When to file ITR mandatorily

The Income Tax Act is a crucial legislation that governs the taxation system in India. Under Section 139(1) of the Income Tax Act, certain individuals and entities are required to file their income tax returns within the specified deadline. These provisions aim to ensure compliance with tax regulations and enable the government to assess and collect taxes effectively.

In this article, we will explore the categories of individuals and entities mandated to file income tax returns under Section 139(1) of the Income Tax Act. We will also delve into situations where filing an income tax return becomes mandatory, even if the income earned does not exceed the maximum taxable amount. Understanding these requirements is essential for taxpayers to fulfill their obligations and avoid penalties.

Mandatory Filing of Income Tax Returns:

The Income Tax Act outlines the persons who are obligated to file income tax returns. Firstly, any person, including individuals, Hindu Undivided Families (HUFs), Bodies of Individuals (BOIs), and Association of Persons (AOPs), whose total income exceeds the maximum taxable amount, must file their income tax returns before the due date.

Furthermore, the Act mandates that all companies, whether private, public, domestic, or foreign, located and/or conducting business in India, must file their income tax returns. Partnership firms, including unregistered partnership firms and Limited Liability Partnership (LLP) firms, also fall under this obligation.

Exceptions to Income Threshold for ITR Filing:

While the general principle is that income tax returns are filed only when the income earned exceeds the maximum taxable amount, the Income Tax Act specifies certain situations where filing becomes mandatory, regardless of the income level. These situations are as follows:

1. Total income before claiming deductions and exemptions exceeds the maximum taxable amount.
2. Holding assets outside India for resident individuals (other than non-ordinary residents).
3. Holding a position of signing authority for accounts operating outside India for resident individuals (other than non-ordinary residents).
4. Incurring foreign travel expenses exceeding Rs 2 lakh in the previous year.
5. Depositing Rs 1 crore or more in one or more current accounts during the previous year.
6. Incurring electricity expenses of Rs 1 lakh or more.
7. Engaging in business with a turnover of Rs 60 lakh or more during the previous year.
8. Receiving total receipts of Rs 10 lakh or more in a profession during the previous year.
9. Depositing Rs 50 lakh or more in aggregate in one or more savings bank accounts.
10. Total Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) is Rs 25,000 or more (Rs 50,000 for senior citizens).
11. Incurring losses under ‘Income from House Property,’ ‘Profits and Gains from Business and Profession,’ or ‘Capital Gains’ and intending to carry forward and set off such losses against future income.

Conclusion:

Filing income tax returns is a vital responsibility for individuals and entities as per the provisions of the Income Tax Act. While the primary criterion for filing is when the income earned exceeds the maximum taxable amount, there are specific situations outlined in the Act where filing becomes mandatory, irrespective of income levels.

Compliance with these provisions is crucial to ensure adherence to tax regulations, promote transparency, and enable the government to assess and collect taxes effectively. By understanding the mandatory filing requirements under Section 139(1) of the Income Tax Act, taxpayers can fulfill their obligations and avoid potential penalties while contributing to the nation’s economic growth.