Who is required to file ITR? [Budget Amendments]

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Amendment introduced in Budget 2019

In case of a person (other than company or firm) – ITR Filing in India is mandatory only if it is more than the minimum amount exempted from the levy of tax. Although there are certain exceptions to this rule, but these exceptions still don’t cover many persons entering into high value transactions.

In order to ensure that people entering into high value transactions file their ITR, the Finance Minister vide Finance Act (No 2) 2019 has introduced an amendment in Section 139 and made it mandatory for the following class of persons to mandatory file their ITR if during the financial year, they enter into any of the following transactions:-

  1. Deposited an amount or aggregate of the amounts exceeding Rs. 1 Crore in one or more current account maintained with a banking company or a co-operative bank, or
  2. Incurred expenditure of an amount or aggregate of the amounts exceeding Rs. 2 Lakhs for himself for himself or any other person for travel to a foreign country, or
  3. Incurred expenditure of an amount or aggregate of the amounts exceeding Rs. 1 Lakhs towards consumption of electricity
  4. A person claiming rollover benefits of investment in a house or bonds or other assets under Section 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB would necessarily be required to furnish a return if before claim of such rollover benefits, his total income is more than the maximum amount not chargeable to tax.
  5. Fulfils such prescribed conditions as may be prescribed in future.

Other Cases where ITR Filing is mandatory

Apart from the amendments introduced in Finance Act (No.2) 2019 for compulsory filing of ITR, there are some other cases as well where ITR Filing is mandatory. ITR Filing in the following cases was applicable before introduction of Finance Act (No. 2) 2019 and is now also applicable.

These cases are:-

  1. In case of Company or Firm irrespective of whether there is a Profit or a Loss
  2. In case the assessee intends to claim Income Tax Refund
  3. In case of Carry Forward of Losses
  4. In case of Resident persons having assets or financial interest in an entity outside India. (Not applicable to NRI’s or RNOR’s)
  5. In case you are a Resident and have a signing authority in a foreign account (Not applicable to NRI’s and RNOR’s)
  6. In case a person is in receipt of income derived from a property held under a trust for charitable or religious purposes or a political or research association, news agency, educational or medical institution, trade union, a not for profit university or educational institution, a hospital, infrastructure debt fund, any authority, body or trust.
  7. In case of a foreign company taking treaty benefits in India

In all the above mentioned cases, it is mandatory for a person to file Income Tax Return.

Although in other cases – it is not mandatory to file income tax return, but in case you are applying for a Credit Card or a Loan – your application will not get processed without submission of proof of Income Tax Return. 

Penalty for Late Filing of ITR

Apart from levy of interest for late payment of income tax, penalty would also be levied in case of delay in filing of ITR.

The penalty levied for late filing of Income Tax Return is as follows

Particulars Penalty
If ITR filed after Due Date but before 31st Dec Rs. 5,000
If ITR filed after 31st Dec but before 31st March Rs. 10,000

 

This penalty as mentioned above would be required to be paid before the filing of the Income Tax Return. In case the penalty is not paid before filing ITR, the ITR will not get accepted.

In extreme cases, where the taxpayer wilfully fails to furnish the return in due time, may also levy penalty under Section 276CC i.e.

  1. In a case where the tax is less than Rs. 25 Lakhs – the income tax officer may penalise with imprisonment for a term of 3 months to 2 years
  2. In a case where the tax exceeds Rs. 25 Lakhs – the income tax officer may penalise with imprisonment for a term of 6 months to 7 years.

However, these penalties are levied in a very rare case and only Rs. 5,000/Rs. 10,000 penalty is levied.

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and is an expert in helping people save Taxes legally. He can be reached by booking an appointment for Tax Advisory Service.