It is commonly believed that if you don't have to pay tax, you don't have to file your income tax returns.
However, many among you would surely be disappointed to note that this belief is NOT TRUE. Even if you have no tax to pay, you may still have to compulsorily file your tax returns... or face a penalty.
Income Tax Department often comes across cases where a salaried person, whose tax has already been deducted by his employer and he earns no other income, does not file his income tax returns. He thinks that since all his taxes have been duly paid, he is not required to go through the rigmarole of filing his tax returns.
Or a person who reduces his tax liability to Nil — by availing the various deductions he is eligible for — also does not file his income tax returns. As mentioned earlier, he is under the false notion that, he need not file his returns when no tax is payable.
So what's the correct rule regarding filing tax returns?
As per Income Tax Act, you need not file your returns ONLY WHEN your "gross taxable income" is BELOW the basic tax exemption limit.
This simply means that you have to look at two things — Gross Taxable Income and Basic Tax Exemption Limit — to determine whether you should be filing your income tax returns or not.
Gross Taxable Income
Your gross taxable income is equal to the
INCOME earned by you during the year
AFTER deducting the Conveyance, LTA, HRA, Profession Tax, Home loan interest, etc.
BUT BEFORE claiming deductions u/s 80C, 80D, 80TTA etc. such as investments in PF, PPF, Insurance premiums, Home loan principal, etc.
Basic Tax Exemption Limit
- If you are below the age of 60, the basic tax exemption limit is Rs.2.50 lakhs.
- For those between 60 to 80 (i.e. Senior Citizens) this limit is Rs.3 lakhs.
- And those above the age of 80 (i.e. Very Senior Citizens) this limit is Rs.5 lakhs.
A few examples:
Case 1: Your income is Rs.6 lakhs and your tax liability of Rs.6500 has already been deducted by your employer. You STILL HAVE to file your returns.
Case 2: Your income is Rs.3.75 lakhs and you have claimed HRA of Rs.1.50 lakhs. So your gross taxable income is Rs.2.25 lakhs, which is below the exemption limit of Rs.2.50 lakhs. You DON'T HAVE to file your returns.
Case 3: Your income is Rs.3.15 lakhs and you have claimed PPF deduction of Rs.1 lakh. So your gross taxable income is Rs.2.15 lakhs, which is below the exemption limit of Rs.2.50 lakhs. You STILL HAVE to file your returns.
Exceptions to the above rule
Even if your gross taxable income falls below the basic exemption limit, you would still be liable to file your returns in the following instances:
- When you have income tax refund to claim
- When you have losses that you want to carry forward
- When you own assets or have financial interest outside India
- When you earn income from property held under a trust, etc.
- When you may have to furnish your IT returns for availing a loan or applying for a visa
Penalty for breaking this rule
If you do not file the returns, even though you are required by law to do so, you can be levied a fine of Rs.5,000 by your Assessing Officer.
Concluding, under Income Tax Act, paying your taxes and filing your income tax returns are two entirely different obligations. There are separate rules for tax payment and filing returns. So please don't confuse between the two... and file your income tax returns even though your tax liability is zero; or you have paid all your taxes.
Moreover, given the simplified ITR forms and filing procedures, it won't take more than 15-20 mins to file your return in straightforward cases. In fact, even the somewhat involved cases too will at best take an a hour or two of your time.
However, many among you would surely be disappointed to note that this belief is NOT TRUE. Even if you have no tax to pay, you may still have to compulsorily file your tax returns... or face a penalty.
Income Tax Department often comes across cases where a salaried person, whose tax has already been deducted by his employer and he earns no other income, does not file his income tax returns. He thinks that since all his taxes have been duly paid, he is not required to go through the rigmarole of filing his tax returns.
Or a person who reduces his tax liability to Nil — by availing the various deductions he is eligible for — also does not file his income tax returns. As mentioned earlier, he is under the false notion that, he need not file his returns when no tax is payable.
So what's the correct rule regarding filing tax returns?
As per Income Tax Act, you need not file your returns ONLY WHEN your "gross taxable income" is BELOW the basic tax exemption limit.
This simply means that you have to look at two things — Gross Taxable Income and Basic Tax Exemption Limit — to determine whether you should be filing your income tax returns or not.
 |
| Can I sit down and enjoy nature OR do I have to go and file my tax returns? |
Your gross taxable income is equal to the
INCOME earned by you during the year
AFTER deducting the Conveyance, LTA, HRA, Profession Tax, Home loan interest, etc.
BUT BEFORE claiming deductions u/s 80C, 80D, 80TTA etc. such as investments in PF, PPF, Insurance premiums, Home loan principal, etc.
Basic Tax Exemption Limit
- If you are below the age of 60, the basic tax exemption limit is Rs.2.50 lakhs.
- For those between 60 to 80 (i.e. Senior Citizens) this limit is Rs.3 lakhs.
- And those above the age of 80 (i.e. Very Senior Citizens) this limit is Rs.5 lakhs.
A few examples:
Case 1: Your income is Rs.6 lakhs and your tax liability of Rs.6500 has already been deducted by your employer. You STILL HAVE to file your returns.
Case 2: Your income is Rs.3.75 lakhs and you have claimed HRA of Rs.1.50 lakhs. So your gross taxable income is Rs.2.25 lakhs, which is below the exemption limit of Rs.2.50 lakhs. You DON'T HAVE to file your returns.
Case 3: Your income is Rs.3.15 lakhs and you have claimed PPF deduction of Rs.1 lakh. So your gross taxable income is Rs.2.15 lakhs, which is below the exemption limit of Rs.2.50 lakhs. You STILL HAVE to file your returns.
Exceptions to the above rule
Even if your gross taxable income falls below the basic exemption limit, you would still be liable to file your returns in the following instances:
- When you have income tax refund to claim
- When you have losses that you want to carry forward
- When you own assets or have financial interest outside India
- When you earn income from property held under a trust, etc.
- When you may have to furnish your IT returns for availing a loan or applying for a visa
Penalty for breaking this rule
If you do not file the returns, even though you are required by law to do so, you can be levied a fine of Rs.5,000 by your Assessing Officer.
Concluding, under Income Tax Act, paying your taxes and filing your income tax returns are two entirely different obligations. There are separate rules for tax payment and filing returns. So please don't confuse between the two... and file your income tax returns even though your tax liability is zero; or you have paid all your taxes.
Moreover, given the simplified ITR forms and filing procedures, it won't take more than 15-20 mins to file your return in straightforward cases. In fact, even the somewhat involved cases too will at best take an a hour or two of your time.
