Do You Need to File Returns if Taxable Income Is Less Than Basic Exemption Limit?

When individuals start earning, many people suggest filing income tax returns. Fitting 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.  

What to Do if My Taxable Income Is Less Than Basic Exemption Limit?

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:

• Savings Account Deposits of More Than Rs 50 Lakh

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. 

• Bank Deposits Exceeding Rs 1 Crore

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. 

• Sales Turnover of More Than Rs 60 Lakh

Gross receipts or annual total sales turnovers exceeding Rs 60 lakh will require income tax return filing. 

• Professional Income Exceeding Rs 10 Lakh 

If a person's professional income crosses Rs 10 lakh in the previous financial year, filing an ITR is mandatory for him/her. 

• Electricity Bills of More Than Rs 1 Lakh

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. 

• TDS/TCS Exceeding Rs 25,000

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. 

• Income From Foreign Assets

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. 

• Expenditure on Foreign Travels

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.  

Minimum Income to File Tax Return in India

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 individuals aged below 60 to file returns only if their gross income exceeds Rs 3 lakh within a financial year. 

Final Word

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.  

Frequently Asked Questions

What is the basic exemption limit to file an ITR?

The basic exemption limit for individuals under 60 to file an ITR is Rs 2.5 lakh gross income within a financial year under the old regime and Rs 3 lakh as per the new regime. 

What does the basic exemption limit mean?

The basic exemption limit indicates the maximum amount of income on which income tax calculation is not applicable. 

What is the benefit of the basic exemption limit?

The benefit of the basic exemption limit is that there will be no tax liabilities in case an individual's income falls below this threshold. It is a benefit offered by the Income Tax Department of India.