ITR 2020: You have not yet filed your income tax return? Here are the consequences you can face

By Chirag Nangia

Individual taxpayers are required to submit tax returns, before the due date, if their total gross income for the year, calculated in accordance with the provisions of the law, exceeds the basic exemption limit. There are certain categories of individual taxpayers for whom the provision of ITR is mandatory, regardless of whether their income exceeds the exemption limit:

Non-residents and foreign asset holders

Non-resident natural persons are subject to tax in India on income received or accrued or generated in India. Therefore, a non-resident person who has income from India and exceeds the basic exemption limit (“2.5 lakh, regardless of age) must submit the ITR. Also, a resident person who owns any assets outside of India. India, either as an individual or as a beneficial owner, must submit an ITR even if its total income is below the basic exemption limit.

Curiously, the presentation of ITR is necessary to transfer the losses suffered during the year and compensate them in subsequent years. Similarly, an individual whose income has undergone the tax deduction at source (TDS) but their final tax liability is below the taxable limit must file the income statement to claim the TDS refund.

Implications of Form 26AS

The Income Tax department provides taxpayers with a return on Form 26AS that contains details of various taxes deducted from taxpayers’ income. The CBDT has recently revamped the form to include additional details from high value taxpayer transactions to information on pending / completed proceedings. All taxpayers must download their Form 26AS from the income tax portal and verify the receipts that appear on Form 26AS. If the income reflected on the Form 26AS exceeds the basic exemption limit, a tax return must be filed to avoid a scrutiny assessment.

As of fiscal year 2020-21, taxpayers have been allowed to opt for an alternative / simpler tax regime, offering six blocks with low tax rates to taxpayers, if they waive a set of 70 exemptions and deductions available under the Income tax laws (including LTC, HRA, standard deduction, Chapter VI-A deduction, etc.).

Under this new regime, the basic exemption limit for all people will be 2.5 lakh, regardless of age. Consequently, the filing of ITR will be mandatory for all people who choose to pay taxes under the new regime and have a total gross income greater than “2.5 lakh”.

Consequences of not submitting an ITR

While filing an ITR has its benefits, failure to file can result in penalties and prosecution. Consequently, it is imperative that a person verify whether or not they are responsible for filing an ITR.

(The writer is the director, Nangia Andersen India. Contributions by Vasudha Arora).