Filing an Income Tax Return (ITR) is a crucial responsibility for individuals and entities in India. While many believe it's only necessary when income exceeds the basic exemption limit, several other scenarios mandate filing, regardless of income level. Understanding these situations is vital for ensuring compliance and avoiding potential penalties. The Income Tax Department has also introduced new guidelines related to mandatory scrutiny of Income Tax Returns for the financial year 2025-26 (assessment year 2026-27), so it is even more important to understand the rules.
Here are 10 situations where filing ITR becomes mandatory:
Income Exceeds the Basic Exemption Limit: This is the most common and well-known criterion. For the assessment year 2025-26, if your total income before claiming any deductions exceeds the basic exemption limit, you are required to file an ITR. The exemption limits under the old tax regime are:
Under the new tax regime, the exemption limit for all individuals is Rs 3 lakh, with the Union Budget 2025 raising this limit to Rs 4 lakh.
High-Value Bank Deposits: Even if your income is below the basic exemption limit, you must file an ITR if you've made substantial deposits in your bank accounts. Specifically, if you have deposited more than Rs 50 lakh in one or more savings bank accounts or Rs 1 crore or more in one or more current accounts during the financial year, filing ITR is mandatory. This condition applies irrespective of whether the deposits are from business or personal sources.
Business Turnover Exceeds Rs 60 Lakh: If you are running a business, and your total sales, turnover, or gross receipts exceed Rs 60 lakh during the financial year, filing ITR is mandatory. This rule applies regardless of your profit or taxable income.
Professional Income Exceeds Rs 10 Lakh: For professionals like doctors, lawyers, consultants, etc., if the total gross receipts from their profession exceed Rs 10 lakh during the financial year, they are obligated to file an ITR.
High Electricity Consumption: If your annual expenditure on electricity exceeds Rs 1 lakh, you are required to file an ITR. This condition aims to identify individuals with high consumption patterns, which may indicate a higher income or standard of living.
Foreign Travel Expenses: If you have spent more than Rs 2 lakh on foreign travel, either for yourself or for any other person, during the financial year, filing ITR is mandatory. This condition is in place to track high-value transactions and ensure tax compliance.
TDS/TCS Exceeds Specified Limit: If the total tax deducted at source (TDS) or tax collected at source (TCS) during the financial year exceeds Rs 25,000, you are required to file an ITR. For senior citizens (60 years and above), this threshold is Rs 50,000.
Holding Foreign Assets or Income: If you are a resident individual owning assets located outside India, such as shares, bonds, or property, or if you have income from any source outside India, such as dividends, interest, or rent, filing ITR is mandatory. This applies even if the income from these assets is below the basic exemption limit.
New CBDT Scrutiny Rules: The Central Board of Direct Taxes (CBDT) has issued fresh guidelines outlining specific cases where Income Tax Returns (ITRs) will face mandatory scrutiny in FY 2025-26. These include high-risk transactions, information received from law enforcement agencies, and discrepancies found during past assessments. Also included in the guidelines, if a survey has been conducted under section 133A (except 2A) at a taxpayer's place after April 1, 2023, then scrutiny of ITR will be mandatory in such cases or If a raid or document seizure has been done at a taxpayer's place under section 132 or 132A between April 1, 2023 and March 31, 2025, then that case will also come under scrutiny.
Claiming Exemption Despite Cancellation of Registration: Entities filing ITR- form 7, particularly trusts or institutions claiming tax exemption under provisions, such as Sections 12A, 12AB, or 10(23C), will be under the scanner if their registration was either not granted, cancelled, or withdrawn by March 31, 2024. The only exception is if the cancellation was later reversed on appeal. So, if someone files a return claiming exemption without a valid registration as on the cut-off date, it's a straight route to scrutiny.
Even if none of the above conditions apply to you, filing an ITR can still be beneficial. It allows you to claim refunds on excess TDS, carry forward losses to future years, and serves as valid income proof for loan or visa applications. Staying informed about these mandatory ITR filing situations ensures compliance with tax laws and helps you manage your financial responsibilities effectively.
