As the income tax return (ITR) deadline for FY 2024-25 (Assessment Year 2025-26) approaches, many taxpayers are asking whether ITR submission is necessary if their annual income is less than ₹2.5 lakh.
It is important to keep in mind that, under the old tax regime, individuals under 60 years of age with income below ₹2.5 lakh are not required to file an ITR, until and unless they fall under certain conditions prescribed by the income tax department.
Furthermore, in contrast, under the new tax regime, the basic exemption limit has been increased to ₹3 lakh. This simply means that individuals with income below this threshold are also exempted from mandatory income tax filing. Going ahead, this exemption limit is expected to rise to ₹4 lakh from FY 2025-26 (AY 2026-27) onwards, although no official notification or bill has been issued on the same yet.
Cases when filing becomes mandatory
Even if your income is less than ₹2.5 lakh (old regime) or ₹3 lakh (new regime), filing becomes mandatory if:
- You have deposited over ₹1 crore in a current account.
- Spent over ₹2 lakh on foreign travel.
- Paid electricity bills exceeding ₹1 lakh in a year.
- TDS deducted is ₹25,000 or more ( ₹50,000 for senior citizens).
- You own foreign assets or have signing authority in a foreign account.
Note: The cases discussed above are illustrative in nature. For updated terms and conditions applicable on an individual basis, discuss your case with a certified financial advisor or tax consultant.
5 key benefits of filing ITR voluntarily
Filing your ITR voluntarily and promptly despite being exempt provides several advantages:
- Claim tax refunds: If any TDS has been deducted, filing is essential to claim it back. Once the income tax is filed, the tax department will process your refund, which will be delivered to the bank account mentioned in your tax submission form.
- Proof of income: ITR acts as credible income proof for financial transactions. Some banking institutions and credit card issuing institutions also permit the submission of ITR documents for carrying out a background check on an individual’s income proof.
- Loan or visa approvals: Banks and embassies often ask for ITRs. These documents are utilised even for personal loans and visa approvals. They are crucial as they are backed by the government.
- Carry forward losses: ITR filing helps in carrying forward capital or business losses. This is crucial because if the income tax return is filed on a consistent basis, the taxpayer can smoothly make sure that they are able to carry forward losses, make capital loss claims in their tax forms and ensure that their overall tax liability is reduced.
- Tax compliance history: It builds a good track record with tax authorities. Such a healthy practice also boosts your credit profile and ensures that your credit score remains high when other financial obligations, such as credit card bills and personal loan EMIs, are repaid in a timely manner.
In short, for FY 2024-25, if your income is below ₹2.5 lakh (old regime) or ₹3 lakh (new regime), then you are not required to file an ITR until and unless you meet specific criteria. Still, voluntary filing is always advisable, which is the most prudent practice for long-term financial planning and building credibility.
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Disclaimer: This article is for informational purposes only and should not be treated as tax advice. Please consult a certified tax professional for guidance tailored to your financial situation.