Filing ITR vs Paying Income TaxImage By Freepik

Filing ITR vs Paying Income Tax : As the deadline for filing Income Tax Returns (ITR) for the financial year 2023-24 (assessment year 2024-25) approaches on July 31, 2024, it is crucial to understand the regulations and requirements surrounding ITR filing, even for those whose income is below Rs 7 lakh.

Understanding the Difference : Filing ITR vs Paying Income Tax

Filing an ITR is distinct from paying income tax. Even if your income does not exceed the basic exemption limit or if you qualify for certain deductions and rebates, filing an ITR might still be mandatory. Under Section 87A of the Income Tax Act, 1961, individuals with a net taxable income up to Rs 5 lakh (under the old tax regime) or Rs 7 lakh (under the new tax regime) are eligible for tax rebates of Rs 12,500 and Rs 25,000 respectively. This could result in zero tax liability, but it does not exempt you from filing an ITR if other criteria apply.

Basic Exemption Limits and Filing Requirements

According to Sudhir Kaushik, Co-founder and CEO of, an ITR must be filed if your gross total income, before deductions under Chapter VI (Sections 80C, 80D, etc.), exceeds the basic exemption limit:

  • Rs 2.5 lakh for individuals below 60 years of age
  • Rs 3 lakh for individuals between 60 and 80 years of age
  • Rs 5 lakh for individuals above 80 years of age

For all categories of taxpayers under the new tax regime, the basic exemption limit is Rs 3 lakh for FY 2023-24.

Mandatory Filing Regardless of Income Level

Neeraj Agarwala, Partner at Nangia Andersen India, outlines specific scenarios where filing an ITR is mandatory, (Filing ITR vs Paying Income Tax) regardless of the gross total income.

  • Annual bank deposits in one or more savings accounts exceeding Rs 50 lakh.
  • Electricity bills exceeding Rs 1 lakh during the year.
  • Ownership of assets in a foreign country, being a beneficiary of such assets, or having signing authority in any overseas account.
  • Professional income exceeding Rs 10 lakh in a financial year.
  • Total TDS/TCS exceeding Rs 25,000 (or Rs 50,000 for senior citizens).
  • Spending Rs 2 lakh or more on foreign travel for oneself or others during the financial year.

Illustrative Examples

Example 1 : A salaried individual with a gross taxable income of Rs 5.5 lakh, a standard deduction of Rs 50,000, 80C deduction of Rs 1.5 lakh, and other deductions totaling Rs 1.1 lakh must file an ITR.

Example 2 : An individual with a net taxable income of Rs 4.25 lakh, falling below the Rs 5 lakh or Rs 7 lakh threshold, is exempt from paying income tax due to the rebate under Section 87A. However, if the gross total income exceeds Rs 2.5 lakh (old tax regime) or Rs 3 lakh (new tax regime), filing an ITR is mandatory.

Example 3 : A salaried person with a gross taxable income of Rs 7.5 lakh and a standard deduction of Rs 50,000 may have no tax liability after deductions and rebates, but must still file an ITR.

Consequences of Not Filing ITR

Penal Interest : Under Section 234A, a penalty of 1% per month on the outstanding tax amount will be imposed if taxes are not paid on time. Delayed advance tax payments incur interest under Section 234B.

Late Fee : According to Section 234F, a late fee of Rs 5,000 is levied for ITRs filed after the due date. For individuals with an annual income below Rs 5 lakh, the fee is limited to Rs 1,000. No penalty is charged if the gross income is below the basic exemption limit.

Loss of Benefits : Filing a belated ITR means forfeiting the ability to carry forward certain losses (e.g., from stocks, futures, and options). Losses from house property can still be carried forward.

Tax Refunds : Filing an ITR is required to claim any tax refund. A belated ITR disqualifies you from receiving interest on the tax refund.

Best Judgment Assessment : The income tax officer may estimate your income and tax liability based on available information if an ITR is not filed.

Default Tax Regime : Without filing an ITR and submitting Form 10-IEA, your income tax will default to the new tax regime, potentially missing out on applicable deductions under the old regime.


Filing your Income Tax Return is a legal obligation, irrespective of whether you have a tax liability or not. Understanding these rules and filing requirements can help you avoid penalties and ensure compliance with tax laws.

ALSO READ : What is Section 80C Tax Deduction, Unchanged in India’s Budget 2024

Leave a Reply

Your email address will not be published. Required fields are marked *