Based on my interaction with most of the salaried people, I have gathered an impression that many of the salaried people feel that as the tax has already been deducted by their employer from their salary, they are not required to file any ITR. Likewise most of the retired people, who mainly survive on interest income and where tax is deducted by the bank, feel that since the bank has already deducted tax on their fixed deposit interest they are not required to file any ITR. These people treat deduction of tax at source equivalent to filing of ITR, which is not correct. Filing of your ITR and discharging appropriate tax liability are two different responsibilities and have to be discharged separately. Even in some cases your income may be below the taxable limits but the law may still require you to file your ITR.
Let us understand when you are required to file your ITR?
In the first category are the cases where the requirement to file your ITR is determined based on your total taxable income. So you are required to file your ITR if aggregate of all of your taxable income, before deduction under various sections of chapter VIA like 80C, 80CCC, 80CCD, 80D, 80E, 80G, 80GGA, 80TTA, 80TTB etc., exceeds the basic exemption limit. These sections cover various deductions available in respect of investments/payments made for items like ELSS, NSC, PPF, repayment of principal of home loan, tuition fee for two children, life insurance premiums, NPS, mediclaim premiums, donations, interest on education loan, rent paid by self employed etc. Section 80TTA allows a deduction in respect of saving bank account interest with banks, post office or cooperative banks. Section 80 TTB allows a deduction of upto Rs. 50,000/- to senior citizens in respect of their interest income from banks, post office and cooperative banks.
The basic exemption limit for the year ended 31st March 2019 is different depending on your age. It is Rs. 2.50 lakhs for an individual who has not yet completed 60 years and for an HUF. Senior citizen who are resident of India and who are between the age of 60 and 80 enjoy higher limit of Rs. 3 lakhs. This limit is Rs. 5 lakhs for a resident Individual above 80 years.
In some of the cases though the aggregate of taxable income may exceed the exemption limit but due to such deductions, it may come down below the basic exemption limit and thus not liable for income tax. For example, in case you are a salaried and your total income for the year ended 31st March 2019 is Rs. 4 lakhs. You have invested Rs. 1.50 lakhs in PPF and have paid medical insurance premium of Rs. 10,000/- during the year bringing down the taxable income below the basic exemption limit of Rs. 2.50 lakh and thus not liable for any tax liability. In such a scenario you are still required to file your ITR though there is no tax liability.
Even if your income does not exceed the basic exemption limits specified above and you are a tax resident of India, you are still required to file your ITR in certain situations like when you have any interest in any asset outside India either as beneficial owner or as legal owner. The asset need not necessarily be immovable and even it may be an movable asset or you are a signatory of any bank outside India. So in case you had been outside India for a brief period and had opened a bank account then and came back to India without closing it. You still will have to file your ITR even if there is no balance left in the bank account. Likewise all residents who have any income from outside India or who have invested in shares, bonds or mutual fund units of foreign companies also have to mandatorily file the ITR . So for example you will have to file ITR here in India in case you have EOPS of a foreign company received under your compensation package, which may be holding company or a subsidiary company of your employer. This is applicable even when you have not exercised the options and the exercise period is not yet over.
All the NRI (Non Resident Indians) who have come back to India for enjoying their retirement here in India will have to file ITR once they spend specified period of time in India so as to make them tax resident of India, if they have left their investments abroad behind them.
I am sure by now majority of you know whether you are required to file your ITR or not.
The writer is a tax and investment expert and can be reached on [email protected] and @jainbalwant on twitter