Situations where ITR filing is required even when income is below 2.5 Lakhs

Last Updated On: Nov. 18, 2020, 10 p.m.


As per Income Tax Provisions, An Income Tax Return report’s one’s income, profit and losses, deductions, exemptions, and as well as tax refund and tax liability.

The Income Tax Law provides for mandatory filing of returns in certain cases. Individuals or HUF who are less than 60 years of age and have gross total income more than Rs 2.5 lakh i.e. above basic exemption limit have to mandatorily file their income tax returns, according to the Income Tax Act. 

For senior citizens, the basic exemption limit is Rs 3 lakh, and for those who are more than 80 years old, the basic exemption limit is Rs 5 lakh.

It is important to understand that the income tax law refers to “gross total income” which should exceed the basic exemption limit and not the taxable income, which is a requirement for mandatory filing of ITR.

Let us refer to the below example of Mr. A who is 55 years old who gets income from house property only.

Rent Received (Considered to be the Net Annual Value of the property) 6,50,000
(-) Standard Deduction u/s 24 @ 30% (1,95,000)
Income from House Property 4,55,000
Gross Taxable Income 4,55,000
Deductions under Chapter VI-A Nil
Net Taxable Income 4,55,000
Tax on above (as per slabs) 12,000
(-) Rebate u/s 87A (12,000)
Tax Liability Nil



Mr. A will have to file ITR even though his tax liability is Nil as his Gross Taxable income is exceeding the exemption limit of Rs 2,50,000.

However in the below-mentioned situations, one will have to mandatorily file an ITR even if the gross total income is less than the basic exemption limit.


Mandatory filing of ITR is required by :

1. A taxpayer who wants to claim a refund:

  • Possibilities where tax deducted at source (TDS) on the name of an individual who makes an income or investment in India.
  • If TDS has been deducted or If there is any refund due from the Income Tax Department, you will have to file the ITR to claim a refund of the same.


2. A taxpayer who has entered into any transaction listed under the Annual Information Return (AIR)

  • If you have entered into any transaction listed under the Annual Information Return (AIR) then you must file your IT Return as the income already has noticed about you being involved in such transactions and may send you a notice asking about your income tax return.
  • An Annual Information Return is a format for filing an additional return with the Income Tax Department, apart from the regular return mentioned under Section 139.
  • The Annual Information Return (AIR) discloses high-value financial transactions carried out by assessees during the financial year.
  • The AIR is required to be furnished under section 285BA of the Income-tax Act, 1961 by the specified persons in respect of the specialized transactions mentioned in the Act.
  • A transaction registered or recorded by an assessee during the financial year will attract the need to file an AIR in case it falls under the specified criteria mentioned in the Act.


3. NRI’s filing to claim a refund

  • NRI’s have to mandatorily file his Income Tax Return if their total income is more than the basic exemption limit.
  • Interest income earned on an NRE account is exempt from tax if the account holder is treated as a person resident outside India under the Foreign Exchange Management Act (FEMA).
  • In some cases, NRI Total Income is less than the Basic exemption Limit and they do not file their income tax return.
  • However, TDS has been already deducted. Such NRI can file their tax return and Claim Refund from the Income Tax Department.


4. Receipt of Gifts

  • The gifts that you receive either in terms of money or in other forms are exempted from tax if their total amount in a given financial year is less than Rs 50,000.
  • A gift above this value makes you liable for paying income tax only on the amount in excess of Rs 50,000.
  • If the value of the gifts received by you exceeds Rs 50,000 in a year, it will be taxable under the head “Income from other sources” and will be taxed according to the individual’s tax slab
  • If you have received a gift of more than Rs 50,000, you should show it in your income tax return. This will work as a historical record and help you produce evidence in case of any future enquiry.
  • If your income is above the basic exemption limit, it is mandatory for you to disclose your income from all sources including those from gifts, although you may not have to pay tax on it if it fulfills the exemption criteria.


5. Taxpayer Claiming Deductions and Exemptions

  • Filing of a tax return is mandatory to avail all deductions in respect of investments (e.g. for an employee contribution to Provident Fund under Section 80C) and to claim exemption of the eligible long-term capital gains (e.g. investment in a new residential house after the sale of another), which may eventually bring your taxable income to zero.
  • If total income before claiming deductions of these eligible investments and exemption of eligible capital gains is more than the above basic exemption thresholds, a tax return would be required to be filed.


6.Taxpayer To Set off and Carry forward losses

  • Set-off of losses means adjusting the losses against the profit or income of that particular year. After making the appropriate and permissible set offs, there could still be unadjusted losses.
  • These unadjusted losses can be carried forward to future years for adjustments against the income of these years.
  • However, unless you file your ITR, you cannot recompense your expenses/losses in the previous financial year to the current. If tax returns are not filed on time, unadjusted losses (with some exceptions) cannot be carried forward to future years. Hence, to ensure that the losses are carried forward for future adjustment, a tax return would be required to be filed


7. Legal Heirs Filing Returns:

  • When a person dies, apart from assets and liabilities, there are other things that get transferred to legal heirs.
  • These include the responsibility to file the last income tax return on behalf of the deceased and surrendering the person’s documents like a permanent account number (PAN) and Aadhaar. 
  • As per section 159 of the Income Tax Act, 1961 in case a person dies, his/her legal representative shall pay the tax due, just as the deceased person would have, had he/she been alive.
  • Not filing returns could land the legal heir in trouble even if their individual income is below the basic exemption limit.

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