Filing an Income Tax Return (ITR) is more than just a legal obligation; it is a fundamental aspect of financial responsibility and civic duty. In countries like India, the ITR serves as a record of an individual's or entity's income, taxes paid and compliance with tax regulations. Whether you are a salaried individual, a business owner, or a professional, filing an ITR offers numerous benefits and safeguards. Below, we explore in detail why filing an ITR is essential.

1. Legal Compliance

Filing an ITR is a mandatory requirement under the Income Tax Act, 1961, in India for individuals, Hindu Undivided Families (HUFs), companies and other entities whose income exceeds the basic exemption limit. For the financial year 2024-25, the exemption limits under the old tax regime are:

• ₹2.5 lakh for individuals below 60 years.
• ₹3 lakh for senior citizens (60–80 years).
• ₹5 lakh for super senior citizens (above 80 years).

Under the new tax regime, the exemption limit is ₹3 lakh for all individuals. If your income exceeds these thresholds, filing an ITR is legally required. Failure to file can result in:

• Penalties: A penalty of up to ₹5,000 under Section 271F for late or non-filing.
• Interest: Interest at 1% per month on unpaid taxes under Section 234A.
• Legal Consequences: In extreme cases, prosecution or scrutiny by tax authorities.

By filing your ITR on time, you avoid these penalties and stay compliant with the law.

2. Claiming Tax Refunds

If excess tax has been deducted from your income (e.g., through Tax Deducted at Source (TDS) or advance tax), filing an ITR is the only way to claim a refund. For example:

• Salaried employees often have TDS deducted by employers, but deductions like investments under Section 80C or 80D may reduce their tax liability.
• If you've paid more tax than required, the Income Tax Department will refund the excess amount, but only after you file your ITR.

Without filing, you forfeit your right to claim these refunds, effectively losing money.

3. Proof of Income and Financial Credibility

An ITR serves as an official document proving your income and tax compliance. This is invaluable in various scenarios:

• Loan Applications: Banks and financial institutions often require ITRs (typically for the last 2–3 years) to assess your repayment capacity for home loans, car loans, or business loans.
• Visa Processing: Many countries require ITRs as proof of financial stability when applying for a visa.
• Credit Card Applications: Credit card issuers may request ITRs to evaluate your creditworthiness.
• Business Tenders: For entrepreneurs, ITRs are often required when bidding for government or private contracts.

Regularly filing ITRs builds a strong financial profile, enhancing your credibility.

4. Carry Forward Losses

If you incur losses in business, investments (e.g., stock market), or other sources, filing an ITR allows you to carry forward these losses to offset future income. For instance:

• Business losses can be carried forward for up to 8 years.
• Capital losses (short-term or long-term) can also be carried forward, provided you file your ITR on time.

Failing to file an ITR means you lose the opportunity to offset these losses, increasing your future tax burden.

5. Avoiding Scrutiny from Tax Authorities

The Income Tax Department monitors financial transactions through sources like bank accounts, property purchases and high-value investments. Filing an ITR ensures your income and transactions are documented, reducing the chances of receiving a notice from the tax department. Non-filing or discrepancies in reported income can trigger:

• Tax audits or scrutiny.
• Notices under Section 143(2) for detailed assessment.
• Investigations into unreported income.

Regular and accurate ITR filing demonstrates transparency, minimizing the risk of such scrutiny.

6. Contribution to Nation-Building

Taxes collected through ITRs fund essential public services like infrastructure, healthcare, education and defense. By filing your ITR, you contribute to:

• Building roads, schools and hospitals.
• Supporting welfare schemes for the underprivileged.
• Strengthening national security and economic development.

Paying taxes and filing ITRs is a civic duty that supports the growth and well-being of the nation.

7. Eligibility for Tax Benefits and Deductions

Filing an ITR allows you to claim deductions and exemptions under various sections of the Income Tax Act, such as:

• Section 80C: Up to ₹1.5 lakh for investments in PPF, ELSS, life insurance, etc.
• Section 80D: Deductions for health insurance premiums.
• Section 24: Interest on home loans.

