Who Should File Income Tax Return?

You may have already understood by now that the ITR full form is: Income Tax Returns.

Filing an ITR or income tax return is a process through which individuals or entities in India declare their income, tax deductions and tax liabilities to the Income Tax Department of India.

It is a mandatory requirement for every citizen, entity and other individuals who come under the income tax jurisdiction of the Indian government.

Indian citizens and other individuals who are earning an income in the country and come under the tax jurisdiction of the government must pay tax as per their applicable tax rate.

The following are the entities or individuals who must file income tax returns in India:

Salaried Individuals: Every salaried employee, regardless of how much their annual income is, is required to file an ITR.

They are provided with Form 16 by their employer, which outlines their salary breakdown along with the tax deductions and other details for filing ITR.

Those with Taxable Income: Every Indian who is generating a taxable income should file an ITR.

In simple words, if you are earning in India and your income is above the maximum tax exemption limit, then you will have to file your ITR.

The tax exemption limit for an individual depends on several factors, such as gross income, choice of tax regime, age, gender, etc.

Businesses: All the companies and business organisations generating income in India, regardless of their profit/loss profile, must file ITR and declare their earnings for the specified financial year.

Self-employed Individuals: Self-employed individuals such as freelancers, designers, and other professionals are eligible to file ITR.

NRIs Earning in India: Non-residential Indians who are generating income in the country are also required to file income tax returns.

Those Seeking Tax Refund: If you have paid a higher tax amount than required and want to claim a refund, then you must file an ITR as soon as possible.

Those with LTCG Gains Over ₹2.5: If you have invested in a long-term scheme and earning capital gains of more than ₹2.5 lakhs, then you are eligible to file income tax returns

Foreign Company: Any foreign firm or business that is operating and earning in India is required to file ITR according to the category they fall into.

Income Held by Non-profit Organisation: If you receive income held by a non-profit organisation or charitable organisation must also file an ITR.

Those Seeking Loans: Most banks and financial institutions require ITR from their loan applicants. So, if you are planning to apply for a loan, then you should file your income tax returns.

Earning Below Taxable Income: Those who are earning less than the taxable limit are exempt from paying income tax.

The tax exemption limit is ₹2.5 lakhs per annum under the old tax regime and ₹3 lakh per annum under the new tax regime.

Agricultural Income: Individuals whose only source of income is agriculture or farming are exempt from filing income returns. However, if the agricultural income exceeds a certain threshold, then individuals may be required to file their ITR.

Certain NRIs: If the NRIs are only generating income from dividends or interest, or if their income is subject to TDS, then they might be exempted from filing tax returns.

Senior Citizens (above 75 years): Senior citizens above the age of 75 whose income consists of pension and interest can be exempt from filing ITR.

Claim Income Tax Refunds: If you have paid a higher tax than applicable to your income, you must file your ITR as soon as possible. It will help you initiate your tax refund as soon as possible.

Easy Loan Approvals: Filing your ITR makes it easier to get various kinds of loans, such as vehicle loans, home loans, personal loans, etc.

Official Proof of Income: An income tax return is a well-recognised proof of income as well as an address. You can use it instead of your payslips or bank statements.

Faster Visa Processing: A majority of embassies and consulates consider income tax return (ITR) as valid proof of income when applying for visas and passports.

Carry Forward Losses to Next Year: By filing your ITR within the specified deadline, you can carry forward your losses to the upcoming year. This, in turn, helps you in managing your finances in a better way.

Step 1: Visit the e-filing Website

On the e-filing website, click “Login”. Next, enter your PAN and hit “Continue”. Now, tick in the security message box, enter your password, and hit “Continue” again.

Step 2: Navigate to “File Income Tax Return”

On the top menu bar, go to “e-File” -> “Income Tax Returns” -> “File Income Tax Return”.

Step 3: Choose Your Assessment Year

Select the assessment year for which you are filing your ITR.

Step 4: Select Your Filing Status

On the following page, you will be required to choose your filing status from the given options: Individual, HUF, or others. Choose “Individual” and then “Continue”.

Step 5: Select the Right ITR Category

Next, select the ITR form applicable to your scenario. For instance, if you are a salaried individual with no other income, then you should choose ITR-1. You can check out your applicable ITR type in the above section.

Step 6: Select the Reason

In the next section, you will be requested to fill in the reason for filing your ITR. You need to select the option that aligns with your situation:

Your gross income exceeds the basic tax exemption limit.

You meet a particular criteria.

Other reasons

Step 7: Add Bank Details

Next, fill in your bank information. If these details are automatically updated, make sure to cross-check and verify them. Then, confirm the summary of ITR by validating all the details.

Step 8: Verify ITR

The final step to IT return filing is to e-verify your tax return. Remember, not verifying an ITR is the same as not filing an ITR at all.

There are several ways in which you can electronically verify your income tax return. You can do so via netbanking, Aadhaar OTP, EVC (Electronic Verification Code), etc.

Alternatively, you can also send a physical copy of form ITR-V to Bengaluru CPC to manually verify your tax return.

As per section 139(1), the due date for filing income tax returns for AY 2024-25 is July 31st, 2024, unless changed by the government of India.

It means every eligible taxpayer must file their income tax return before July 31st 2024.

Is There a Penalty for Not Filing the ITR?

Yes. Any failure to meet the ITR deadline can attract several legal consequences, including hefty penalties.

As per section 234F, a late fee will be levied on the taxpayers who file their returns after the due date.

Effective from FY 2017-18, a fine of ₹5,000 will be imposed if you file your income tax return after July 31st 2024, but before December 31st.

Note that there is a small relief given to the low-income groups — if your total income is below ₹5 lakhs, then you need to pay a late fee of ₹1,000 instead of ₹5,000.

If you generate an income in India that is above the basic tax exemption limit, then you must file an income tax return mandatorily.

It applies to every earning individual including salaried employees, business owners, freelancers, and even NRIs.

Always remember, filing an ITR is not merely a mandatory income tax regulation, it is an exercise that keeps everything fair and transparent between the government and the citizens.

We have discussed everything you need to know about the ITR filing process and eligibility. We hope it helps!