Should salaried employee having salary between Rs. 2.5 lakh to Rs. 5 lakh file Income tax return? | Income tax return for salaried employee

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Filing of Income tax return is an annual filing of Income tax and which needs to be done by every person earning income above a certain limit.

Few years ago government had introduced section 87A under the Income tax act wherein the taxpayers were allowed a rebate of certain amount from their total tax.

Currently for AY 2021-22 i.e. FY 2020-21 which is financial year ending 31.03.2021 the limit prescribed under section 87A is of Rs. 5 lakh and a tax amount of Rs. 12,500.

Thus, any person who is earning income upto Rs. 5 lakh and does not have any special rate income is not required to pay any tax as for any normal individual basic exemption limit of Rs. 2.5 lakh shall be available and any income above Rs. 2.5 lakh and upto Rs. 5 lakh will be taxed at 5%.

Thus, tax on 2.5 lakh (i.e. Rs. 5 lakh less Rs. 2.5 lakh) would be Rs. 12,500 and hence they would get full rebate under section 87A of the Income tax act and hence no tax shall be required to be paid by such individual under Income tax act.

Now, the question which comes to mind is whether one will have to file Income tax return in such a situation where no tax is required to be paid.

The answer to same is yes. Not liable to pay tax and not liable to file Income tax return are two different things.

As per section 139 of the Income Tax Act, every individual whose total income exceeds the maximum amount which is not chargeable to tax has to file his income tax return within the due date. In a normal case, in case of an individual below the age of 60 year the maximum amount is Rs. 2.5 lakh. Hence, even if a person has salary below Rs. 5 lakh and he is not liable to pay tax but if his total income exceeds Rs. 2.5 lakh he needs to file Income tax return.

Further, the above total income needs to be checked before giving the effect of Chapter VI-A deduction or exemption u/s 54 etc.

Relevant extract of section 139 is as under:

“139. (1) Every person,—

(a)  being a company or a firm; or

(b)  being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax,

shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

.

..

…

Provided also that every person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year, without giving effect to the provisions of clause (38) of section 10 or section 10A or section 10B or section 10BA or section 54 or section 54B or section 54D or section 54EC or section 54F or section 54G or section 54GA or section 54GB or Chapter VI-A exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed:”

Therefore, payment of tax and filing of income tax return are two different things and if a person whose total income exceeds Rs. 2.5 lakh he/ she needs to compulsorily file Income tax return or else he might be liable to pay penalty/ late fees between Rs. 1,000 to Rs. 5,000 as per section 234F.

“(1) Without prejudice to the provisions of this Act, where a person required to furnish a return of income under section 139, fails to do so within the time prescribed in sub-section (1) of the said section, he shall pay, by way of a fee, a sum of five thousand rupees :

Provided that if the total income of the person does not exceed five lakh rupees, the fee payable under this section shall not exceed one thousand rupees.“

Also, there are various other benefits of filing return of income such as one could carry forward losses. Also, filing return of income helps in applying for loan, visa etc.

If you need any assistance in filing your return of income you can book the slot using the below mentioned link wherein you can file your Income tax return with the help of a tax expert.

You can book phone consultation/ assistance online with expert as mentioned below:

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