These deductions can significantly reduce your taxable income, but they are only available if you file an ITR.

8. Avoiding Higher TDS Rates

For certain transactions, such as the sale of immovable property or fixed deposits, TDS is deducted at a higher rate if you haven't filed your ITR for the last two years. For example:

• Under Section 206AB, if you haven’t filed ITRs for the last two years and your TDS/TCS exceeds ₹50,000, a higher TDS rate (e.g., 20% instead of 10%) may apply.
• Filing ITRs consistently ensures you avoid these penal rates.

9. Building a Financial Record for Future Planning

ITRs create a documented financial history, which is useful for:

• Retirement planning: Understanding your income trends helps in planning investments.
• Tax planning: Analyzing past ITRs helps optimize future tax-saving strategies.
Succession planning: ITRs provide clarity on your financial status for heirs or legal purposes.

10. for Certain Transactions

Certain high-value transactions require you to quote your ITR acknowledgment or PAN linked to filed returns. Examples include:

• Purchasing property above a certain value.
• Investing in mutual funds or stocks beyond specified limits.
• Opening certain types of bank accounts.

Non-filing can restrict your ability to engage in these transactions smoothly.

11. Revised ITR for Corrections

If you make an error in your ITR, you can file a revised return under Section 139(5) to correct mistakes. However, this option is only available if you've filed the original ITR by the due date. Non-filing eliminates this opportunity, leaving errors uncorrected and potentially leading to penalties.

12. Encourages Financial Discipline

Filing an ITR requires you to maintain records of your income, expenses and investments. This promotes financial discipline by:

• Encouraging you to track your earnings and spending.
• Helping you identify tax-saving opportunities.
• Ensuring accurate reporting of income sources.

This discipline can lead to better financial management and long-term wealth creation.

Who Should File an ITR?

Even if your income is below the exemption limit, you should file an ITR if:

• You want to claim a refund for excess TDS.
• You have foreign income or assets.
• You've incurred losses you wish to carry forward.
• You've made high-value transactions (e.g., property purchases above ₹50 lakh).
• You're a company, firm, or trust, where filing is mandatory regardless of income.

Conclusion

Filing an Income Tax Return is not just a legal formality but a critical step toward financial responsibility and societal contribution. It ensures compliance, unlocks financial benefits and safeguards against penalties or scrutiny. By filing your ITR on time, you establish credibility, claim refunds and contribute to nation-building. Make it a habit to file your ITR accurately and promptly to enjoy these benefits and maintain peace of mind.

Filing an Income Tax Return (ITR) is a critical obligation for individuals, businesses and other entities in India whose income or specific transactions meet certain criteria under the Income Tax Act, 1961. For the Financial Year (FY) 2024-25, which corresponds to the Assessment Year (AY) 2025-26, the rules for mandatory ITR filing are clear and non-compliance can lead to penalties, interest, or legal consequences. This article outlines who is required to file an ITR, the conditions that trigger this requirement and answers to frequently asked questions to help taxpayers understand their obligations.

Why Filing ITR is Important

Before diving into the specific criteria, it's important to note that filing an ITR is not just a legal requirement but also provides several benefits:

• Claiming tax refunds for excess tax deducted (TDS or advance tax).
• Establishing financial credibility for loans, visas, or business contracts.
• Carrying forward losses (business, capital, etc.) to offset future income.
• Contributing to nation-building by funding public services.
• Accessing tax benefits and deductions under various sections of the Income Tax Act.

1. Individuals with Taxable Income Above Exemption Limit

Individuals whose total income (before claiming deductions under Sections 80C, 80D, etc.) exceeds the basic exemption limit must file an ITR. The exemption limits for FY 2024-25 are as follows:

• General Individuals (below 60 years):
• Old Tax Regime: ₹2.5 lakh
• New Tax Regime: ₹3 lakh
• Senior Citizens (60 to 80 years):
• Old Tax Regime: ₹3 lakh
• New Tax Regime: ₹3 lakh
• Super Senior Citizens (above 80 years):
• Old Tax Regime: ₹5 lakh
• New Tax Regime: ₹3 lakh

Note: The income mentioned above is before claiming deductions like those under Section 80C or 80D. If your income exceeds these thresholds, filing an ITR is legally required.

