Income Tax Return: Know who should file ITR for FY21; due date is approaching

Last date to file Income Tax Return won’t be extended: FM Nirmala Sitharaman
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Last date to file Income Tax Return won’t be extended: FM Nirmala Sitharaman

Highlights

Income Tax Return (ITR) is a form in which the taxpayers file information about his income earned and tax applicable to the income tax department and every taxpayer should file his/her ITR on or before the specified due date.

Income Tax Return (ITR) is a form in which the taxpayers file information about his income earned and tax applicable to the income tax department and every taxpayer should file his/her ITR on or before the specified due date. The applicability of ITR forms varies depending on the sources of income of the taxpayer, the amount of the income earned and the category the taxpayer belongs to.

The due date of the filing income tax return (ITR), which has been extended by CBDT from July 31, 2021, to September 30, 2021, is approaching, so it's the right time to know what should be done and who should file ITR – it includes for both the income and non-income criteria for filing of an ITR.

Income-based criteria of filing an ITR: A person should file an ITR in a case where his entire income from all the sources exceeds the basic limit of exemption, which varies based on age. Here is the variation depending on age:

  • People Below 60 years: People who belong to the age group below 60 years should pay tax if their taxable income crosses the mark of Rs 2,50,000.
  • People in age-group 60 to 80 years: The exemption limit on their income is up to Rs 3 lakhs.
  • People in the age group of 80+ years: The exemption limit stands up to Rs 5 lakhs.

Interestingly, before reaching the threshold limits mentioned above for filing of the ITR people have the facility where they can claim deductions under the Chapter VI A of Income Tax Act contains the following sections: Section 80C, 80 CCD, 80 D, 80G 80TTA, 80 TTB among others. Similarly, one can also claim the exemption in respect to the long-term capital gains (LTCG) under different sections like 52, 54F, 54EC among others for reinvestment in a residential house. It also includes the capital gains bonds – though it is exempt from payment of tax – which should be added to your taxable income so that you can determine the threshold amount before filing the ITR.

  • Section 80C: 80C allows a deduction for the investment made in PPF, EPF, LIC premium, Equity-linked saving scheme, principal amount payment towards home loan, stamp duty and registration charges for the purchase of property, Sukanya Smriddhi Yojana (SSY), National saving certificate (NSC), Senior citizen savings scheme (SCSS), ULIP, tax saving FD for 5 years, Infrastructure bonds etc. The deduction limit is up to Rs 1.5 lakh together with section 80CCC and section 80CCD(1).
  • Section 80CCD: 80CCD relates to the deductions available to individuals against contributions made to the National Pension Scheme (NPS) or the Atal Pension Yojana (APY). Contributions made by the employers towards the NPS, also come under this section. NPS is a notified pension scheme from the Central Government.
  • Section 80G: Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G of the Income Tax Act. All donations, however, are not eligible for deductions under section 80G. Only donations made to prescribed funds qualify as a deduction. This deduction can be claimed by any taxpayer – individuals, companies, firms or any other person. Depending on the nature of the donee, the limit varies from 100 per cent of total donation, 50 per cent of total donation or 50 per cent of donation with a cap of 10 per cent of gross income.
  • Section 80TTA: Deduction allowed under Section 80TTA includes savings account with a bank, savings account with a cooperative society carrying on the business of banking and savings account with a post office. Deductions in respect of interest on savings bank account up to Rs 10,000 in case of assessees other than Resident senior citizens.
  • Section 80TTB: Section 80TTB is a provision whereby a taxpayer who is a resident senior citizen, aged 60 years and above at any time during a Financial Year (FY), can claim a specified amount as a deduction from his gross total income for that FY. This section is applicable from April 1, 2018. Deductions in respect of interest on deposits up to Rs 50,000 in case of Resident senior citizens.

You can claim the benefits of these deductions to not pay any tax by bringing down your taxable income below the basic exemption limit but it does not mean that you need not file an ITR. In the same manner, you should file an ITR even if you don't have any tax liability as your next taxable income does not exceed the mark of Rs 5 lakhs due to the rebate that is granted under Section 87A. A rebate under section 87A is one of the income taxes provisions that help taxpayers reduce their income tax liability. You can claim an income tax rebate under section 87A if your total income does not exceed Rs 5 lakh in a financial year. Your income tax liability becomes nil after claiming the rebate under section 87A.

Non-income Criteria: There are two sets of criteria under the non-income group for filing an ITR.

Set-I: It applies to those who are residents under the tax laws. If you are a resident for tax purposes then you will have to file an ITR if you have beneficial interests in any asset outside India – need not necessarily be in an immovable asset, and can be even in a movable asset like bonds, shares, ESOPs of foreign company. The second case is if you have a signing authority of any foreign account where the value of balance in the account is irrelevant. This should be filed irrespective of your income. Importantly, you will have to file an ITR even if you have a bank account with zero balance outside India otherwise you are not required to file ITR. This category even includes all those NRIs who have returned to India by leaving behind assets in a foreign country.

Set-II: It applies to people whether he/she is a tax resident or not. In this case, you will have to file an ITR if you have deposited more than Rs 1 crore in current bank accounts – maybe one or more - in any bank or cooperative bank in India in a year. The deposits include cash deposits as well as deposits in any form in the current accounts. Similarly, you will also have to file an ITR for foreign travel in case you have paid more than Rs 2 lakhs for any person or yourself. However, the foreign travels do not cover travels to neighbourhood countries or for religious purposes.

A person will also have to file an ITR in the case if you have incurred electricity cost for an amount that exceeds Rs 1 lakh in a year. This applies even you are residing in rented accommodation or an office.

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