At the outset, it is important to understand that the income-tax law refers to “gross total income" which should exceed the basic exemption limit and not the taxable income. Gross total income is the sum total of all the income earned by a taxpayer during the relevant financial year without claiming any deduction which may be linked to the specified investments, expenses, donations, etc.
On the contrary, taxable income is the net income computed after considering the aforesaid deductions and exemptions. Therefore, even if your total taxable income (i.e. after considering deductions) falls below the basic exemption limit but your gross total income exceeds the basic exemption limit, a tax return is required to be filed.
Besides, the tax law prescribes certain conditions wherein individuals who qualify as “resident and ordinarily resident" in India during a financial year are required to file a tax return even if the gross total income is below the basic exemption limit. Such individuals are required to file their return if, at any time during the financial year, they:
•hold any asset (including financial interest in any entity) located outside India; or
•have signing authority in any account located outside India; or
•are beneficiaries of any asset (including financial interest in any entity) located outside India (however, if income from such asset is included in the total income of the legal owner, there is no need for the beneficiary to file a return in India).
Also, individuals are required to file tax returns in India if they have claimed relief under a tax treaty with a foreign country even if the taxable income is “Nil" after claiming such relief. Further, in order to claim carry forward of losses for set off against income of subsequent years, it is mandatory to file a tax return.
Thus, in case any of the above conditions are met, one should file a tax return in India. In case you missed the due date of filing the return for fiscal year 2018-19, you still have a chance to file a belated return by 31 March 2020.
Apart from the above, although not mandatorily required, an individual may decide to file a tax return in India in the following situations:
•To claim refund of tax deducted at source, if income is less than the basic exemption limit;
•To apply for loan, to obtain visa, etc. (wherein a tax return acts as a supporting document of your income).
Amendments in budget 2019-20
The government has amended the income-tax law vide the Union budget 2019 to introduce further conditions for filing tax returns by individual taxpayers whose gross total income is below the basic exemption limit. This condition is applicable from fiscal year 2019-20 onwards and individuals would be required to file a tax return in India if they meet any of the conditions mentioned below during the financial year:
•deposit an aggregate amount of `1 crore or more in current account(s) maintained with a banking company or a co-operative bank;
•spend `2 lakh or more on foreign travel for himself or any other person;
•incur an expense aggregating `1 lakh or more towards consumption of electricity; or
•fulfil any other conditions as may be prescribed.
The tax filing requirement for taxpayers other than individuals would depend on the type of entity. Individuals who own or are a partner/member in an entity should take note of these requirements.
•It is mandatory for companies and firms (including limited liability partnerships) registered in India to file their income tax return in India irrespective of the income earned or loss incurred during the year.
•For all other taxpayers, such as Hindu Undivided Family, Association of Persons, Body of Individuals or an artificial juridical person, the requirement to file a return in India is same as the requirements for individuals explained above.
CA Nilpa Keval Gosrani and CA Mihir Vahi contributed to this story.
Vikas Vasal is national leader tax at Grant Thornton India LLP.