No Taxable Income? You May Still Have to File Your Returns

A general understanding is that an income-tax return (ITR) is required to be filed only if the taxable income exceeds the basic exemption limit for a relevant financial year. While it is an important condition to determine whether a tax return needs to be filed in India, there are certain other situations as well where an individual may be required to file a tax return even when the taxable income is less than the basic exemption limit.

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. Gross total income is the sum total of all the income earned by a taxpayer during the relevant financial year without claiming any deduction which may be linked to the specified investments, expenses, donations, etc.

On the contrary, taxable income is the net income computed after considering the aforesaid deductions and exemptions. Therefore, even if your total taxable income (i.e. after considering deductions) falls below the basic exemption limit but your gross total income exceeds the basic exemption limit, a tax return is required to be filed.

Besides, the tax law prescribes certain conditions wherein individuals who qualify as “resident and ordinarily resident” in India during a financial year are required to file a tax return even if the gross total income is below the basic exemption limit. Such individuals are required to file their return if, at any time during the financial year, they:

•hold any asset (including financial interest in any entity) located outside India; or

•have signing authority in any account located outside India; or

•are beneficiaries of any asset (including financial interest in any entity) located outside India (however, if income from such asset is included in the total income of the legal owner, there is no need for the beneficiary to file a return in India).

Also, individuals are required to file tax returns in India if they have claimed relief under a tax treaty with a foreign country even if the taxable income is “Nil” after claiming such relief. Further, in order to claim carry forward of losses for set off against income of subsequent years, it is mandatory to file a tax return.

Amendment in budget 19-20

The government has amended the income-tax law vide the Union budget 2019 to introduce further conditions for filing tax returns by individual taxpayers whose gross total income is below the basic exemption limit. This condition is applicable from fiscal year 2019-20 onwards and individuals would be required to file a tax return in India if they meet any of the conditions mentioned below during the financial year:

•deposit an aggregate amount of Rs. 1 crore or more in current account(s) maintained with a banking company or a co-operative bank;

•spend Rs 2 lakh or more on foreign travel for himself or any other person;

•incur an expense aggregating Rs 1 lakh or more towards consumption of electricity; or

•fulfil any other conditions as may be prescribed.

The tax filing requirement for taxpayers other than individuals would depend on the type of entity. Individuals who own or are a partner/member in an entity should take note of these requirements.

It is mandatory for companies and firms (including limited liability partnerships) registered in India to file their income tax return in India irrespective of the income earned or loss incurred during the year.


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Kanhaiya Gautam

Practicing Chartered Accountant | Advisor to MSME and Start Ups for Business Development and Tax Planning | Statutory Compliance | GST Services provided Accounting Bookkeeping Tax Preparation Personal Tax Planning Tax Law Business Law