2. Individuals with Specific High-Value Transactions

Even if your income is below the exemption limit, you must file an ITR if you meet any of the following conditions:

• Bank Deposits:
• Deposited more than ₹1 crore in one or more current bank accounts in a financial year.
• Deposited more than ₹50 lakh in one or more savings bank accounts.
• Foreign Travel Expenses: Incurred expenditure of more than ₹2 lakh on foreign travel (for yourself or another person).
• Electricity Expenses: Paid more than ₹1 lakh towards electricity bills in the financial year.
• Property Transactions: Engaged in the sale or purchase of immovable property worth more than ₹50 lakh.

These thresholds are designed to track high-value transactions and ensure tax compliance.

3. Individuals with Foreign Income or Assets

You must file an ITR if you:

• Have income from foreign sources (e.g., dividends, rental income, or salary from abroad).
• Hold foreign assets, such as bank accounts, property, or shares, during the financial year.
• Have signing authority in any foreign account.

This applies to residents and, in some cases, non-residents with Indian-sourced income.

4. Businesses and Professionals

Individuals engaged in business or professional activities may need to file an ITR under the following conditions:

• Gross Receipts:
• Businesses with gross receipts exceeding ₹60 lakh.
• Professionals with gross receipts exceeding ₹10 lakh.
• Presumptive Taxation: If you opt for presumptive taxation under Sections 44AD, 44ADA, or 44AE but wish to declare income lower than the deemed profit or carry forward losses.
• Losses: If you’ve incurred business or capital losses (e.g., from stock market investments) and want to carry them forward to offset future income.

5. Entities Required to File ITR

Certain entities must file ITRs regardless of income or specific criteria:

• Companies: All private and public companies, including those with no income or losses, must file ITRs.
• Partnership Firms: Including Limited Liability Partnerships (LLPs).
• Hindu Undivided Families (HUFs): If total income exceeds ₹2.5 lakh (old tax regime) or ₹3 lakh (new tax regime).
• Trusts, Societies and Political Parties: Charitable trusts, political parties, or other entities registered under specific sections (e.g., Section 12A) must file ITRs.
• Other Entities: Entities like cooperative societies or local authorities with taxable income.

6. Individuals Claiming Tax Refunds

If excess tax has been deducted (e.g., through Tax Deducted at Source (TDS) on salary, interest, or other income), you must file an ITR to claim a refund, even if your income is below the exemption limit. For example:

• TDS deducted on fixed deposit interest or salary may exceed your tax liability due to deductions like Section 80C.
• Without filing an ITR, you cannot claim this refund.

7. Non-Residents with Indian Income

Non-resident individuals (NRIs) earning income from India, such as:

• Rental income from property.
• Capital gains from selling assets (e.g., shares, property).
• Professional fees or business income sourced in India.

must file an ITR, regardless of the income amount.

8. Other Cases

• Exempt Income: Residents with exempt income (e.g., agricultural income exceeding ₹5,000) along with taxable income above the exemption limit must file an ITR.
• Avoiding Higher TDS Rates: Under Section 206AB, if you haven’t filed ITRs for the last two years and your TDS/TCS exceeds ₹50,000, you may face higher TDS rates (e.g., 20% instead of 10%) on certain transactions. Filing ITRs avoids this.
• Mandatory for Specific Transactions: Certain high-value transactions (e.g., mutual fund investments, property purchases) require you to quote your ITR acknowledgment or PAN linked to filed returns.

Key Due Dates for FY 2024-25

• September 15, 2025: For individuals, HUFs and businesses/professionals not requiring a tax audit (extended from July 31, 2025).
• October 31, 2025: For businesses or professionals requiring a tax audit (e.g., turnover exceeding ₹1 crore for businesses, subject to conditions).
• November 30, 2025: For entities with international transactions or specified domestic transactions requiring transfer pricing documentation.

