Should you file ITR if your total income less than Rs 5 lakh?

Income Tax Return filing AY 2024-25: Is filing an ITR mandatory for everyone? Does this question also come to your mind?

The filing of income tax returns (ITRs) is not compulsory for all. If your taxable income is not exceeding the basic exemption limits provisioned under the Income Tax Act, you are not required to file an ITR.

What is basic tax exemption limits under new and old tax regimes for taxpayers?

Under the new tax regime, individuals with a taxable income of less than Rs 3 lakh per annum are exempt from filing an ITR. Similarly, under the old tax regime, this limit is Rs 2.5 lakh per annum for individuals below the age of 60. Senior citizens aged between 60 and 80 years with an income of up to Rs 3 lakh under the old tax regime are not required to file a tax return, as their basic exemption limit is higher. For super senior citizens (those above 80 years old), the exemption limit is Rs 5 lakh.

Is it necessary to file an ITR if your total income is under Rs 5 lakh?

The answer is yes, and here’s why. Under the old tax regime, the basic exemption limit is Rs 2.5 lakh. If your annual income is Rs 5 lakh, the amount exceeding the exemption limit is taxable at a 5% rate, which amounts to Rs 12,500. However, due to the rebate under Section 87A, there won’t be any tax liability. Despite this, income tax rules require you to file an ITR if you have claimed the rebate of Rs 12,500 under Section 87A of the Income Tax Act.

Also read: ITR Filing 2024 Due Date: Income tax return deadline to be extended beyond July 31?

If an individual opts for the new tax regime and has an annual income of Rs 5 lakh, the first Rs 3 lakh is exempt from tax. For the next Rs 2 lakh, he receives a standard deduction benefit of Rs 50,000 and a rebate under Section 87A. After deducting the Standard Deduction, the 5% tax rate applies to Rs 1,50,000, resulting in a tax amount of Rs 7,500. Under the new tax regime, there is a rebate of up to Rs 25,000 under Section 87A. After the rebate, the tax liability of this individual becomes ‘Nil’.

No tax liability if annual income is up to Rs 7.75 lakh under new tax regime

In the Budget 2024-24, FM Nirmala Sitharaman has further sweetened the new tax regime by enhancing Standard Deduction benefit by Rs 25,000 to Rs 75,000 and tweaking the tax slabs. With these changes, now an individual earning Rs 7.75 lakh per annum would not have to pay any tax.

Taxpayers must note that the changes announced in the recent budget would be applicable on your this year’s income so it won’t change your tax liability to be shown in your ITR for the current assessment year or the fiscal year 2023-24.

The taxation changes in the budget announced on July 23 would be effective for full fiscal year 2024-25.