Filing of Income Tax Returns in India

Everyone has a vague idea about the entire concept of Income Tax and its consequences. A layman is confused whether he is required to pay income tax or not. Second confusion arises that whether he is required to file the Income Tax Return or not. And thereafter he or she is in dilemma about filing income tax return online or manually. This document emphasises about the following :

Who should pay income tax in India?

If you live in India, then you need to pay Income Tax in following cases for the income earned during financial year 2014-15 :

  1. If an individual is below 60 years of age
  2. An individual whose total income is less than Rs. 2,50,000 is not liable to pay the Income Tax. For example, X earns Rs. 2,10,000 and Z earns Rs. 2,80,000 in a year respectively. X is not liable to pay the Income Tax as X’s total income is less than the minimum amount chargeable to tax (Rs. 2, 50, 000). Z is liable to pay the Income Tax as the total income is more than the minimum amount.

  3. If an individual is 60 years and above but less than 80 years of age
  4. However,an individual of age above 60 years but below 80 years (a Senior Citizen) is not liable to pay the Income Tax if the individual has earned Rs. 3,00,000 or less during a particular Financial Year.

  5. If an individual is above 80 years of age
  6. If an individual is above 80 years of age (a super Senior Citizen), no Income Tax is payable upto Rs. 5,00,000.

    From the above discussion, it is clear that the Government has specified maximum amount which is not chargeable to Income Tax for different people based on their age. The limit of Income till which an individual is not liable to pay tax is also known as Basic Exemption Limit or Maximum Amount not Chargeable to Tax. You can refer income tax slabs for different years to determine basic exemption limit.

Who is required to file Income Tax Return?

Applicability of filing of Income Tax Return is dependent on the type of assesse as per the Income Tax rules.

Mandatory Filing of Income Tax Return

  1. Individuals
    • In case of a Resident person :
      • Gross Total Income is Above Exemption Limit : If the Gross Total Income (income before claiming any deductions under section 10A,10B,10BA,80C to 80U) is more than the basic exemption limit then the ITR filing is mandatory. To determine the limit refer to our discussion above . It is important to note that an individual might not be liable to pay Income tax in case if his Total Income (i.e. Gross Total Income earned minus Deductions u/s 80C to 80U) is less than basic exemption limit but he may be compulsorily required to file Income Tax Return even if his Gross Total Income (Sum of all the Incomes before Section 80 Deductions) is above the basic exemption limit.
      • Example

        If the Gross Total Income of Amit is Rs. 2,80,000 before deducting the Income Tax benefits under section 80C to 80U of Rs. 60,000/-, Amit is required to file the Income Tax Return as it is more than the basic exemption limit of Rs. 2,50,000 prescribed for Financial Year 2014- 15. Note that his Total Income is Rs. 2,20,000 and he is not liable to pay Income but still he has to file Income Tax Return. On the other hand, Sumit earns Rs. 2,35,000/- in 2014-15 and hence Sumit doesn’t require to file ITR as the income is below the exemption limit.

      • Owner of Assets Located Outside India : Any Person who is a resident of India and has any asset or financial interest in an entity which is located outside India, has to compulsorily efile his income tax return.
      • Income from Trust and others : E-filing of Tax Returns is needed for persons who are in receipt of income from a property held under a trust for charitable or religious purpose or a political party or a research association news agency, educational or medical institution, trade union, a non-profit university or educational institution, a hospital infrastructure debt fund, anybody, any authority or trust and their gross income exceeds the minimum amount chargeable to Income Tax.
      • Seeking Income Tax Refund : If an individual is eligible for any income tax refund which means some TDS has been deducted on the individual’s income while the individual feels that the actual income tax on income may be less than the amount of TDS. Therefore, some Income Tax Refund will be accrued to the individual. In such a scenario, filing of income tax return has been made mandatory from 1st June 2015. So, e-filing of Income Tax Return has been made mandatory for every tax payer who is seeking any Income Tax Refund, otherwise his refund may not be allowed by Income Tax Department.
    • In case of a Non Resident Individual : A Non-Resident Individual will be required to furnish a return if the income is earned in India or deemed to be earned in India.If the NRI falls in any of the above discussed categories, as per law, NRI should face consequences.
  2. Company : Every company is compulsorily required to file Income Tax Return irrespective of whether they incur profits or losses.
  3. Partnership : Similar to Companies, Partnership firms are required to file Income Tax Return every year whether they have incurred losses or profits.

Voluntary Filing of Income Tax Return

Apart from the mandatory provisions for filing the Income Tax Return, the individual may file the Income Tax Return if the individual wants to serve any one of the following purposes :

  1. Availing Housing Loan / Credit Cards : These days, banks offer home loans / credit cards after due verification of the income details. In such cases, banks consider Income Tax Return as a proof of income. Therefore, if anyone is planning to avail home loan in future, then the individual must start filing the Income Tax Return.
  2. Visa applications : Some Countries grant Visa after verifying the details. Again, Income Tax Return serves as important proof of your income. Therefore,it is always suggested to file your income tax returns timely as the ITR serves as in Income Proof which can be required at any point of life.

Misconception about non-filing of Income Tax Return by salaried individuals if income is below Rs. 5,00,000

There is a lot of confusion among the salaried individuals and other taxpayers about the requirement of filing the Income Tax Returns if the income is below Rs. 5,00,000. The confusion is due to the special exemption notification issued by Income Tax department in 2011 and 2012 which stated that , an individual with a salary of less than Rs. 5,00,000 and the annual interest earned from the savings bank account is less than Rs. 10,000, is not required to file the return for the financial year 2010-2011 and 2011-2012. But, later on from financial year 2013-2014 no such notification was issued and thus even if the salary is less than Rs. 5,00,000, the individual is required to file the Income Tax Return if the individual falls in any of the above discussed conditions.

When is online filing of Income Tax Return mandatory?

You can file your returns electronically. Though, they have not been made mandatory for everyone. However, in the following cases, the Income Tax Department has made it mandatory to efile Income Tax Returns :

  1. If the total earnings exceed Rs. 5,00,000, or
  2. If you own foreign assets or are a signing authority in any account located outside India. Apart from the above statutory requirements for filing the Income Tax Return in online mode, the efiling of Income tax returns has many advantages which are discussed further, or
  3. If you need Refund: From financial year 2014-15, one has to compulsorily efile his Income Tax Return if he needs income tax refund from income tax department.

Benefits of e-filing of Income Tax Return over manual filing

Following are various benefits of filing ITR electronically :

  1. Faster processing : The processing of e-returns is faster which means the submission of ITR acknowledgement is faster.
  2. Accurate : E-filing is performed through software developed with the help of IT professionals and experienced Chartered Accountants. Therefore, calculation of income and taxes to be paid on it are more accurate. Thus, E-filing is less prone to errors.
  3. Unconstrained : The user is not constrained to a particular place or time, as the e-filing facility is available to everyone, 365*24*7. It is less time consuming and can be done from anywhere.
  4. Eco friendly : It is eco-friendly which reduces paper work by saving environment.
  5. Reliability : It is more reliable way of keeping records than manually filing the returns. All the information is available on cloud and thus if the user needs any past records in future for reference, it’s readily available.
  6. Easy access : It provides easy access to data to the user from anywhere and at any time.

Learn how to efile Income Tax Returns in a simple and quick way at Mytaxcafe.

Section 80GGA, 80GGB and 80GGC of Income Tax Act April 9, 2015

Documents needed for e-filing Income Tax Return May 1, 2015



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