In india, taxpayers pays tax based on various levels of income. The tax rates are based on income and age. In this guide we will understand the basic exemption limit, taxslabs for various individuals based on age, conditions when ITR filing for income less than 2.5 lakhs is mandatory and benefits of ITR filing.
What is the basic exemption limit to file an ITR?
Essentially, it signifies the maximum amount of income a taxpayer can earn in a financial year without being subjected to income tax. Gross income before any deduction is considered to get to the basic exemption limit.
Individuals below the age of 60 years are eligible for a basic exemption limit of Rs. 2.5 lakhs under old tax regime and Rs. 3 lakhs under new tax regime for the financial year 2023-23 or Assessment year 2024-25.
Individuals between the age of 60 years and 80 years are eligible for a basic exemption limit of Rs. 3 lakhs.
Individuals above the age of 80 years are eligible for a basic exemption limit of Rs. 5 lakhs.
Next we will discuss the tax slabs applicable to individuals.
Income tax slab for individuals below 60 years (Old Regime)
| Income | Tax rates |
| Less than Rs.2,50,000 | 0% |
| Rs.2,50,000 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax slab for individuals below 60 years (New Regime from FY 23-24)
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.6,00,000 | 5% |
| Rs.6,00,001 – Rs.9,00,000 | 10% |
| Rs.900,001 – Rs.12,00,000 | 15% |
| Rs.12,00,001 – Rs.15,00,000 | 20% |
| More than Rs.15,00,000 | 30% |
Income tax slab for individual between 60 & 80 years
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax slab for individual above 80 years
| Income | Tax rates |
| Less than Rs.5,00,000 | 0% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Conditions when ITR filing is mandatory even when income is below basic exemption limit
Individuals may still be required to file Income Tax Returns even if their taxable income is below the basic exemption limit due to certain conditions:
- Savings Account Deposits: If an individual deposits Rs 50 lakh or more in one or more savings accounts during the previous financial year.
- Bank Deposits: If an individual deposits Rs 1 crore or more within a financial year in one or more current accounts in a commercial or cooperative bank, ITR filing is necessary (excluding businesses).
- Sales Turnover: Gross receipts or annual total sales turnovers exceeding Rs 60 lakh.
- Professional Income: When an individual’s professional income surpasses Rs 10 lakh in the previous financial year.
- Electricity Bills: Payment of an electricity bill greater than Rs 1 lakh in a single bill or on aggregate within a financial year.
- TDS/TCS: If Tax Deducted at Source (TDS) or Tax Collection at Source (TCS) amounts to Rs 25,000 or more. For senior citizens, the threshold is Rs 50,000.
- Income From Foreign Assets: Individuals with assets or beneficiaries of assets located in foreign countries, or with signing authority in foreign accounts.
- Expenditure on Foreign Travels: If an individual spends more than Rs 2 lakh during foreign travel, for themselves or others.
Benefits of ITR filing for income less than 2.5 lakhs or the applicable limit
Filing Income Tax Returns even if income is less than Rs. 2.5 lakhs offers several benefits, irrespective of whether an individual’s income exceeds the basic exemption limit or not. Here are some key advantages:
- Claiming Tax Refunds: Many individuals are eligible for tax refunds if excess taxes have been deducted from their income, such as through TDS (Tax Deducted at Source) or TCS (Tax collected at Source). Filing ITR allows taxpayers to claim these refunds, thereby maximizing their tax-saving opportunities.
- Easy approval of loan application: Banks, financial institutions, and other lenders often require ITRs as proof of income when applying for loans, credit cards, or other financial products. Regular filing of ITRs facilitates smoother access to loans.
- Carrying Forward Losses: If an individual incurs losses in a particular financial year, such as capital losses or business losses, filing ITR enables them to carry forward these losses to future years. This can help offset future taxable income and reduce tax liability.
- Proof of Income and Financial Stability: ITR serves as an official document providing proof of income and financial stability. It is often required for various purposes such as visa applications, immigration processes and government tenders.
- Building Financial History: Regular filing of ITR helps in building a comprehensive financial history with the income tax department. This can be beneficial in case of future inquiries by the income tax department.
Conclusion
Filing your tax return is not compulsory if your income falls below the basic exemption limit, but it’s highly recommended. It’s now simpler with ITR1 Sahaj, taking just minutes. Why is it important? Well, for bank loans and claiming deductions on investments or payments made. Plus, filing can lead to tax refunds, including TDS. While it’s not necessary, filing won’t hurt, so it’s best to do it.
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