“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.

Requirement of filing of return of income For Individuals and HUFs:

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.:-

1. Criteria of total Income more than the basic exemption limit:

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. 

  • Total income to be calculated without considering deductions under Chapter VI-A of the Income Tax Act: Chapter VI-A deals with various types of deductions which are provided in sections 80C to 80U of this Chapter. It includes certain important deductions, that most of the Individual and HUF assessee claim. For example, section 80C, allows a deduction for investments in provident fund, payments of insurance premiums, tuition fees, subscription to National Saving certificates (VIII Issue and IX Issue), etc. Section 80D for Mediclaim insurance. Section 80G deals with deductions on donations made to charitable trusts, certain Funds such as Prime Minister’s Relief Fund, etc.

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.

  • Total income to be calculated without considering certain exemptions: Total income of the assessee for the F.Y. is to be calculated without considering the claim of exemption under sections 10(38), 10A, 10B, and 10BA. On such calculation, if the total income is more than the basic exemption limit of Rs. 2,50,000/-, the person has to file the return of income.
  • Total income to be calculated without considering exemption u/s 54, 54B,54D, 54EC, 54F, 54G,54GA and 54GB: Total income of the person for the F.Y. is to be calculated without considering the claim of exemption in the above-mentioned sections. On such calculation, if total income is more than the basic exemption limit of Rs. 2,50,000/-, assessee must file the 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.

2. Compulsory filing of return- if assets located outside India:

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.

3. When Income Tax Return filing is Compulsory irrespective of their income level?

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.

  • Criteria of deposits made in current accounts: If during the F.Y., any person has deposited (cash and other deposits) more than Rs. 1 Crore in his current account(s) in the bank(s) or co-operative bank(s), the person is required to file a return of income, even if his total income is below the basic exemption limit of 2,50,000/-.
  • Criteria of expenses on foreign travel: If a person has spent more than Rs. 2 Lakh on Foreign Travel during the F.Y. for himself/herself or for somebody else, the person is required to file a return of income, even if his total income is below the basic exemption limit of 2,50,000/-.
  • Criteria of Expenses on electricity consumption: If a person has incurred expenses of more than Rs. 1 lac in the F.Y. towards the Electricity Bill(s), the person is required to file a return of income, even if his total income is below the basic exemption limit of 2,50,000/-.
  • Criteria of Turnover in business: If a person has any business and total sale, turnover or gross receipts in the business is more than 60 Lakh for the F.Y., the person is required to file a return of income, even if his total income is below the basic exemption limit of 2,50,000/-.
  • Criteria of Professional receipts: If a person is a professional and his total professional receipts for the F.Y. is more than 10 Lakh, the person is required to file a return of income, even if his total income is below the basic exemption limit of 2,50,000/-. 
  • Criteria of TDS/TCS: An Individual person, whose aggregate tax deducted at source (TDS) or tax collected at source (TCS) during F.Y. is Rs 25,000 or more, has to file an income tax return even if his total income is below the basic exemption limit of 2,50,000/-. In the case of senior citizens, the aggregate TDS or TCS amount making them to file a return of income is Rs 50,000 or more.
  • Criteria of deposits in savings bank account: If a person has total deposits (including cash and other deposits) in his saving bank account(s) of more than 50 Lakh in the F.Y., he has to file income tax return even if his total income is below the basic exemption limit of 2,50,000/-.

Due date of filing return of income:

For the Individual and HUF assesses, the due dates are as under:

Description 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-

  • It is advisable to file the return of income, irrespective of your income level. Because the return of income is a very important document and it is helpful in many areas, say, VISA processing where foreign embassies sometimes require evidence of return of income for three years, obtaining bank loans, etc. Please note that filing of return of income is also required for making a claim for a refund of income tax.
  • If a person has incurred a loss in any F.Y. under the head “ Profits and gains of business or profession” or under the head “ Capital Gains”, he must file the return of loss on or before the due date, otherwise, he will not be entitled to claim to carry forward of the loss under these heads in the next year for adjustment of the said loss against income of the next year.
  • The NRIs, who derive income in India from any sources of Income, must file a return of Income in India.

*****

For any query or consultation on any Income-Tax provisions, the Author may be contacted through email- at bdconsultantsindia@gmail.com or through WhatsApp at +91 9967745680

Author Bio

Qualification: Graduate
Company: M/s BD Consultants
Location: Navi Mumbai, Maharashtra, India
Member Since: 06 Apr 2023 | Total Posts: 9
I am an ex-Income Tax Officer. I worked in the Income Tax Department in Mumbai for 21 years and have vast experience in matters of Direct Taxes. I have a keen academic interest in Personal Income Tax and Corporate Taxes matters. As an Audit Officer of the Department, I was selected as Auditor of the View Full Profile

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