-Resident Indians (NRIs). - Signing Authority of Foreign Accounts:
Resident Indians who have signing authority for foreign accounts must file income tax returns, excluding NRIs. - Income Held by Trusts:
Individuals receiving income from trusts, religious institutions, educational institutions, research organizations, trade unions, or non-profit organizations must file ITR. - Foreign Companies:
Foreign companies benefiting from a treaty with India must file income tax returns for all transactions. - Loan Applications:
Filing an ITR is essential when applying for a bank loan. - NRIs:
NRIs earning income in India must file income tax returns.
Filing Returns Online
E-filing of income tax returns is crucial in several cases:
- To claim a refund from the income tax department.
- For those required to file ITR-3, ITR-4, ITR-4S, ITR-5, ITR-6, and ITR-7.
- If the taxable income is more than Rs. 5 lakh.
Penalty for Not Filing Income Tax Returns
- Until FY 2016-17: The assessing officer could levy a penalty of Rs. 5000 under Section 271F for not filing the return.
- After FY 2017-18: A penalty of Rs. 5000 is applicable if the return is filed after the due date (31st July) but before 31st December. If filed after 31st December but before 31st March, the penalty increases to Rs. 10,000. The penalty is limited to Rs. 1000 if the total annual income is less than Rs. 5 lakh.
Section 234F introduces a new penalty of Rs. 10,000 for filing ITR after the due date, applicable from the assessment year 2018-19.
Section 234A imposes a simple interest of 1% per month for late payment of taxes.
Benefits of Filing Income Tax Returns
Filing ITR regularly offers multiple benefits:
- Civic Duty: Paying income tax is a civic duty for Indian citizens.
- Loan Applications: Banks and financial institutions require ITRs for loan applications.
- Visa Applications: ITRs may be necessary for visa applications.
- Credit Cards: Some credit card companies insist on ITRs before issuing credit cards.
- TDS Refunds: Ensures proper refund of TDS.
TDS (Tax Deduction at Source)
TDS is a means of collecting income tax in India. The deductor provides a certificate to the receiver, ensuring tax compliance. Prominent TDS certificates include:
- Form 16: For salaried employees.
- Form 16A: For all other classes of income.
Form 26AS
Form 26AS is a consolidated annual tax credit statement accessible from the Income Tax Department’s website. It reflects the tax proceeds credited by the employer, bank, and other establishments. Taxpayers should verify details in Form 26AS before filing ITR to avoid discrepancies.
Categories of Income Tax Returns
- ITR-1: For salaried individuals and pensioners with annual income less than Rs. 50 lakhs.
- ITR-2: For income from salary/pension, more than one house, capital gains, foreign assets, or agricultural income of less than Rs. 5000.
- ITR-3: For business owners, professionals, and HUF with income from proprietary business.
- ITR-4: For businessmen under the presumptive income scheme.
Filing income tax returns is not just a legal obligation but a responsible act contributing to the nation’s development. Ensuring timely and accurate filing can help individuals and entities benefit from various financial opportunities and maintain compliance with tax regulations.
