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While it may not be mandatory to file an ITR if your net taxable turnover is ₹2.5 lakhs or below, Filing an Income Tax Return (ITR) in India is not compulsory for everyone, especially if your net taxable turnover is below the threshold limit (currently ₹2.5 lakhs for individuals below 60 years). However, there are several reasons why it might be beneficial to file an ITR even if your income is below the taxable limit: there are significant advantages to doing so. These include claiming tax refunds, carrying forward deductions, and improving your financial documentation for loans, visas, and other purposes. Filing an ITR demonstrates financial responsibility and can provide benefits that extend beyond the immediate tax implications. Following Reasons to File an ITR Even with a Net Taxable Income of ₹2.5 Lakhs
Even if your income is below the taxable threshold, you may still be required to file an ITR if you meet any of the above criteria. In the Following case regardless of their income level, there are specific instances where an individual must file their Income Tax Return (ITR) in India.
Filing a ITR provides multiple benefits beyond just tax compliance. It can serve as proof of financial stability and address, facilitate loan and visa applications, and ensure compliance with mandatory reporting requirements, it allows for the carry-forward of losses and the claiming of TDS refunds, making it a prudent practice even for individuals with income below the taxable threshold.
Mandatory ITR Filing: Income Tax Return (ITR) filing is mandatory if your total income exceeds the basic exemption limit, even if your final tax liability is zero due to tax rebates. The basic exemption limits are as follows:
Section 87A of the Income Tax Act provides a tax rebate for individuals whose total income is up to ₹5 lakh. This rebate is available to resident individuals whose total income does not exceed ₹5 lakh. The maximum rebate available under Section 87A is ₹12,500. If the total income is ₹5 lakh or less, the rebate ensures that the tax liability becomes zero, as the rebate amount (₹12,500) covers the entire tax payable on an income up to ₹5 lakh.
For individuals with a total income of ₹5 lakh or below, no tax is payable after applying the rebate under Section 87A. However, if your income exceeds ₹5 lakh, the rebate is not applicable, and you will have to pay tax as per the applicable slab rates.
Even if no tax is payable due to the rebate, individuals must file their ITR if their total income exceeds the basic exemption limit. Since the final tax liability is zero due to the rebate, no tax needs to be paid, but the individual still needs to file an ITR if their income exceeds ₹2.5 lakh.
Filing an Income Tax Return is mandatory if your total income exceeds the basic exemption limit. However, the Tax rebate u/s 87A ensures that individuals with a total income of up to ₹5 lakh do not have to pay any tax. Despite this rebate, the requirement to file an ITR remains for those with incomes above the exemption threshold, ensuring compliance with tax regulations.
A tax rebate on an income of Rs 7 lakh has been introduced in the new tax regime (applicable for FY 2023-24).
Issue concerning the Income Tax Return utility, specifically in relation to Section 87A. The recent update to the ITR filing utility, effective from 5th July 2024, does not correctly implement the rebate provisions as outlined u/s 87A of the Income Tax Act, post-amendment by the Finance Act 2023.
This discrepancy in the Income Tax Return utility is causing significant inconvenience and potential financial strain for taxpayers eligible for the rebate but unable to claim it due to the faulty utility. Income Tax dept immediate rectification of the Income Tax Return utility to ensure accurate implementation of Section 87A as per the amended provisions.
To avoid these consequences, it is advisable to file your ITR within the stipulated deadlines
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