The finance ministry recently extended the due date for filing Income Tax returns (ITR) for the year 2019-20 till December 31, 2020. As per Income Tax rules, it is mandatory for individuals with an income to file ITR.
Individuals are required to file income tax returns to inform the government about total income earned during a particular year and whether taxes have been paid on that in a timely manner.
It may be noted that millions of people in the country still do not file income tax, which results in losses to the government.
While the government is trying to make tax laws smoother to help more individuals file their returns seamlessly, it is important to note that all individuals in the country are not required to file income tax returns mandatorily.
Who needs to file ITR mandatorily?
Individuals should also note that the basic exemption limit for any individual varies with age. For FY 2019-20, the basic exemption limit is Rs 2.5 lakh for individuals aged below 60 years; it is Rs 3 lakh for individuals aged between 60-80 years and it is Rs 5 lakh for individuals aged 80 years and above.
In case an individual’s total income exceeds the basic exemption limit in accordance with age, then they are required to mandatorily file income tax returns.
Exceptions
However, there are some exceptions where individuals may still need to file income tax returns even if total income — before taxes or other deductions — does not exceed the basic exemption limit.
Any individual who has spent an amount of Rs 2 lakh or more for travel to a foreign country has to file returns even if gross income does not exceed the basic exemption limit. Individuals will also have to file income tax returns if an aggregate amount of Rs 1 crore or more has been deposited in one or more current accounts maintained with banks.
A person who has paid an electricity bill exceeding Rs 1 lakh in a single bill or on an aggregate basis will also have to file ITR irrespective of gross income.
Any resident individual who has a source of foreign income, assets or any account outside India is also required to file ITR returns.
ITR will also have to be mandatorily filed if an individual’s gross income exceeds the exemption limit before claiming tax exemption on capital gains under Section 54, 54B, 54D, 54EC, 54F, 54G, 54GA or 54GB, according to The Economic Times.
New tax regime for FY20-21
For FY20-21 tax return filing, individuals have two regimes to chose from. An individual can opt for the existing tax regime where they can claim tax exemptions such as HRA, leave travel allowance and deductions under various sections of the Income Tax Act.
The individual can also opt for the new tax regime under which most tax exemptions and deductions cannot be claimed, but taxpayers can enjoy a lower tax rate.
It is worth mentioning that the base exemption limit will depend on the tax regime chosen by an individual. Under the new regime, the basic exemption limit for all taxpayers — irrespective of age — will be Rs 2.5 lakh. Simply put, if an individual’s gross income exceeds Rs 2.5 lakh, then he/she will have to file ITR mandatorily.