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Who should file ITR and When? – These questions have been hitting our inbox for some time. There are many misconceptions among taxpayers regarding ITR filings. We have tried to clear such misconceptions in this article.

But before getting into the topic “Who should file ITR? And When?”, let us try to understand the benefits of filing income tax return. Let us see some of the benefits:

Benefits of filing ITR:

  1. Income Tax Return (ITR) is a well-accepted proof of your income and wealth
  2. Loan/credit card can be approved easily based on your income
  3. Quicker visa approvals
  4. Timely filing of return allows claiming losses incurred if any on account of capital gains, business/profession, and house property
  5. Can claim a refund of excess TDS deducted if any 
  6. To comply with the land of the law and avoid interest and penalties.

Who should file ITR:

  • Every individual based on his/her age and whose total income is more than the specified limit as per the below table must file the income tax return every year with the department.
Age limitTotal income threshold limit
Below 60 yearsMore than Rs. 2,50,000/-
Above 60 but below 80 yearsMore than Rs. 3,00,000/-
Above 80 yearsMore than Rs. 5,00,000/-
Individual taxpayers – income thresholds

For calculating the total income threshold during the financial year, one should consider all the sources of income and exclude the deductions relating to capital gains and chapter- VIA deductions such as LIC, tuition fee, PPF contribution, repayment of housing loan and etc. However, section 10 exemptions can be excluded like agricultural income, share of the profit from partnership firm, income from mutual funds, etc.

However, in the following cases it is mandatory for an individual to file tax returns even his/her income is below taxable income;

  • If he/she deposits more than one crore rupees in cash during the financial year in one or more current accounts maintained with a banking company or a co-operative bank.
  • If he/she incurs expenditure which is more than Rs. 2,00,000/- towards foreign travel during the financial year.
  • If he/she incurs expenditure which is more than Rs. 1,00,000/- towards the consumption of electricity during the financial year.
  • Resident individual who is a beneficial owner or otherwise, who holds any asset (including financial interest in any entity) which is located outside India
  • Resident individual who is a signing authority in any account located outside India.
  • Resident individual who is a beneficiary of any asset (including financial interest in any entity) which is located outside India.
  • Non-resident individual is liable to file the return only when he earns income in India which is more than the specified threshold limit as given below;
Age limitTotal income threshold limit
Below 60 yearsMore than Rs. 2,50,000/-
Above 60 but below 80 yearsMore than Rs. 3,00,000/-
Above 80 yearsMore than Rs. 5,00,000/-
Non-resident income thresholds

Let us see this with some illustrations for better understanding:

  • Mr. Ram, a resident individual aged 52 years has earned rental income of Rs. 2,40,000/- during the year and he does not have any other income other than rental income during the financial year. With the accumulated savings, he travelled to US along with family. He spent an amount of Rs. 4,00,000/- towards travel expenditure. Is Mr. Ram liable to file the Income Tax Return?

Ans:  Yes, Mr. Ram is liable to file income tax returns. Though his total income is below Rs. 2,50,000/- he is liable as he spent more than Rs. 2,00,000/- towards foreign travel. 

  • Mr. Gopal is a resident individual whose age is 65 years earned agriculture income of Rs. 10,00,000/- during the year and he does not have any other income during the year. Is Mr. Gopal liable to file the Income Tax Return?

Ans:   No, Mr. Gopal is having only agricultural income, which is excluded from the total income threshold, hence he is not liable to file the income tax return.

  • Mr. Varma is a non-resident individual whose age is 45 years & has earned Rs. 2,30,000/- from the house property situated in India and earned salary income of Rs. 35,00,000/- from a US entity during the year. Is Mr. Varma liable to file the income tax return?

Ans:  No, as Mr. Varma is a non-resident and his income earned in India is less than Rs. 2,50,000/-, he is not liable to file the income tax return.

When ? ITR – Due Dates

  1. Every individual who is having income from business/profession and subject to tax audit, the due date for filing income tax return is 31st October.
  • In any other case (other than tax audit), the due date for filing of income tax returns is 31st July.

However, due to COVID-19, for all the cases due date for filing of income tax returns has been extended to 30/11/2020 for the financial year 2019-20.

