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When individuals start earning, many people suggest filing income tax returns. Filing ITRs and keeping the government informed on your income is a good practice. However, is it necessary for people earning less than the exemption limit to file taxes? Most importantly, what is the meaning of taxable income more than the exemption limit
Keep reading this article to learn more.
Budget 2025 Update
The basic exemption limit under the new tax regime has been increased to Rs. 4,00,000, up from Rs. 3,00,000.
According to Income Tax laws, an Indian citizen must file an ITR only if his/her taxable income exceeds the basic exemption limit. In case the person's income falls below this threshold, it is not mandatory to file a return.
The basic threshold will tend to differ depending on the chosen income tax regime. For the old regime, the basic exemption limit is Rs 2,50,000. Whereas, for the new one, it is set at Rs 3,00,000.
However, there are certain conditions under which individuals must file ITRs even if their taxable income is less than the basic exemption limit. They are as follows:
In case a person deposits Rs 50 lakh or more in one or more savings accounts in the previous financial year, it is mandatory for him/her to file an income tax return.
If an individual deposits Rs 1 crore or more within a financial year in one or more current accounts in a commercial bank or a cooperative bank, an ITR filing is necessary. However, this rule does not apply to businesses.
Gross receipts or annual total sales turnovers exceeding Rs 60 lakh will require income tax return filing.
If a person's professional income crosses Rs 10 lakh in the previous financial year, filing an ITR is mandatory for him/her.
Paying an electricity bill greater than Rs 1 lakh in a single bill or on aggregate within a financial year requires individuals to file an ITR.
In case a person has Tax Deducted at Source (TDS) or Tax Collection at Source (TCS) of an amount equal to or more than Rs 25,000, ITR filing is mandatory. For senior citizens, this threshold is set at Rs 50,000.
If an individual has an asset or is a beneficiary of an asset that is located in a foreign country, he/she is required to file an ITR. It is also applicable if the person has signing authority in an account which is located outside the country.
During foreign travel, if an individual spends more than Rs 2 lakh on him/herself or any other person, it is mandatory to file an income tax return.
The minimum income needed to file an income tax return will depend upon the individual's age and opted tax regime. In the case of the old regime, individuals below 60 years of age with a gross income of more than Rs 2.5 lakh within a financial year need to file an ITR.
For senior citizens (people aged between 60 to 80 years), the minimum gross income limit is Rs.3 lakh. While for super senior citizens (individuals aged above 80 years), the limit rises to Rs.5 lakh.
However, the new regime requires all individuals to file returns only if their gross income exceeds Rs 3 lakh within a financial year.
Even if your income does not exceed the basic exemption limit, there are some great advantages to filing ITRs. They can help you get TDS refunds and carry forward capital losses to adjust with profits in the upcoming years. Furthermore, when you are applying for a loan, the lender may ask for a copy of your ITR filing. It enables them to assess your repayment capacity and hasten the loan approval process.
Thus, filing your income tax returns every year is a habit which can benefit you in the long run.
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