In a notification that has come as a relief to all salaried tax payers earning Income below Rs. 5 Lakhs, the Govt. has exempted such salaried tax payers from filing of Income Tax Return for those class of Taxpayers who have:-
- Salaried Income of not more than Rs. 5 Lakh during a financial year (Rs. 5 Lakhs to be computed after allowing deductions)
- Interest earned by way of Interest through a saving bank is less than Rs. 10,000
The Govt. has also notified that the above exemption shall only be applicable to those class of taxpayers who have:-
- Reported their Permanent Account Number (PAN No.) to their employer
- Reported their Interest Income to their employer and the employer has adequately deducted the Tax thereon
- Received Form 16 from their employer which clearly states the Total Income earned during the year, the PAN No., the TDS deducted and the deposited with the Central Govt.
- Received Salary from not more than 1 Employer
- Have no claim for Refund of Income Tax for the TDS deducted
However, the exemption from the requirement of furnishing Income Tax Return shall not be available where a notice under section 142(1) or section 148 or section 153A or section 153C of the Income-tax Act has been issued for filing a return of income for the relevant assessment year i.e. if your returns have come up for scrutiny or your income has escaped assessment
The above notification only applied to Salaried Individuals who have received salary of less than Rs. 5 lakhs and have earned interest of less than Rs. 10,000. This notification is not applicable for taxpayers who have earned income from sources other than specified above.
Moreover, many individuals interpret the above notification that if the Income is less than Rs. 5 Lakh – no Income Tax is payable which is wrong. This notification only states that Salaried Taxpayers earning less than Rs. 5 Lakh are not mandatorily required to file their Income Tax Return but they would be liable to pay Taxes on the Income earned computed as per the income tax slab rates.
For all other individuals earning Income from sources other than specified above, they are mandatorily required to file Income Tax Returns if Taxes are liable to be paid on the Income earned computed as per the Income Tax Slab Rate.
Moreover, if the Income of an Assessee is less than Rs. 5 Lakhs from Salaries but the tax deducted is more than what he was liable to pay, he will have to file an Income Tax Return. Income Tax Return has to be mandatorily filed in all cases if the assessee wants to claim refund of Income Tax
Salaried People with Rs. 6.5 Lakh Income may also get exempt
The above Notification says that if an Individual has income less than Rs. 5 Lakh (after deductions), he is exempt from filing Income Tax Return.
Now, let’s take an example
- Suppose you have Income of Rs. 6.5 Lakh
- Now you can Invest upto Rs. 1 Lakh u/s 80C (EPF, PPF, Mutual Funds, Life Insurance etc)
- You can also invest Rs. 20000 in Infrastructure Bonds u/s 80CCF
- Health Insurance is also deductible from Taxable Income – Rs. 15000 for self and Rs. 20000 for Parents under section 80D
- After taking the above into account, you are left with a Taxable Salary of Rs. 4.95 Lakh and there is no need for you to file Returns for Taxable income below 5 Lakh
Therefore, although the Notification states that No Income Tax is payable on Income below Rs. 5 Lakh, even if your Income is less than Rs. 6.5 Lakhs and you’ve made use of the Deductions available to you as per the Income Tax Act, you would still not be mandatorily required to pay Income Tax