Skip Filing ITR When Income Less Than 5 lakhs

Some good news after all ! If you are salaried and have income less than 5 lakhs, your IT returns are no longer a necessity ! You might not be required to file an income tax return (ITR) provided you meet some conditions.

It must be noted that the exemption from filing the income tax return (ITR) is not applicable for all salaried people whose income is less than Rs 5 lakhs but only to those who meet some conditions.

So read on to find out if you belong to this class of lucky people.

ITR When Incone Less than 5 Lakhs – Eligibility

To be eligible to be exempt from filing your tax returns, you need to meet the following criteria:

# Your income needs to be less than Rs 5 lakhs. Note that income here is total income after allowing for deductions. So your total income could possibly be more than Rs 5 lakhs but after deductions, if it is less than Rs 5 lakh, you meet this criteria.

# Income is earned under the head salary among the 5 heads of income.

# You can also have interest income from bank saving accounts. This interest income has to be less than Rs 10,000.

# You do not have any other income (income from capital gains, income from house property and income from business)

# Salary is from one employer only.

# All interest income and dividend income is included in Form 16

You will note that in case you are salaried, you always get Form 16 from your employer. Your Form 16 needs to reflect your interest income and incomes from dividends. So make sure that you pass on this information to your employer so that your Form 16 is correctly updated.

Skip filing income tax returns if your income is less than 5 lakhs

When does this take effect?

A little known fact but this is applicable from Financial Year 2010- 2011 (Assessment Year 2011-2012).  So if you meet the above criteria, you do not have to file an IT return this year.

This actually was a part of Direct Tax Code but the notification has been issued making it applicable for this year also.

ITR When Incone Less than 5 Lakhs – You are not eligible if –

Obviously, if you receive any other income, then you cannot skip this and will need to file tax returns. The following are some of the scenarios when you will need to file IT returns – note this is not the comprehensive list.

# You have income from buying and selling stocks and mutual funds. Such income is classfied under the head called capital gains.

# You have interest from FDs/NSCs.

# You are claiming income tax benefits for a home loan that you have.

# You are looking for a tax refund from the government.

# You had more than one employer in one financial year.

Last Word

I am not sure how many people will fall in this category of income less than Rs 5 lakhs and who do not have any other sources of income. I do not know of a single client of mine who hasn’t invested in any instrument and has let his money lie idle in savings accounts. Many of them have invested in FDs which will earn them income and hence disqualify them.

So while the government might have thrown a nice option at tax payers, it does not make much sense practically.

I also hope all employers give options to employees to include the interest income and dividend income and do this in time for tax payers to file their income tax returns.

Another challenge is to collect this interest income from banks and give to employers in time. I am not sure how smooth this process will work.

Has anyone whose income is less than 5 lakhs used this process at all ?