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There is a general perception among middle class and working families in India that if their annual income is less than Rs 4 lakh or falls within the basic exemption limit, then there is no need to file income tax return (ITR Filing). If you also think the same, then it can prove to be a big and huge mistake for your financial health. According to the strict rules of the Income Tax Department, it has been made legally mandatory for the citizens of the country to file tax returns in certain special circumstances (Mandatory ITR Filing) even if the income is less than the tax slab. Ignoring these important rules, taxpayers may not only have to face legal notices from the Income Tax Department, but can also face heavy fines and punitive legal action.
Foreign travel and electricity bill of ₹ 1 lakh: You will come on the radar as soon as you spend these expenses.
Under the Income Tax Act, the government has greatly strengthened the tracking system of taxpayers on the basis of expenses. If your annual income is less than ₹ 4 lakh, but you have spent a total amount of more than ₹ 2 lakh on foreign tours or foreign travel of yourself or any other family member in any one financial year, then it is absolutely mandatory for you to file ITR. Additionally, if a domestic consumer pays a total electricity bill of ₹1 lakh or more for his home or commercial establishment in an entire year, he comes under the direct supervision of the tax department. In all such cases, returns have to be filed even if the taxable income is less than the basic exemption limit.
Cash transaction of ₹50 lakh in bank accounts: Attention savings and current account holders
The Income Tax Department keeps a very close watch on large financial transactions taking place through banking channels. Under the new rules, if a person has deposited cash or digital amount aggregating to ₹ 50 lakh or more in one or more of his savings accounts during a financial year, he will have to mandatorily file ITR. At the same time, this limit is more strict for current accounts; If the total balance in your current account crosses ₹1 crore, the legal obligation to file returns comes into effect. This rule also applies fully to small businessmen and freelancers whose net annual income does not come under the tax net.
Foreign assets and ESOPs of parent company: Strict rules for global investors
If your household income is very low, but you have any movable or immovable property in your name outside India, or you are a direct beneficiary of a foreign asset or trust, then it is mandatory for you to file taxes under Indian tax rules. Nowadays, many employees working in IT companies and startups are given shares of foreign parent companies through Employee Stock Options (ESOPs). If you hold such foreign shares or have signing authority in a foreign bank account, you will be required to give full details of the same in your ITR form, even if you have zero liability.
Illusion of Zero Tax and Section 87A: Heavy fine of ₹ 5,000 for not filing return on time
Another big misconception spread among salaried class employees is that if they are getting tax rebate under Section 87A of the Income Tax Act and their net tax liability has become zero, then they are free from filing returns. Experts say that getting the rebate is a separate process, but if you fit into any of the mandatory conditions given above, you must fill the form before the deadline. If you fail to file ITR within the prescribed time limit, a late filing fine of Rs 1,000 on income up to Rs 5 lakh and Rs 5,000 on income above Rs 234F will be imposed under Section 234F of the Income Tax Act, along with monthly compound interest under Section 234A on outstanding tax.