Who has to file income tax return mandatorily?

Synopsis

As per income tax laws, ITR must be mandatorily filed if a resident individual’s total income during the financial year exceeds the basic exemption limit. Remember, the basic exemption limit for an individual depends on his/her age.

The government requires people to file income tax returns (ITRs) to get information about their income and to check if income tax has been correctly paid on it. ITRs are required to be filed for each financial year. As per current income tax laws, it is only mandatory for an individual to file ITR if his/her income/expenditure/investments meet certain defined criteria.

As of now, the ITR filing deadline for the financial year 2020-21 stands extended to December 31, 2021.

Who has to mandatorily file income tax return?
As per income tax laws, ITR must be mandatorily filed if a resident individual’s gross total income during the financial year exceeds the basic income exemption limit. Remember, the basic exemption limit for an individual depends on the tax regime chosen by him/her in FY 2020-21.

If an individual opts for the new, concessional personal tax regime, then his/her basic exemption limit will be Rs 2.5 lakh, irrespective of age. Senior citizens do not get any higher exemption limit benefit under the new tax regime.

However, if an individual continues with the old or existing tax regime, then the basic tax exemption income limit will depend on his/her age. For FY 2020-21, the basic exemption limit under old tax regime is as follows:

Age of an individual Basic exemption limit under old tax regime (Rs)
Below 60 years of age 2,50,000
Between 60 and 80 years of age (Senior citizen) 3,00,000
80 years and above (Super Citizen) 5,00,000

Thus, if your gross total income exceeds the amount mentioned in the table above (depending on your age) and you are opting for the old tax regime, you will have to mandatorily file income tax return. Missing the income tax deadline will lead to penal consequences.

Other reasons why you may have to mandatorily file return
There are certain exceptions to the above basic income exemption limit rules. That is, in certain cases, even if the gross total income does not exceed the exemption limit as mentioned above, the individual will have to mandatorily file ITR irrespective of the tax regime chosen.

As per current income tax law, income tax return for FY 2020-21 must be mandatorily filed before the deadline i.e. December 31, 2021 if an:
a)Individual has spent an amount or aggregate of amounts exceeding Rs 2 lakh for himself/herself or any other person for travel to a foreign country;
b)Individual has deposited an amount or aggregate of amounts exceeding Rs 1 crore in one or more current accounts maintained with a bank or co-operative bank;
c)Individual has paid electricity bill exceeding Rs 1 lakh in a single bill or on aggregate basis during the financial year;
d)Ordinarily resident individual having income from foreign countries and/or assets in foreign countries and/or having signing authority in any account outside India; and
e)If an individual’s gross total income exceeds the exemption limit before claiming tax exemption on capital gains under section 54, 54B, 54D, 54EC, 54F, 54G, 54GA or 54GB of the Income-tax Act, 1961.

For income tax refunds
Another thing to note is that even if your gross total income is below the basic exemption limit and tax has been deducted from your income, then you have to mandatorily file ITR to claim income tax refund.

Filing ITR, if you have opted for new tax regime
Do keep in mind that if an individual opts for new tax regime at the time of filing ITR, then he/she cannot claim common tax exemptions such as house rent allowance (HRA), leave travel allowance etc. and deductions under section 80C, 80D, 80TTA etc. The only deduction available under the new tax regime is section 80CCD(2). This is the deduction available on the employer’s contribution to the NPS account. The maximum deduction available is 10% of the basic salary within the tax-exempt limit of Rs 7.5 lakh in a financial year.