Who Should File An Income Tax Return? (Complete Update)

If your gross annual revenue exceeds ₹2,50,000 under the new tax regime in a fiscal year, you should submit a tax return, per tax regulations. Gross profit comprises earnings from sources, including salaries, real estate, capital gains, etc. To submit a tax return, you must know what ITR is.

Let us learn about who should file ITR and What is ITR here.

What is ITR?

Income Tax Return (ITR) is a form you are supposed to submit to the Income Tax Department of India. It contains information about your income and the taxes to be paid during the year. 

Information filed in ITR should pertain to a particular financial year, i.e., starting on 1st April and ending on 31st March of the upcoming year.

Your Income can be of:

• Your salary
• Profits and gains from your business and profession
• Your house property gains
• Revenue from your capital gains
• Income from other sources such as dividends, interest on deposits, royalty income, winning the lottery, etc.

The Income Tax Department has specified seven types of ITR forms – ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7 and applicability of the form will depend on your income and the type.

Who is accountable for filing an income tax return?

If you have a valid PAN, you can file ITR even if your income is below the exemption limit.

However, if your taxable income exceeds the limit, you should file ITR.

The basic exemption limit is Rs 3 lakh for senior citizens (aged between 60 and 80 years), Rs 5 lakh for super senior citizens (aged 80 years or more), and Rs 2.5 lakh for others.

• If you claim a tax refund or avail of a loan, you can file ITR.
• If you are an Indian resident acting as a signing authority for any foreign account, you can file ITR.
• If you are an Indian resident possessing an asset or financial interest located outside India, you can file ITR.
• If you are an NRI and your total annual gross income earned or accrued in India exceeds Rs2,50,000, you are also eligible to file ITR.

Who is exempt from filing ITR?

If your gross income is under the exempted limit of Rs 2.5 lakh, you are not required to file ITR. 

However, even if your taxable income falls under the limit, you should file a return. Such a return is called a nil income-tax return (ITR). Filing it reports to the Income-Tax department that you did not pay the tax that year as your income was low.

What is the minimum income to file ITR?

You need to file ITR if your annual income exceeds Rs.2.5Lakhs. This limit is Rs.3,00,000 for senior residents and Rs.5,00,000 for super senior citizens.

Is it required to file an income tax return?

The answer is Yes. It is compulsory to file income tax returns online if you are a registered taxpayer. However, paper returns can be filed by those above 80 years of age who do not have income from regular business or profession.

What will happen if I don’t file ITR?

You should file the returns as early as possible before the deadline ends. 

If you fail to submit your ITR by the deadline, you should file a belated ITR and a penalty.

You may file returns up to December 31 of the assessment year 2023 even if the ITR filing date is July 31. Therefore, the deadline for submitting a late return is on or before the end of the applicable estimation year.

Does the housewife need to file ITR?

The general opinion is that housewives do not have an active source of income, so need not file Income Tax.

However, there may be scenarios where housewives need to file ITR.

Some of these cases are briefed here,

1. If you get income from investments, you need to file an ITR. Your parents or Spouse may have made investments in your name either for your financial security or to reduce their household tax liability.

Such investments may be bank deposits, mutual funds, stocks, etc. Over a period of time, such investments may accumulate and generate interest or dividend income.

If your total investment income, as said above, exceeds 2.5Lakh per year, you need to file ITR. The exemption limit is Rs.3 Lakh for homemakers aged above 60 years and below 80 years, and Rs.5 Lakh for those above 80 years.

2. You may receive gifts on occasions like birthdays/festivals from family and friends. If the aggregate value of all gifts, in a financial year, exceeds Rs.50,000 then the entire amount becomes taxable under the head ‘Income from other sources. You may have to pay a fine ranging from 50% to 200% of the tax assessed if you fail to disclose the gifts.

3. If you gain profits by selling the capital assets in your name, it will attract capital gain tax depending on earnings and holding period.

4. If you avail of a personal loan, Car loan, Business loan in the future, etc, you should file your returns regularly. ITR acts as your proof of income and you become more eligible to avail of the loan.

5. If your taxable income is below the threshold and tax has been deducted at source (TDS) from investments such as interest income, you can file your ITR claiming a refund.

Frequently Asked Questions (FAQs)

What happens if I fail to file taxes for ten years?

As per Section 271(C) of the Income Tax Act of 1961, if you hide your income, the penalty can be between 100% to 300% of the amount of tax that was due but not paid. 

Unfortunately, till the previous 3 years, you can pay the fine and file ITR. If your period exceeds 3 years, you may be subject to imprisonment, where the prison period may vary from 3 months and 2 years. 

Do I have to file a tax return if I don’t owe anything?

The Simple answer is Yes. You need to file Returns though you are not liable for tax. It shows the Income tax department that you earn less money and are not liable to pay the taxes. These records are of utmost importance to the IT department.

Can we file ITR for zero income?

You should file NIL ITR in such a case. However not mandatory, it is advisable to file ITR if there is any source of income earned by you in a financial year.

You can choose any of the following – ITR-5, ITR-6, and ITR-7 to file ITR as a non-salaried person.

Can you legally avoid tax?

Avoiding tax means tax evasion. Tax Evasion is an illegal activity in which you avoid paying the tax liability. It involves if you hide or false income, without proof of inflating deductions, not reporting cash transactions, etc. Tax evasion is a serious violation that comes under criminal charges and substantial penalties.

However, no one stops you from saving taxes using legitimate ways. Here are ways to escape tax legally when investing in the name of family members.

1) You can transfer some money to your non-working spouse or a minor child and invest them in a tax-free instrument.

2)You can declare a lessening of up to Rs 1,500 per child for two children in case of assets made in the name of children.

3)If your child turns adult, they are treated as a separate individual where you can save up to 2.5Lakhs in their name.

Similarly, you can find several legal ways to save your tax.

Can a person refuse to pay taxes?

If you fail to pay tax as per self-assessment you are known as tax fraud under Section 140A (1). 

In such a case, the officer can levy a penalty up to the total amount of tax owed. However, if there is a valid reason for not paying tax as per self-assessment, the officer may waive the penalty.

In Short, the answer is: No, you cannot refuse to pay taxes.

Bottomline

Filing Income Tax returns is the responsibility of every citizen for the benefit of the nation. ITR is a form that shows your gross annual income sources to the government and the taxes to be paid for that. You should file ITR if your annual income exceeds Rs.2.5 Lakh. You might have got a clear idea about what is ITR and Who should file ITR. File your ITR within the stipulated time to comply with your responsibilities to the nation.

Recommended Articles

Tax Audit and ITR Filing Last Date

ITR 3 Income Tax ( New Update)