IDEA OF ITR: An Income Tax Return (ITR) is a formal statement filed by a taxpayer with

the Income Tax Department of India, disclosing details about their income, deductions,
exemptions, and taxes paid during a particular financial year. It is a self-declaration of
income and tax liability, enabling the government to assess the correct amount of tax payable
or refundable. The filing of ITR is governed by the Income Tax Act, 1961, and is a legal
obligation for certain individuals and entities, depending on their income and other criteria.

Legal Provisions Relating to Income Tax Return and Filing Under the
Income Tax Act and Rules

The process of filing Income Tax Returns (ITRs) in India is governed by several provisions
under the Income Tax Act, 1961 and the corresponding Income Tax Rules, 1962. These
legal provisions lay down the requirements, timelines, forms, consequences of non-
compliance, and special cases where filing is mandatory even if income is below the basic
exemption limit.

1. Section 139 – Obligation to File Return of Income

 Section 139(1):
o Mandates filing of return by individuals, HUFs, firms, AOPs, BOIs, and others
if their total income exceeds the basic exemption limit.
o Companies and firms must file ITR compulsorily, regardless of income.
o Certain residents holding foreign assets or signing authority in any account
located outside India must file returns irrespective of income.
 Section 139(3):
o Allows filing of return for loss under the head “Profits and Gains from
Business or Profession” or “Capital Gains” to carry forward the loss.
 Section 139(4):
o Permits filing of a belated return after the due date but before 3 months prior
to the end of the relevant assessment year or before completion of assessment.
 Section 139(5):
o Allows filing of a revised return if the original return had any error or
omission.
 Sections 139(4A) to 139(4D):
 o Mandate filing by charitable trusts, political parties, research institutions, and
universities, even if their income is exempt.

2. Section 140 – Verification of Return

Specifies who is authorized to verify and sign the return (e.g., individual, managing partner,
principal officer, etc.).

3. Section 142(1) – Inquiry Before Assessment

An Assessing Officer can issue a notice requiring the assessee to furnish a return if not
already filed.

4. Section 144 – Best Judgment Assessment

If the assessee fails to furnish the return or comply with notices, the Assessing Officer can
make an assessment based on available information.

5. Section 234F – Late Filing Fee

Prescribes fees up to ₹5,000 (or ₹1,000 if income is below ₹5 lakh) for failure to file ITR on
time.

6. Section 276CC – Prosecution for Non-Filing

Provides for prosecution and imprisonment for wilful failure to file ITR if tax payable
exceeds ₹10,000.
Relevant Rules under Income Tax Rules, 1962

 Rule 12: Specifies the different ITR forms and the categories of persons who must
use them.
 Rule 12A: Provides for filing returns electronically.
 Rule 14: Covers verification and signing of returns.

Under Section 139(1) of the Income Tax Act, every individual, Hindu Undivided Family
(HUF), Association of Persons (AOP), Body of Individuals (BOI), and other entities whose
total income exceeds the basic exemption limit is required to file an income tax return. For
companies and firms, the filing of ITR is mandatory irrespective of income or loss.

The Income Tax Act prescribes different forms of ITR for different types of taxpayers. For
instance, ITR-1 (Sahaj) is for salaried individuals with income up to ₹50 lakh, while ITR-4
(Sugam) is for those opting for presumptive income schemes under Sections 44AD, 44ADA,
or 44AE. Companies and firms are required to file ITR-6 or ITR-7, depending on their nature
of income.

The due date for filing the ITR is also specified under the Act, generally 31st July for
individuals and 31st October for companies and firms subject to audit. Delay in filing
attracts penalty under Section 234F, and interest may also be charged under Sections 234A,
234B, and 234C for non-payment or underpayment of tax.

Filing an ITR serves multiple purposes:

1. It is a proof of income and is essential for applying for loans or visas.

2. It enables the taxpayer to claim a refund if excess tax has been deducted or paid.
3. It establishes a record with the Income Tax Department, ensuring transparency and
accountability.
Moreover, even if a person is not mandatorily required to file ITR, voluntary filing is
encouraged to avail of future benefits such as carrying forward losses, claiming refunds, and
maintaining a financial record.