Consequences for non-filing/late filing of IT return:

Late filing of IT return

Belated return can be filed till 31st March of next financial year. However late filing fee will be levied as per the below table.

DateLate filing fee if total income is below Rs. 5,00,000/-Late filing fee if total income is more than Rs. 5,00,000/-
Before 31st DecemberRs. 1,000/-Rs. 5,000/-
After 31st December but before 31st MarchRs. 1,000/-Rs. 10,000/-
Penalties for late filing
  • Along with the late filing fee, if you are having tax liability then, interest under section 234A will be levied at the rate of 1% p.m.
  • Apart from the above late filing fee and interest, business loss and capital losses cannot be carried forward.

Non-filing of IT return

If you fail to furnish the IT return before 31st March, then the consequences are as follows:

  • Fee (penalty) anyway will be levied up to Rs. 10,000/- based on total income.
  • If you are having taxable income and if you fail to file the return, that can be treated as concealment of income and the penalties will be higher and it may go up to 300% of your tax liability along with interest.
  • You cannot claim the refund of taxes (excess TDS deducted, if any).
  • You cannot carry forward the losses.

Also read Selection of Correct ITR From & More Pointers in filing IT Returns

In my last article Selection of Correct ITR Form, I had covered the topic of selecting the correct ITR form. In this digital era tax platforms with their powerful software have helped tax-paying communities in a big way. But it is still not all that easy. Taxpayers generally tend to make many omissions and mistakes in filing income tax returns – which can lead to unnecessary notices from the department. I have compiled some of the most common mistakes.    

Mistakes in Filing Income Tax Returns:

  • Personal Information: Ensure that you have given the correct name, address, valid e-mail, and valid mobile number. These details are necessary for obvious reasons. Any wrong inputs might cost you with not receiving the communication from the income tax department. Taxpayers should be aware that communications from the tax department go to the e-mail and mobile number given in the profile section of the income tax portal, hence it is necessary to update e-mail and mobile number.     
  • Bank Details: It is mandated that all savings and current accounts held at any time during the relevant financial year are to be provided while filing IT returns including accounts closed during the financial year. It is important to note that all the bank accounts are mapped to either PAN or Aadhaar. Effective 1st April 2020 PAN and Aadhaar can be used interchangeably. Ensure that you have given the correct IFS Code and account number to receive a refund correctly. The Income tax department has initiated the process of pre-validation of bank accounts to receive refunds as well as EVC (Electronic Verification Code to Verify IT Return).
  • Aadhaar number: Resident individuals and citizens of India must furnish the Aadhaar number/Enrollment number in the IT return. It is also important that Aadhaar is to PAN. 
  • Residential status information: In the ITR, you have to give the correct information regarding residential status because taxation depends on the residential status of the taxpayer. (Also read Taxability of Dividends – NRIs, and Recent Changes to Residential Status under Income Tax Act). As per the Indian Income Tax Act, A taxpayer is categorized into a. Resident & Ordinarily Resident – Global income is taxable. b. Non-Resident – Income earned in India is taxable. c. Resident but not Ordinarily Resident – Along with Income earned in India income from business (controlled from India) and profession (set up in India) is also taxable.  

For the financial year 2019-20, due to the Covid-19 pandemic, the department has issued a circular regarding the calculation of the number of days stayed in India for the purpose of residential status. If anyone visited India on or before 22/03/2020 and unable to leave India, then the days to be ignored in the following manner:

