Filing ITR for Incomes Below 2.5 LPA

Written by : Knowledge Centre Team

2024-08-02

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My income is less than Rs 2.5LPA do I need to file ITR

It is easy to confuse income tax jargon. The terminology in annual budget announcements and a lot of income-tax related articles and forums tends to be convoluted and nobody can be blamed for being misled into getting the incorrect picture.

The short answer is No, you do need to file ITR for income less than 2.5LPA (lakhs per annum). Indeed, the bright side of being in this income tax bracket is that you do not need to compulsorily file ITR or pay any taxes at least.

However, as per annual budget 2019. if an individual who during the previous year—(i) has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or (ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or (iii) has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or than will required to file ITR.

Further, you may need to file ITR (income tax returns) if you need to claim a refund or carry forward losses. Also, for a lot of our favourite travel destinations, ITR for the past three to five years are often part of the documents checklist. As a result, while you do not have to, it is advisable for you to do so anyway. It's like working out. Nobody has to work out, unless you make a living off your appearance (like actors) or if your daily bread relies on your fitness (like sports people) but most people do today anyway, because it is the healthier alternative.

What do you mean by I need to file ITR for income less than Rs 2.5L but pay no tax?

You need to file what is called a nil income tax return. You get proof of your income for Visa applications in the future, not to mention that this comes in handy even when you want to apply for loans or any other type of credit. Similarly if you have paid TDS despite your income being below the taxable limit you need to file ITR to claim a refund. What if you have incurred a loss in your day trading or mutual fund investments. This too can be claimed if you file an ITR. So long as your overall income is less than Rs 2.5LPA you simply file a nil ITR and pay no tax and if you during the previous year—(i) has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or (ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or (iii) has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or than will required to file ITR

Do I still need to invest? If yes, why?

Yes, absolutely. Investments are not only for tax saving but also for wealth generation, to grow your earnings and also to safeguard your future and that of your family. Heard that one a lot but don't know what it means? Well, put simply, it implies that you save to ensure that you and your family always have funds available no matter what eventualities come your way. Eventualities is a euphemism or a softer word used in place of harsher ones such as death and critical illness. However, we live in uncertain times. It is better to look at the possibility of eventualities in the eye and be prepared. Far better than to display ostrich syndrome and bury your head in the sand pretending that nothing bad can happen to you.

How should my investment plan differ from someone who has to pay tax?

You are not limited to tax saving investments for any chunk of your investments. You can choose any option that offers you good returns and that suits your other criteria. Look at lock-in period, costs (processing costs, payments to financial advisors etc) , taxability of ROI and accessibility (can transactions be carried out online?)

For example you could consider the iSelect Smart360 Term Plan by Canara HSBC Life Insurance. This gives you a bundle of benefits such as:

Payment of assured sum to family members nominated upon death of the insured
Payment if assured sum to family members nominated even upon diagnosis of a critical illness
Full repayment of premiums paid if you outlive the tenure
Flexibility when it comes to tenures, premiums, how many years you will pay premiums for and so on

What if I am earning Rs 2.5LPA from one job and another 1.5LPA from another part-time job?

That means your total income is Rs 4LPA which places you in the Rs 2.5L to Rs 5L slab. Your income is hence taxable and you are liable to pay taxes. You can however opt for investment options such as the Canara HSBC Life Insurance Invest 4G ULIP which gives you tax saving plus insurance cover plus delivers growth (typically about 12% to 14%) on your capital sum. You are eligible for tax breaks of up to Rs 1.5L and upon maturity neither the maturity amount nor the interest is taxable.

What happens if I do not file A Return, for income less than Rs 2.5L and If I do not falling in one or more conditions in the seventh proviso to section 139(1) of the Income-tax Act, 1961 (the Act) i.e., have not deposited more than Rs 1 crore in bank accounts or have not incurred Rs 1 lakh or Rs 2 lakh on electricity or foreign travel, respectively. So, in any case not under compulsion to file the return?

Nothing legally or in other words, nothing punishable by law. You also will not face any financial implications if you do not need to claim rebates or carry forward any losses.. But it is not to say that there are absolutely no consequences. You could have trouble obtaining visas to some destinations and you could face obstacles should you need credit in the near future.

The bottomline is that if you are earning it is always advisable to invest and to file ITR even if you are exempt from taxes.

206AB: Section 206AB of the Income Tax Act

Penalty for Late Filing of Income Tax Returns (ITR) in 2024

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