Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

GET SET TO FILE RETURN THOUGH NO TAX PAYABLE!

If Your Gross Total Income Exceeds The Taxable Limit You Are Under Obligation To File Your Income-tax Return!

                       Section 139 of the Income-tax Act provides that an Individual or a Hindu Undivided Family is required to file his income-tax return, if his Gross Total Income (GTI) prior to various deductions under Section 80 family (such as 80C, 80D, 80G etc.) exceeds the basic income-tax exemption limit. From Assessment Year 2012-13, the prescribed exemption limit is Rs.1,80,000 (Rs.1,90,000 in case of a female, Rs.2,50,000 for individuals aged 60 years and above but below 80 years and Rs.5,00,000 in case of individuals aged 80 years and above).

                 GTI includes within its scope the total of all taxable incomes, after considering the relevant deductions available under the five heads of income, but before allowing the eligible deductions under Section 80 family for purpose of computing the Total Income. The case studies below will meaningfully illustrate this point.

Case Study – 1: Mr. J earned gross salary of Rs.4,00,000 in FY 2010-11. After excluding his exempt allowances and perquisites of Rs.70,000, his taxable salary works out to Rs.3,30,000. The interest payable on housing loan eligible for deduction under Section 24 is Rs.1,00,000 and his taxable income from other sources is Rs.30,000. His GTI thus works out to Rs.2,60,000 (3,30,000-1,00,000+30,000). Mr. J has invested Rs. 1,00,000 in investments eligible for deduction u/s 80C and also paid Mediclaim premium of Rs.10,000 entitled to deduction under Section 80D. His TI stands determined at Rs.1,50,000 (2,60,000-1,00,000-10,000) and therefore, the income-tax payable by him is Rs. Nil. However, in this case, Mr. J would be required to mandatorily file his tax return for Assessment Year 2011-12.

Case Study – 2: Taxable Pension and investment income of Mr. R, a Senior Citizen (aged around 70 years), is Rs.2,35,000. In this case, the GTI of Mr. R is Rs.2,40,000, which is below the basic exemption limit of Rs.2,40,000 in his case as a Senior Citizen. He is thus under no obligation either to pay any tax or even to file his tax return for Assessment Year 2011-12.

Case Study – 3: If in Case Study-2, if the GTI of Mr. R was Rs.3,35,000 and he had invested Rs.1,00,000 in Section 80C savings, his TI would work out to be Rs.2,35,000. Although no tax would be payable by him in this case, he would still be required to file his income-tax return for Assessment Year 2011-12, his GTI being higher than his exemption limit of Rs.2,40,000.

Case Study – 4: Mrs. P earns annual rental income of Rs.2,50,000. She is entitled to a standard deduction of Rs.75,000 (at 30% of the annual rental) and accordingly her GTI works out to Rs.1,75,000. This being lower than her personal exemption limit of Rs.1,90,000 applicable in the case of a female tax payer, she is not required to file her tax return for Assessment Year 2011-12.

80 FAMILY DEDUCTIONS UNDER SCANNER

The underlying logic of the aforesaid provisions is that the Income-tax Department would want your I.T. return to be under its tax scanner, if you are claiming a zero tax status on account of any deductions eligible under the family of Section 80. So even if you have no tax to pay, be ready to file your tax return in time, if your Gross Total Income exceeds your personal exemption limit!

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