You may have to file ITR even if your income is below taxable limit

You may be susceptible to file your tax return (ITR) this point albeit your income was below the taxable limit in the fiscal year 2019-20. In its endeavor to catch tax evaders, the govt last year introduced certain criteria from FY20 that make individuals susceptible to file ITR.

So if your gross total income is below the edge limit of ₹2.5 lakh (individuals below 60 years), ₹3 lakh (60-79 years) or ₹5 lakh (more than 80 years of age), but you meet any of the new criteria, you'll need to file ITR.

The idea behind enhancing the return filing criteria is to catch the taxpayer where there's a mismatch between income declared and expenses incurred.

“Those having expenses not matching declared income are sure to be caught. Honest taxpayers needn't worry and will rather feel satisfied that evaders are getting to are available line," said Sudhir Kaushik, chief military officer (CEO), Taxspanner.com.

Here are the standards to stay in mind to seek out if you're susceptible to file ITR or not.

Expenditure limit

Under the seventh proviso to Section 139(1) of the Income-tax Act, 1961, albeit the income is below the exempted limit, an individual will need to file ITR just in case he or she meets anybody of the subsequent criteria: a) paid an electricity bill of ₹1 lakh or more during the year; b) incurred an expenditure of ₹2 lakh or more for visiting a far off country for self or the other person; c) deposited an amount of over ₹1 crore or more in one or more current accounts.

However, there's an exception to the rule out the case of foreign travel.

“Foreign travel doesn't include visit neighbouring countries or places of pilgrimage, as could also be notified by the tax department. Hence, such foreign travel doesn't fulfil the standards for filing an ITR," said Archit Gupta, founder and CEO, Cleartax, an income tax return filing portal.

The tax forms for assessment year 2021 are amended to require a declaration from the taxpayer to state that if he or she is filing the return under the seventh proviso to Section 139(1).

Experts said taxpayers filing under these criteria will get to keep a record of the documents supporting the claims to reply to the tax department queries, if any.

“No document is to be provided while filing ITR. However, the department can check records of up to eight years if you are doing not have foreign assets, otherwise 16 years," said Kaushik.

Calculating income

Tax exemption on capital gains will not be considered while calculating the minimum tax-exempt income.

“Previously, a person who claimed the advantage of the exemption from capital gains tax wasn't required to file ITR, provided his or her total income didn't exceed the essential exemption limit after claiming such capital gains exemption under Sections 54 to 54GB of the Income-tax Act. However, post the Finance Act, 2019, amendment to the sixth proviso to Section 139(1) of the Act now requires everyone to calculate the edge limit or basic exemption limit without giving effect to the exemption benefit under Sections 54 to 54GB," said Suresh Surana, founding father of RSM India, a tax consulting company.

So, if your income before claiming exemption under Sections 54 to 54GB is quite the essential exempted limit, you'll need to file ITR.

For example, if you had a gross total income of ₹2 lakh and capital gains of ₹3 lakh on the sale of a house, which you invested under Section 54 EC to say exemption, you'll still be susceptible to file returns as your gross total income is going to be calculated as ₹2 lakh plus ₹3 lakh ( ₹5 lakh). Until last fiscal year, your gross total income would are considered ₹2 lakh, during this case.

Foreign assets

Remember that in any case if you've got any foreign assets, you're required to file ITR, albeit you don’t have any income in India.

“Every individual being a resident and ordinarily resident in India, having any asset, including financial interest in any entity located outside India or signing authority in any account located outside India are going to be mandatorily required to furnish ITR, regardless of the very fact whether the resident taxpayer has taxable income or not," said Surana.

So assess your liability to file ITR carefully at this point.