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In some instances, filing of income tax return may not be mandatory
February, 21st 2017

My mother is 73 years old and has a Permanent Account Number (PAN) but does not file tax returns. She has an annual income of about Rs60,000 from fixed deposits. Apart from this, rental income from a house that would be let out from April 2017, will also come to her. The rental amount will be Rs20,000 a month. She has not availed any loan against the said property. Will she have to file a tax return for the fixed deposit income for this year (2016-17), and for both the incomes from next year (2017-18)?

For an individual, whose total income during the relevant financial year exceeds a specified income threshold or who holds specified overseas assets, filing personal tax return within the specified due date (section 139 of the income tax Act) is mandatory. We have assumed that:

a) your mother currently does not hold specified overseas assets and

b) she has no other income/losses other than those specified above.

Further, for a senior citizen (age 60 years and above but below 80 years) like your mother, the aforesaid income threshold for FY2016-17 and FY2017-18 is Rs3 lakh. In light of the above, your mother’s gross total income during the FY 2016-17 is not likely to exceed Rs3 lakh, and it is not mandatory to file tax return for the said financial year.

If any taxes are deducted by the bank from the fixed deposit interest, then she has to file tax return to claim refund of tax deducted at source.During FY2017-18, your mother’s income would comprise fixed deposit interest and rental income from the let out house property (LOP).

The taxable rental income from LOP is determined by factoring the specified deductions such as municipal taxes and standard deduction of 30% of the net rental value (i.e., gross rent minus municipal taxes). In absence of details, we have assumed that no municipal taxes would be paid on LOP during FY2017-18. Accordingly, income from LOP would be about Rs1.68 lakh.

From the annual rent of Rs2.4 lakh, subtract Rs72,000 (30% of Rs2.4 lakh). As your mother’s gross total income during the FY2017-18 is likely to be about Rs2.28 lakh only (Rs60,000 + Rs1.68 lakh), it is not mandatory for her to file a tax return.

Please note that as your mother’s tax liability is nil, she may submit Form 15H to her bank, giving a declaration that the tax on her estimated total income would be nil; or the income would be below the amount not chargeable to tax. In such a case, tax would not be deducted at source by the bank on the fixed deposit interest.

 
 
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