Now that the time of the year has arrived where the IT Returns have to be filed, one of the questions that get asked frequently is whether everyone is supposed to file their IT returns? Is it mandatory for everyone?
Well, there are certain factors associated with it.
For example, if the gross total income, excluding the applicable deductions, of an individual exceeds the basic exemption limit of income tax, above which the tax is charged, then one will have to file their income tax returns.
On the other hand, those who had spent over INR 2 lakhs on foreign trips or had deposited INR 1 crore in a year in a bank, or paid electricity bills over INR 1 lakh in a year, will also have to file their ITR.
Having said that, there are a number of myths around tax filing and first time taxpayers or those are filing their returns for the first time often find it very confusing. There are those who believe that if the employer issues a Form 16 and had deducted taxes, then they do not need to file their ITR anymore. That is not correct. Even if the income is below the taxable limit for which otherwise filing ITR may not be required, the scenario will be different for different people, depending on other conditions. Hence, if the gross total income, excluding the deductions, exceeds the basic limit of income on which tax is charged, one will have to file ITR.
What else to know
So for example, in the assessment year 2019- 20, if the limit is INR 2.5 lakhs for individuals below the age of 60 years, Rs 3 lakhs for senior citizens and it is Rs 5 lakhs or super senior citizens. Also, irrespective of the income, if one wants to claim a tax refund or want to carry a loss forward, then filing of ITR becomes mandatory in those cases as well. Any residential individual, who holds any kind of beneficial interest in any asset that is located outside India, or who has any kind of financial interest in any entity outside India, should file their returns. This also holds true for anyone who has signing authority in a foreign bank and all of this would be irrespective of the gross total income.
From the assessment year, 2020- 21 onwards, a few more categories of people will also be brought under the purview of filing ITR and this has been declared in the Budget of 2019. These will include those who have withdrawn more than Rs 1 crore from their current bank account in a year or have paid electricity bills more than Rs 1 lakh in a year. If anyone has spent more than Rs 2 lakhs in foreign travel during the current financial year, then they will also have to file their ITR.
For those who are filing their returns for the first time, it is always a good idea to enroll the assistance of a CA for the first couple of years to understand all the norms of filing the ITR and that will prevent any kind of mistakes that are associated with wrong filings. Filing of ITR is also important as the records would be necessary for any other financial transactions as well, most importantly, while availing a loan from a bank and the IT returns are the key documents that have to be submitted in such cases. So, it is always better to file the returns irrespective of the income level and it will also help an individual keep better track of their finances and evaluate their financial strengths and weaknesses in the long run.