As per the current income tax laws, an individual below 60 years of age is required to file ITR if his/her gross total income exceeds Rs 2.5 lakh in a financial year. This is irrespective of the income tax regime (old vs new) chosen by him. It is important to note that gross total income includes income from various sources such as salary, interest income from savings account, fixed deposits, recurring deposits etc
To arrive at gross total/taxable income of Rs 2.5 lakh or more, one needs to add up net income under five income heads- salary, house property, other sources, capital gains and business income. Those choosing the old/existing income tax regime need to calculate their net income from each head after claiming the deductions (available to him/her) under each head. For example, while calculating the net taxable income under the head salary, one needs to claim or deduct the tax exemptions and deductions (allowed from salary) as applicable to him or her from the gross salary.
However, those choosing the new tax regime are not eligible for most commonly claimed tax exemptions/deductions.
Referring to those aged below 60 and choosing the old tax regime, Abhishek Soni, CEO of Tax2win.in says, “The requirement of filing ITR by salaried employees depends on whether his/her total income exceeds Rs 2.5 lakh in a financial year or not. Assuming there is no other income than salary, if a salaried employee’s total income after claiming HRA, LTA tax exemption and standard deduction do not exceed Rs 2.5 lakh in a financial year, then he/she is not required to mandatorily file ITR.”
This is explained by an example below. Suppose your annual salary income is Rs 2.76 lakh. After claiming a standard deduction of Rs 50,000 (assuming HRA is fully taxable and opted for old tax regime) from your salary income, the taxable income becomes Rs 2.26 lakh. This makes your taxable income below the exemption limit of Rs 2.5 lakh. Hence, you are not required to file ITR as your total income is below the exemption limit.
Taking another example. Suppose your annual salary income is Rs 3 lakh. You have also earned interest of Rs 2,000 from savings bank account and Rs 3000 from fixed deposits. Under the head of salary income, you are eligible to claim standard deduction of Rs 50,000 and HRA exemption of Rs 40,000.
Soni says, “In the second example, you will be required to file ITR mandatorily only if your gross total income (net taxable salary+ interest from savings account + interest from fixed deposits) exceed Rs 2.5 lakh. From example, as the gross total income of Rs 2.15 lakh does not exceed exemption limit of Rs 2.5 lakh, then you are not required to file ITR.”
Above table assumes that the individual is aged below 60 and chooses the old income tax regime.
Interest earned from the savings account and fixed deposits is taxed under the head ‘Income from other sources.’
If an individual opts for a new tax regime, then he/she has to mandatorily file ITR as salary income in the example above exceeds exemption limit of Rs 2.5 lakh.
Also Read: New vs old income tax regime
It is important to note that your employer only knows/has information about your salary income. He/she does not have any information about your income from any other sources such as interest income from savings account, capital gains, rental income etc. Thus, it is an individual’s responsibility to calculate his/her total income (as seen from the 2nd example above) and if it exceeds exemption limit of Rs 2.5 lakh, then you have to mandatorily file ITR.
For help in calculating your taxable income, click here.
Exceptions to income exemption limit rule
Under the income tax laws, there are certain exceptions to the income exemption limit rule. This means that an individual is mandatorily required to file ITR, even if his/her gross income does not exceed the exemption limit of Rs 2.5 lakh. If an individual satisfies any of the below-mentioned conditions/ falls in these categories , then ITR filing becomes mandatory:
a) who has spent an amount or aggregate of amounts exceeding Rs 2 lakh for himself/herself or any other person for travel to a foreign country,
b) who has deposited an amount or aggregate of amounts exceeding Rs 1 crore in one or more current accounts maintained with a bank or co-operative bank,
c)who has paid electricity bill exceeding Rs 1 lakh in a single bill or on aggregate basis during the financial year,
d) Ordinarily resident individuals who are having income from foreign countries and/or holding assets in foreign countries and/or having signing authority in any account outside India,
e) If an individual’s gross total income exceeds the exemption limit before claiming tax exemption on capital gains under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA or 54GB of the Income-tax Act, 1961,
f) An individual depositing Rs 50 lakh or more in a savings bank account in a financial year,
g) whose total TDS/TCS deducted in the financial year is Rs 25,000 or more even if the individual’s gross total income is below the basic exemption limit. For senior citizens, this limit will be applicable if the TDS/TCS is Rs 50,000 or more, and
h) To claim income tax refunds.
(An individual can file ITR even if the July 31, 2022 deadline of filing ITR is missed. The income tax return filed after the deadline is called belated ITR. One will have to pay a late filing fee when filing a belated ITR. Click here to fine out what to do if you have missed income tax return filing deadline of July 31.)