As per the current income tax laws, a person below 60 years of age is required to file ITR if his gross total income exceeds Rs 2.5 lakh in a financial year. This is irrespective of the income tax regime chosen by him (old vs new). It is important to note that gross total income includes income from various sources like salary, interest income from savings account, fixed deposits, recurring deposits etc.
To arrive at a gross total/taxable income of Rs 2.5 lakh or more, one needs to add up the net income under five income heads- salary, house property, other sources, capital gains and business income. Those opting for old/existing income tax regime need to calculate their net income from each head after claiming deduction (available to him) under each head. For example, while computing net taxable income under head salary, one needs to claim or deduct tax exemption and deduction (allowed from salary) from gross salary.
However, those who opt for the new tax regime are generally not eligible for the claimed tax exemption/deduction.
Abhishek Soni, CEO, Tax2win.in, referring to those who are below 60 years and opting for the old tax regime, said, “The requirement of filing ITR by salaried employees depends on whether their total income is 2.5 per cent in a financial year. Let us assume that there is no income other than salary, if the total income of a salaried employee after claiming HRA, LTA tax exemption and standard deduction exceeds Rs 2.5 lakh in a financial year If not, then he need not mandatorily file ITR.
It is explained below by an example. Suppose your annual salary income is Rs 2.76 lakh. After claiming a standard deduction of Rs 50,000 from your salary income (assuming that HRA is fully taxable and the old tax regime is opted for), the taxable income comes to Rs 2.26 lakh. This reduces your taxable income below the exemption limit of Rs 2.5 lakh. Hence, you are not required to file ITR as your total income is less than the exemption limit.
Taking another example. Suppose your annual salary income is Rs 3 lakh. You have also earned interest of Rs 2,000 from savings bank account and Rs 3000 from fixed deposits. Under the head Salary Income, you are eligible to claim standard deduction of Rs 50,000 and HRA exemption of Rs 40,000.
Soni says, “In the second instance, you have to mandatorily file ITR only if your gross total income (net taxable salary + interest from savings account + interest from fixed deposits) exceeds Rs 2.5 lakh. For example, since the total income of Rs 2.15 lakh does not exceed the exemption limit of Rs 2.5 lakh, you are not required to file ITR.
The above table assumes that the person is below 60 years of age and opts for the old income tax regime.
Interest earned from savings account and fixed deposits is charged to tax under the head ‘Income from other sources’.
If a person opts for a new tax regime, he/she will have to mandatorily file ITR as the salary income in the above example exceeds the exemption limit of Rs 2.5 lakh.
Read also: new vs old income tax regime
It is important to note that your employer only knows about your salary income. He has no idea about your income from any other source like interest income from savings account, capital gains, rental income etc. Thus, it is the responsibility of an individual to calculate his/her total income (as seen from the 2nd example above) and if it exceeds the exemption limit of Rs 2.5 lakh, you must compulsorily ITR has to be filed.
To help you calculate your taxable income, click here,
Exceptions to the Income Exemption Limit Rule
Under the income tax laws, there are some exceptions to the income exemption limit rule. This means it is mandatory for an individual to file ITR even if his gross income does not exceed the exemption limit of Rs 2.5 lakh. Filing of ITR becomes mandatory if a person fulfills any of the following conditions or falls under these categories:
a) who has spent an amount or an aggregate amount exceeding rupees two lakhs on foreign travel for himself or for any other person,
b) who has deposited an amount or aggregate amount exceeding one crore rupees in one or more current accounts maintained with any bank or co-operative bank,
c) who has paid an electricity bill of more than Rs 1 lakh in a single bill or on aggregate basis during the financial year,
d) Ordinarily resident persons having income from abroad and/or holding assets abroad and/or having the right to sign any account outside India,
e) if the gross total income of an individual exceeds the exemption limit before claiming tax exemption on capital gains under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA or 54GB of the Income-tax Act, 1961,
f) a person making deposits of Rs 50 lakh or more in a savings bank account in a financial year,
g) Whose total deduction of TDS/TCS in a financial year is Rs.25,000 or more, even if the gross total income of the individual is less than the basic exemption limit. For senior citizens, this limit will be applicable if TDS/TCS is Rs 50,000 or more, and
h) To claim income tax refund.