DescriptionDays to be Ignored
Unable to leave India on or before 31/03/2020.From 22/03/2020 to 31/03/2020
Quarantined in India due to Covid -19 on or before 01/03/2020 and has departed on an evacuation flight on or before 31/03/2020 or unable to leave India on or before 31/03/2020.Period of stay from the beginning of quarantine to departure or 31/03/2020 as the case may be.
Has departed on an evacuation flight on or before 31/03/2020Period of stay in India from 22/03/2020 to date of departure.
Residency days” tweaked to help stranded NRIs, thanks to COVID-19
  • Asset and Liabilities Information: It is mandatory that if taxable income is more than Rs. 50 lakhs then the details of all assets and liabilities as on 31st March of the year to be provided in IT return. It is to be noted that the amount to be filled is the Cost of the Asset and not the Market value.
  • Foreign Assets and Liabilities: It is to be noted that an individual who is resident should give his/her foreign asset and labilities irrespective of his/her quantum of Income.
  • Directorship in a company: Generally, a taxpayer having income from salary and income from other sources tend to miss to quote directorship in a company as ITR form will not show any error even if it is not quoted. Point is to be noted here is while the company filing its tax return details of all the directors along with their DIN and PAN will be given. The CPC has designed its program to detect the error while processing the IT return of the individual. Non-furnishing of required details will attract notice from the department and also attract a penalty of Rs. 10,000/-
  • Partner in Partnership Firm/LLP: It is to be noted that details of investment in the partnership firm and Limited Liability Partnership (LLP) have to be given such as capital balance and percentage of share of profit and income received from Firm/LLP i.e remuneration and share of profit.
  • Investment in unlisted shares: The taxpayer has to provide the details of unlisted shares held during the financial year such as the name of the company, PAN of the company, shares acquired during the year, and shares transferred during the year.

It is to be noted that unlisted company does not mean the only private limited company. It also includes public companies that are not listed on NSE/BSE. Recently, few companies which were listed earlier have delisted voluntarily. If you are owning any shares of those companies the same shall be disclosed in the IT return.

Recent Changes in Residential Status

Mr. Ram is an Indian citizen (NRI) living abroad for several years now. He has his extended family, immovable properties and other investments in India. He frequently visits India to meet his family and friends and to manage his investments. During his recent conversation with an Indian friend, he came to know that there have been sweeping changes to the Indian tax laws with respect to residential status of an individual which may result in expanding his tax base in India and he may qualify to be a ‘stateless’ person. Ram is curious to know more about these changes.

So what are these changes? Does it really have far reaching impact on NRIs like Ram? Who is a state less person? Let us understand these in detail.

Hitherto (till 31 March 2020), an Indian citizen or a person of Indian origin living outside India and coming on a visit to India could have stayed in India for a period less than 182 days without triggering residency in India. However, the new rule (applicable from 01 Apr 2020) reduces this threshold to 120 days. Further, the new rule has inserted an income threshold of INR 1.5 million from sources within India in order to trigger residency. So, both the conditions i.e., no. of days and the income level need to be satisfied in order to trigger a residency. In case of Ram, he would be considered as Resident but Not Ordinarily Resident in India provided his stay in India during the relevant tax year exceeds 119 days (but less than 182 days) and his total income from Indian sources exceeds INR 1.5 million.

Stateless person or Deemed resident

A stateless person in the context of taxation means a person who is not liable to tax on his income in any country during the year. It may be possible for an individual to position his affairs in such a manner that he is not liable to tax in any country. In order to curb these kinds of arrangements, the new rules introduced the concept of ‘deemed residential status’.  As per this, an Indian citizen having total income exceeding INR 1.5 million or 15 lacs from sources within India during the relevant year, will be deemed to be a resident of India (RNOR) if he is not liable to pay tax in any country outside India.

So in case of Ram, since he is a resident of foreign country and is a citizen of India, he may be considered as RNOR for India tax purposes provided his total income exceeds INR 1.5 million from sources within India and he is not liable to tax in his country of residence.

For the purpose of above rules, the income from sources within in India includes income arising outside India from a business controlled in India or profession set up in India.

So you are an RNOR. Is your global income taxed, then? uh!

So what happens if an individual qualifies as RNOR? Will his global income be taxed in India?

Definitely NO. In case of an RNOR, in addition to the Income derived from Indian sources, the individual would be taxed on income arising outside India from a business controlled /profession set up in India.

Further, in case an RNOR who is liable to tax on his income arising outside India from a business controlled /profession set up in India, may result in double taxation of income both in India and in his resident country. So in order to mitigate the double taxation implications, one may resort to the Double Taxation Avoidance Agreement (DTAA) that India has entered into with other countries in order to mitigate the possibility of paying taxes in two countries.

The write-up is for general understanding. We suggest the readers to discuss with their CAs before deciding on their residential status and related tax-implications.