ITR filing not mandatory for everyone: Who can skip filing a tax return?

While most individuals whose income exceeds the basic exemption limit are required to file an ITR, the Income Tax Department has carved out certain exceptions.

Income tax return filing is mandated for assessees whose total income during the year exceeds the income threshold limit applicable for nil tax. For FY: 2025-26, an assessee having a total income below Rs 4 lakhs and applying the new tax regime is not mandated to file a tax return. On the other hand, for the assessee applying the old tax regime, the threshold is Rs 2.5 lakhs.

Apart from individuals whose income falls below the taxable threshold, there are specific categories of taxpayers who may be exempt from filing an income tax return, provided they meet prescribed conditions. Here’s a detailed look.

Who can be exempt from filing an ITR?

While income thresholds and senior citizen benefits are the most commonly recognized criteria for exemption from filing income tax returns (ITRs), the Income-tax framework in India also provides relief to certain categories of taxpayers based on the nature and source of their income. The following are exempt from filing ITRs:

Individuals with fully exempt income: Persons whose entire income is exempt under the Income-tax Act are generally not required to file an ITR.

Minor children (income clubbed with parent): Where a minor’s income is clubbed with a parent’s income under Section 99 of ITA 2025 (corresponding to Section 64 of ITA 1961), the minor is not required to file a separate return.

Certain non-resident taxpayers are exempt from filing an Income Tax Return in India if their income falls under specified categories and tax has been deducted at source (TDS) at the prescribed rates. CA (Dr.) Suresh Surana says, some of the key exemptions are as follows:

Non-resident Indian (NRI): No return required under section 115G if income consists only of:

Investment income from a foreign exchange asset; or

Long-term capital gains from such assets.

Provided that TDS has been duly deducted from the source. 

“This exemption is specific to NRIs covered under Chapter XII-A and does not apply where the taxpayer has any other nature of taxable income in India, wishes to claim a refund or is otherwise required to file a return,” said CA (Dr.) Suresh Surana. 

Non-resident Non-citizen Sportsperson, Sports association/ Institution or Entertainer: No return required under section 115BBA(2) if income consists of specified income and TDS has been properly deducted. This generally covers income from:

Earnings from participation in games/sports in India (except lottery winnings under Section 115BB);

Advertisement income;

Writing articles on sports for Indian newspapers/journals/magazines, etc.

Non-residents with Specified Incomes: No return required to be filed under section 115A(5) if income consists only of the following:

Interest/dividend on specified bonds or GDRs

Dividend income

Income from mutual fund units purchased in foreign currency

Royalty/fees for technical services (not covered under Section 44DA).

While filing may not be mandatory in these cases, submitting an income tax return is often advisable. 

“It helps individuals establish a formal record of income, facilitates refund claims, and serves as an important document for financial transactions such as loan applications, visa processing, and credit assessments. As such, voluntary compliance through return filing continues to be a prudent practice even where exemptions apply,” Surana stated. 

What are the key conditions that determine whether an individual must file an ITR?

The income threshold is the primary consideration for filing the tax return, but apart from this, the other considerations for filing a tax return, according to Aarti Raote, Partner, Deloitte India, are:

Having incurred losses under the business and profession or capital gains that the taxpayer wants to carry forward to subsequent years 

Having incurred more than Rs 2 lakhs on foreign travel expenses for himself or any other person.

Having incurred more than Rs 1 lakh on electricity bills.

Has total sales/ turnover/gross receipts exceeding Rs 60 lakhs from business / Rs 10 lakhs from profession.

Has deposited more than Rs 1 crore in one or more current accounts with banks during the year.

Has deposited more than Rs 50 lakhs in one or more savings bank accounts during the year.

Has been subject to TDS / TCS in excess of Rs 25,000 in any year (Rs 50,000 for a senior citizen).

Separately, for an ROR holding Foreign assets during the year, the holder should also file a tax return. 

What are the most misunderstood ITR filing exemptions among taxpayers?

There are various criteria that make filing of tax returns mandatory, and missing or miscalculating on any of these could result in the taxpayer not filing their return. 

Most common amongst these is where a taxpayer having a total income lower than Rs 4 lakhs (in case of the new tax regime) and Rs 2.5 lakhs (in case of the old tax regime) is not mandated to file the tax return. 

The total income is the aggregate of income from all sources during the year, less any deductions under Chapter VIA.  Some taxpayers, when reviewing the total income threshold, inadvertently miss out on some sources of income or consider exemptions under Sections 54 to 54F. 

Many also do not file the tax return when they have incurred significant losses and lose out on the carry-forward benefit. 

What documentation should senior citizens maintain if they are exempt from filing?

For a senior citizen, it is required that the thresholds for not filing the tax return be examined closely. Further, as documentation for the year, it’s advisable to maintain:

Bank account copies 

AIS/ 26AS statements 

Brokerage statements, if any 

Details of rental receipts 

Any other receipts of income sources 

What benefits might taxpayers miss if they choose not to file an ITR?

Filing an ITR is advisable even where there may not be a requirement to file a tax return. 

“This is because a tax acknowledgement is a requisite document for loan applications, visa applications and maintaining continuity of records. Filing of tax return is also required to carry forward losses incurred that are permitted to be set-off in subsequent years, or for claiming refunds for excess taxes withheld,” commented Aarti Raote.  

What are the consequences of incorrectly assuming that filing is not required?

If one incorrectly assumes that filing is not required, then one would be liable to face interest for delay in filing ITR and interest on the unpaid taxes due as well. Penal consequences of non-filing the return can also be triggered, and in severe cases of concealment, imprisonment may also be possible.

Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws and regimes are subject to frequent changes by the government. Readers should verify details with official Income Tax Department notifications or consult a Chartered Accountant before making any financial decisions.    

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