Penalties for Non-Compliance

Failing to file an ITR by the due date can result in:

• Penalty: Up to ₹5,000 under Section 271F for late or non-filing.
• Interest: 1% per month on unpaid taxes under Section 234A.
• Loss of Benefits: Inability to claim refunds or carry forward losses.
• Scrutiny: Increased risk of notices or audits from the Income Tax Department.

Voluntary Filing

Even if not mandatory, filing an ITR is recommended to:

• Claim tax refunds.
• Carry forward losses.
• Build financial credibility for loans, visas, or contracts.
• Avoid higher TDS rates under Section 206AB.
• Document financial records for future planning.

FAQs on ITR Filing Requirements for FY 2024-25

Q1: Do I need to file an ITR if my income is below the exemption limit?

Ans : No, if your total income (before deductions) is below the exemption limit (₹2.5 lakh or ₹3 lakh, depending on the tax regime and age). However, you must file if you meet other criteria, such as high-value transactions (e.g., ₹1 crore in current bank deposits), foreign income/assets, or to claim a refund.

Q2: I am a salaried employee with TDS deducted. Do I need to file an ITR?

Ans : If your income exceeds the exemption limit or you want to claim a refund for excess TDS, you must file an ITR. Even if your income is below the limit, filing is recommended to claim refunds or for financial documentation.

Q3: What happens if I don't file my ITR by the due date?

Ans : You may face:

• A penalty of up to ₹5,000 under Section 271F for late or non-filing.
• Interest at 1% per month on unpaid taxes under Section 234A.
• Loss of ability to carry forward losses or claim refunds.
• Potential scrutiny or notices from the Income Tax Department.

Q4: Is ITR filing mandatory for NRIs?

Ans : Yes, if you earn income from India (e.g., rental income, capital gains, or professional fees), regardless of the amount. You may also need to file if you hold foreign assets or have signing authority in foreign accounts.

Q5: I run a small business under presumptive taxation. Do I need to file an ITR?

Ans : Yes, if you opt for presumptive taxation under Sections 44AD, 44ADA, or 44AE and wish to declare income lower than the deemed profit or carry forward losses. Otherwise filing is mandatory if your income exceeds the exemption limit.

Q6: Can I file an ITR to carry forward losses even if my income is below the exemption limit?

Ans : Yes, filing an ITR is necessary to carry forward business or capital losses to offset future income, even if your income is below the exemption limit.

Q7: Do I need to file an ITR if I have only exempt income, like agricultural income?

Ans : If your agricultural income exceeds ₹5,000 and you have other taxable income above the exemption limit, you must file an ITR. Otherwise, exempt income alone does not trigger mandatory filing.

Q8: How do I know which ITR form to use?

Ans : The ITR form depends on your income sources and status:

• ITR-1 (Sahaj): For individuals with salary, one house property and other sources (e.g., interest) up to ₹50 lakh.
• ITR-2: For individuals/HUFs with no business income but with capital gains or foreign assets.
• ITR-3: For individuals/HUFs with business/professional income.
• ITR-4 (Sugam): For presumptive taxation or income up to ₹50 lakh.
• ITR-5, 6, 7: For firms, companies, trusts, or other entities.

Consult a tax professional or the Income Tax Department’s website for guidance.

Q9: Is ITR filing mandatory for a company with no income?

Ans : Yes, all companies (private or public) must file an ITR, even if they have no income or incur losses.

Q10: Where can I get more information on ITR filing?

Ans : Visit the official Income Tax Department website (https://www.incometax.gov.in) or consult a chartered accountant for personalized advice.

Conclusion

Filing an ITR for FY 2024-25 is mandatory for individuals, HUFs, businesses and other entities meeting specific income or transaction thresholds. This includes those with taxable income above the exemption limit, high-value transactions, foreign income/assets, or those seeking refunds or loss carryforwards. Timely filing by the updated due dates (September 15, October 31, or November 30, 2025, as applicable) ensures compliance, avoids penalties and provides financial benefits.

CA. Amol V. Waybhat

caamolybhat@gmail.com