“Navigate the complexities of Income-tax Returns in India with our comprehensive guide. Understand the criteria for mandatory filing, including total income, foreign assets, and specific expenses. Don’t miss out on crucial details – discover why filing a return is essential, regardless of income level. Get insights on due dates and valuable tips for a hassle-free filing experience.”
In this article, we shall deal with the requirement of filing of return of income only in the case of Individual and HUF (Hindu Undivided Family) persons. Of course, everyone is not required to file a return of income. Yet, provisions for filing returns of income have been framed in such a manner as to ensure that a large number of persons are required to file returns and nobody escapes the tax net. Many times people do not file their Income-tax returns under the wrong impression that it is not mandatory to file the return. Many people say that since his due taxes have been deducted as TDS, why should they file the return? Many people are under the impression that there is no tax on the income up to 5 lahks in the old regime and 7 lahks in the new regime, the filing of returns is not required, which is a wrong notion. Paying taxes and filing of return of income are two different issues.
In this article, we will discuss the various situations in which the Individual and HUF assessees must file the return of income as it is required under the law. For ease of understanding, we are taking up the Assessment Year 2023-24 (that, is Financial Year 2022-23). If anyone falls in any one of the following categories, the person is statutorily required to file the return of income for that F.Y.:-
Simply put, the assessee has to file a return of income for the F.Y. if his total income (or total income of any other person in respect of which he is assessable under the Income Tax Act) is more than the maximum amount which is exempt from income tax. For AY 2023-24,i.e., FY 2022-23, the basic exemption limit is Rs.2,50,000/-. The total income of the assessee for this purpose would also include the income of the minor children or the income of anyone else whose income is to be added to the income of the assessee under the provisions of the Income Tax Act.
It is very essential to understand the concept of total income from the limited viewpoint of filing return of income. In this regard, the following points may be kept in view.
It may be noted that the total income of the assessee has to be calculated without considering the claim for deduction under sections 80C to 80U. On such calculation, if the total income is more than the basic exemption limit of Rs. 2,50,000/-, then the assessee has to compulsorily file a return of income.
Let us take an example- Mr. A has a salary income of Rs. 3,50,000/-. He invested Rs. 1,00,000/- in Insurance premiums, PF,etc and Rs. 50,000/- for mediclaim. So after deduction under section 80C and 80D, his income shall be Rs. 2,00,000/- (Rs. 3,50,000/- less Rs. 1,50,000/-). Although after claiming deduction u/s 80C and 80D, his income was Rs. 2,00,000/-, for the purposes of filing of return of income, his income will be treated at Rs. 3,50,000/-, which is above the basic exemption limit of Rs. 2,50,000/-, Mr. A must file his return of income.
Here it would be useful to have a brief glance at some important exemptions.
Exemption u/s 54: If a person has sold a residential house and the sale results in long-term capital gains, section 54 allows exemption from capital gains if the person has invested the capital gains in another residential house. If the total income of the person is more than the basic exemption limit of Rs.2,50,000/-, without considering the claim for exemption u/s 54, he must file the return of income.
Exemption u/s 54B: If capital gains, whether short-term or long-term, arise from the sale of urban land which was being used for agricultural purposes at least 2 years before its transfer by the person or his parents, section 54B allows exemption from capital gains if the person has invested the capital gains within a period of 2 years in another land to be used for agricultural purposes. If the total income of the person is more than the basic exemption limit of Rs.2,50,000/- without considering the claim for exemption u/s 54B, the person must file the return of income.
Exemption u/s 54EC: Section 54EC allows deduction to all assessees be it Individual, firm, company or any other person, if the long-term capital gains arising from the sale of any immovable property. The exemption is allowed from capital gains for a maximum of Rs.50 lacs if it is invested within 6 months of the sale of the property in bonds of National Highways Authority of India (NHAI) or Rural Electrification Corporation Ltd (REC). If the assessee has a total income which is more than the basic exemption limit of Rs.2,50,000/-, without considering the exemption u/s 54EC, the assessee must file the return of income.
Exemption u/s 54F: Section 54F allows an exemption if the long-term capital gains arising from the sale of a capital asset other than a residential house – it may be Commercial Property, Land, Jewellery, Painting, Sculpture, Art collection, Drawing, Bullion, Precious and semi-precious stone, etc. Exemption under section 54F can be claimed if the net sale consideration is invested in acquiring one residential house in India within the prescribed time and fulfilling all other conditions laid down to claim the exemption. If the person has total income which is more than the basic exemption limit of Rs.2,50,000/-, without considering the claim for deduction u/s 54F, the person must file the return of income.
Important Note: Many persons, whose income is below the exemption limit of Rs.2,50,000/- after considering the deduction under the above provisions, carry the impression that there is no need to file the return of income as their income is below the exemption limit. This is not correct.
Let’s take the example of deduction u/s 54 for the sake of clarity. Mr. A has long-term capital gains of Rs.50,00,000/- for A.Y. 2023-24 from the sale of a residential house. He has other income, say, by way of interest of Rs. 80,000/-. So his total income becomes Rs. 50,80,000/-. If he invests, say, Rs.49,00,000/- for acquiring another residential house in India within the prescribed time and fulfilling all conditions, he will get a deduction u/s 54 of Rs.49,00,000/-. So as such, his total income after considering the deduction u/s 54 of Rs.49,00,000/- will be Rs.1,80,000/-, which is below the exemption limit of Rs.2,50,000/- for AY 2023-24. Yet, Mr. A will have to file the return of income because, for the purpose of total income from the angle of filing the return, exemption u/s 54 has to be ignored. Hence, in this case, the total income of Mr. A for seeing the requirement of filing the return will be Rs.50,80,000/- ( Rs.50,00,000+ Rs.80,000), and he will have to compulsorily file the return of income.
It is important to note that to claim the exemption u/s 54, 54B, 54EC, 54F, etc. filing of Return of Income is compulsory.
If a person is Resident in India [other than not ordinarily resident, as defined in Section 6(6)], and at any time during the financial year, holds any asset, including financial interest in any entity, which is located outside India, or the person has signing authority in any account which is located outside India, the person has to file a return of income, irrespective of his income level. This shall apply also to cases where the person is a beneficial owner of any asset or a beneficiary in any asset.
A beneficial owner of the asset means- A person is treated as a beneficial owner of an asset acquired outside India and he/she has provided, directly or indirectly, consideration for the asset, which is for the immediate or future benefit, directly or indirectly, for himself or for any other person.
A beneficiary in any asset means- if a person derives any benefit during the financial year from the asset situated outside India, consideration for the said asset has been provided by somebody else.
Apart from the above, the assesees are also required to compulsorily file a return of income, irrespective of their income level, if any one of the following criteria is satisfied in their cases.
For the Individual and HUF assesses, the due dates are as under:
|Due Date of filing of return
|In the normal cases
|On or before 31st July after the end of F.Y.
|a). In cases, where accounts of the assessee are required to be audited under any law.
b). In cases, where assessee is a partner in a firm whose accounts are required to be audited under any law.
|On or before 31st October after the end of F.Y.
|In cases, where the assessee is required to file a report under section 92E relating to international/specified transactions
|On or before 30th November after the end of F.Y.
Before concluding, I would like to say that-
For any query or consultation on any Income-Tax provisions, the Author may be contacted through email- at firstname.lastname@example.org or through WhatsApp at +91 9967745680