Article
Is tax return mandatory in India?
As per the provisions of the Income Tax Act, 1961, it is not mandatory for any individual to file their IT Return whether they fall under the prescribed tax slab or not. However, we would recommend that you file your Income Tax Return even when you are not earning and do not fall under any of the prescribed tax slabs. Every individual/organization is required to pay taxes on the income they earn, even though there is no compulsion for anyone to file their ITR, heavy penalties may be levied for non-compliance in terms of filing your ITR.
Under what circumstances it is mandatory to file ITR?
Following are the circumstances under which it is mandatory for the taxpayer to file ITR: -
- If your income, whether you are an individual, HUF (Hindu Undivided Family), AOP (Association of People) and/or BOI (Body of Individuals) exceeds Rs. 2.5 lakhs in a given financial year, you have to file your Income Tax Return. However, for Senior Citizens (between 60 years to 80 years) the minimum slab for filing ITR is Rs. 3 lakhs.
- If you are a company or firm, regardless of earning profits or incurring losses, you will have to file your Income Tax Return annually.
- If you want to claim an income tax refund, you are required to file an IT Return.
- If you want to carry forward a loss from previous financial year under the head of income, then you must file an Income Tax Return.
- If you have exempt long-term capital gains from either sale of equity shares of a company or sale of unit of equity directed from mutual funds or sale of a unit of business trust of more than Rs. 2.5 lakhs in a particular financial year. Even though these gains being exempt from tax, it is still mandatory for you to file your IT Return.
- If a resident of India has an asset or financial interest in an entity located outside of India, then in such a situation they are required to file Income Tax Return. However, this does not apply to Non-Resident Indians (NRIs) or Resident but not Ordinary Resident (RNORs).
- If a resident of India is a signing authority in a foreign account, then they are required to file ITR. (not applicable to NRIs or RNORs)
- You are required to file Income Tax Return if you receive any income from property held under either a trust for charitable, religious purposes, a political party, research association, news agency, educational or medical institution, trade union, a non-profit university, hospital, infrastructure debt fund, any authority, body or trust.
- If a foreign company is getting a treaty benefit on a transaction in India. Moreover, a proof of the ITR filed may also be required at the time of applying for a loan or visa.
- Any NRI (Non-Resident Indian) who acquires any income in India has to file Income Tax Return.