In conclusion, an Income Tax Return is not merely a compliance formality but a vital
financial document backed by provisions under the Income Tax Act, 1961, reflecting the
income and tax responsibility of a taxpayer to the nation.

The filing of an Income Tax Return (ITR) is not just a procedural formality but a legal
obligation under the Income Tax Act, 1961. The primary legal reason behind the filing of
ITR is to ensure compliance with the tax laws of the country and to facilitate the assessment
and collection of direct taxes by the government. It is the taxpayer’s legal declaration of
income earned, tax liabilities, and other financial particulars during a financial year.

The core legal provision mandating the filing of ITR is found under Section 139(1) of the
Income Tax Act, 1961. According to this section, every person whose total income exceeds
the maximum amount not chargeable to tax is required to furnish a return of income within
the prescribed due date. The law applies to individuals, Hindu Undivided Families (HUFs),
firms, companies, and other entities.

Additionally, Section 139(4A) to 139(4D) provides for mandatory return filing by trusts,
political parties, institutions, and universities under specific circumstances, even if their
income is exempt. Similarly, Section 139(5) allows for the filing of a revised return in case
the original return contains any omission or incorrect statement.

There are various legal implications and consequences for not complying with return filing
requirements. For example:

 Penalty under Section 234F: If a taxpayer fails to file the ITR within the due date,
they are liable to pay a late filing fee of up to ₹5,000.
 Interest under Sections 234A, 234B, and 234C: Delays or defaults in tax payments
lead to the charging of interest.
 Prosecution under Section 276CC: Wilful failure to furnish returns may lead to
prosecution with imprisonment ranging from 3 months to 7 years, depending on the
amount of tax evaded.
Moreover, Section 142(1) empowers the Assessing Officer to issue a notice requiring a
person to file a return of income. Failure to comply with such a notice can lead to best
judgment assessment under Section 144, and further penal actions.

The legal rationale behind these provisions is to bring all taxable and non-taxable persons
under the surveillance of the tax system, ensure fair taxation, prevent tax evasion, and
generate revenue for public welfare.

In essence, the legal requirement to file ITR under the Income Tax Act, 1961, strengthens the
integrity and accountability of the taxation system, ensuring that all eligible taxpayers
contribute their fair share towards nation-building.

Whether Every Individual is Liable to File Income Tax Return (ITR)?

No, not every individual is liable to file an Income Tax Return (ITR) in India. The
liability to file an ITR depends on various factors such as the amount of total income, nature
of income, and certain specific transactions or conditions. The primary legal basis for
determining this obligation is Section 139(1) of the Income Tax Act, 1961.

1. Mandatory Filing Based on Income

As per Section 139(1), an individual must file an ITR if their total income before claiming
deductions (under Chapter VI-A like Section 80C, 80D, etc.) exceeds the basic
exemption limit, which is:

 ₹2.5 lakh for individuals below 60 years

 ₹3 lakh for senior citizens (60 years and above)
 ₹5 lakh for super senior citizens (80 years and above)

This rule applies to both residents and non-residents.

2. Filing Mandatory in Certain Cases (Even if Income is Below Exemption

Limit)
The following individuals must file ITR regardless of their income level:

 Foreign Asset Holders: If the individual owns any asset (including financial interest)
outside India or has signing authority in any account located abroad. (Section 139(1))
 Deposit in Bank Account: If the individual has deposited more than ₹1 crore in one
or more current accounts during the financial year.
 Foreign Travel: If expenses incurred for foreign travel exceed ₹2 lakh during the
year.
 High Electricity Consumption: If the electricity bill paid exceeds ₹1 lakh in a
financial year.
 Business Turnover: If the individual carries on business and turnover exceeds
prescribed limits, even if income is below exemption.
 TDS/TCS Deducted: If total TDS or TCS is ₹25,000 or more (₹50,000 for senior
citizens), return filing becomes mandatory (as per updated rules from FY 2022-23
onwards).

3. Voluntary Filing

Even if not required by law, individuals may voluntarily file ITR for purposes such as:

 Claiming refund of excess TDS

 Establishing financial history for loans, visas, or tenders
 Carrying forward losses