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What Is ITR And What Happens If Income Tax Return Is Not Filed?

By Ektha Surana


Updated on: Feb 27th, 2023


8 min read

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What Is ITR And Why Is It Necessary?

An income tax return(ITR) is a document that you file with the government. This return informs the government about your income, investments and the tax payable. 

ITR Filing Is Mandatory In India If Any Of These Conditions Apply To You:

1. If your total income in the year is more than the tax-free limit-

AgeTax-free limit
Below 60 yearsRs 2.5 lakh
60 years or more but below 80 yearsRs 3.0 lakh
80 years or moreRs 5.0 lakh

2. If you want to claim an income tax refund.

3. If you have earned from or have invested in foreign assets during the FY.

5. If the taxpayer is a company or a firm, irrespective of profit or loss.

6. If you have a loss from business/profession or under capital gains head, you will only be allowed to carry them forward to the next years if you file the return before the due date.

7. If you have deposited a total of Rs 1 crore or more in one or more current accounts with a bank. However, no such restriction has been placed on deposits made in post office current accounts

8. If you have deposited more than Rs 50 lakh in your 'savings' bank accounts

9. If you have spent more than Rs 2 lakh on foreign travel, whether for yourself or any other person

10. If the yearly electricity expenditure is more than Rs 1 lakh

11. If your tax is withheld in the form of TDS/TCS is more than Rs 25,000. For a senior citizen (above 60 years), this limit is Rs 50,000.

12. Your business turnover is more than Rs 60 lakhs

13. Income from your profession is more than Rs 10 lakhs

5 Reasons Why Should You File ITR?

Claim Tax refunds: If you earn less than Rs 5 lakh a year, you can get back all the tax that was deducted from your income only by filing tax returns by the 31st July deadline. 

Legal consequences: If you don't file tax returns, the income tax department may send you a notice. You may face huge penalties and taxes if you do not file ITR, despite their reminder.

Carry forward of Losses: If you have losses in your business or capital gains, you can carry them forward to reduce your future tax liability by filing tax returns on time.

Verified income statement: Freelancers and self-employed people don't have official income statements like salaried employees do, so filing tax returns is the most reliable way to verify their income.

Loan and Visa application: When applying for a loan or visa, your last 3 years ITR is required. Submitting tax returns from the last few years can help lenders or embassies verify your financial status and eligibility.

What Happens If ITR Is Not Filed ?

Late-filing fee: If you do not file ITR within the due date, you may have to pay a late-filing penalty of Rs 5,000. This penalty will be reduced to Rs 1,000 if your income is below Rs 5 lakh.

Interest: You may have to pay interest under Section 234A @ 1% per month or part month on the unpaid tax amount. 

How To File ITR For FY 2022-23?

  • If you get a salary, you can simply upload your Form 16, and ClearTax will prepare your return automatically and help you finish e-filing quickly.
  • If you are a freelancer or run a small business or a home-based business like a Kirana store or an e-commerce seller (Section 44AD or 44ADA), ClearTax is the easiest place to e-file your ITR-4. Our CAs can prepare and e-file your income tax return. Please have a look at our CA-assisted plans here
  • ClearTax automatically selects the correct ITR form applicable to you. We support all ITR forms – ITR-1ITR-2ITR-3ITR-4ITR-5ITR-6, and ITR-7

Which ITR To File

If you are wondering which ITR to file, take a look at this.

About the Author

Multitasking between pouring myself coffees and poring over the ever-changing tax laws. Here, I've authored 100+ blogs on income tax and simplified complex income tax topics like the intimidating crypto tax rules, old vs new tax regime debate, changes in debt funds taxation, budget analysis and more. Some combinations I like- tax and content, finance & startups, technology & psychology, fitness & neuroscience. Read more


Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

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