You need to file returns even if your income falls below the basic threshold after all deductions

Given the pandemic, the due date for filing the income-tax return (ITR) for the financial year (FY) 2019-20 has been extended from July 31, 2020 to November 30, 2020. The new deadline is unlikely to get extended further, given that we are now in Unlock 5.0. So, if you are required to file your ITR, do so before the due date. Don’t wait till the last day. An emergency or a glitch in the system can result in your not being able to file, landing you in trouble. Here are details of those required to file an ITR.

Is it mandatory to file an income tax return?

Yes, if your total income from all  sources—salary, business and profession, house property, capital gains and others—exceeds the exemption limit, you need to file an income tax return. For an individual below the age of 60, the exemption limit up to which income is not taxable is Rs 2.5 lakh. For individuals between the age of 61 and 80, the exemption limit is Rs 3 lakh and for those above 80, the exemption limit is Rs 5 lakh.

Should I first take into consideration various deductions and then see whether my income is above exemption limit or not? 

No, if your gross income – without taking into account the usual deductions such as those under section 80C, 80U etc. – is above the exemption limit, you are supposed to file an ITR. Even if your gross income goes below the exemption limit after taking the deductions into consideration, you have to file the ITR.

Are there other rules or conditions apart from income level that make filing returns mandatory?

Yes, even if your income does not exceed the maximum exemption limit, you may still need to mandatorily file your return in many cases. For instance, if you own or are a beneficiary of any assets (including any financial interest in any entity) located outside India, or if you are a signing authority in any account located outside India, you are supposed to file your return and declare details of such an assets and account details in your tax return.

Besides these, if you had deposited more than Rs 1 crore in one or more current accounts, if you have spent more than Rs 2 lakh on foreign travel during the last year, or if your electricity consumption was more than Rs 1 lakh in the previous financial year, you are required to file your return.

Is it mandatory to file an ITR, even though there is the tax deducted at source (TDS) already done by my employer?

Yes, if your income exceeds the exemption limit or you fulfill other criteria that make it mandatory for you to file your ITR, you need to file it even if no tax is due. Until and unless you file your ITR, the government cannot assume rights over the taxes paid by you in the form of advance tax, TDS or tax collected at source (TCS). Filing of return is critical for this process and, hence, has been made mandatory.

Can I be prosecuted if I don’t file my ITR, even though my income is taxable?

Is it necessary to file ITR to carry forward losses?

Yes, if you have losses in the financial year, for instance, long-term capital loss from sale of equity shares, you are allowed to carry forward the loss to the subsequent year for adjustment against subsequent year(s)' positive income. However, for this purpose, it is mandatory to make a claim of loss by filing your tax return before the due date.

Are there any benefits of filing my ITR, even if I am not required to?

Yes, there are many benefits. Your ITR documents can come handy for various purposes. For instance, they validate your credit worthiness before financial institutions while taking loans. While applying for a visa, many countries ask you to provide the ITR, to make sure that you are financially capable of taking care of the expenses on your trip.