Mandatory Income Tax Return under Seventh Proviso to Section 139(1) of Income Tax Act, 1961

A new column is appearing in Part A-General Information which is “Are you ling return of income under Seventh proviso to section 139(1) but otherwise not required to furnish return of income?” for filing an Income tax return (‘ITR’) for Assessment Year 2020-21 (Financial Year 2019-20).

Please note that Finance (No. 2) Act, 2019 has inserted a new seventh proviso to section 139(1) of the Income Tax Act, 1961 (‘the IT Act’) w.e.f. 01-04-2020 to provide for mandatory filing of ITR for those people who have certain high-value transactions even though that person is otherwise not required to file a return of income due to the fact that total income is below the basic exemption limit.

Section 139(1) of the IT Act provides for filing of return of income and prescribes the due date of filing of return of income subject to the certain exceptions. Section 139(1) of the IT Act prescribed the requirement to furnish the return of income. As per Section 139 (1) of the IT Act

“every person –

(a) being a company of firm; or

(b) being a person other than a company or a firm, if his total income during the previous year exceeded the maximum limit not chargeable to income-tax.

shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.”

Currently, a person other than a company or a firm is required to furnish the return of income only if his total income exceeds the maximum amount not chargeable to tax, subject to certain exceptions. Therefore, till the amendment by Finance (No. 2) Act, 2019, a person entering into certain high-value transactions is not necessarily required to furnish his return of income.

But by the aforesaid amendment persons who enter into certain high-value transactions, now required to furnish their return of income even though his total income exceeds the maximum amount not chargeable to tax. Please note that the amendment applies only to a person covered in section 139(1)(b) of the IT Act which includes an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person.

The newly seventh proviso inserted to Section 139(1) of the IT Act may be read as under-

“Provided also that a person referred to in clause (b), who is not required to furnish a return under this sub-section, and who during the previous year—

(i)  has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or

(ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or

(iii) has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or

(iv)  fulfils such other conditions as may be prescribed,

shall furnish a return of his income on or before the due date in such form and verified in such manner and setting forth such other particulars, as may be prescribed.”

Please note that CBDT is empowered to prescribe other conditions or high-value transactions under this seventh proviso. Till date, no such conditions have been prescribed.  It is not necessary that all the conditions have to be fulfilled. Fulfilling any one of the above-mentioned conditions is sufficient to file a return of income.

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.