Income Tax Return – Who are all exempted from filing ITR?

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income-taxIncome Tax Return – ITR – Who are all exempted from filing ITR? – What are all the conditions imposed by Income Tax Department for exempting an Income Tax Assessee from filing of Income Tax Return?

We know that when Salaried employees whose total income assessed to Income tax did not exceed Rs 5 lakh in a year need not file any income tax return as per Finance Ministry notification No. 9/2012, dated: February 17, 2012.
It is estimated that around 85 lakh salaried class employees will be benefited by this exemption from filing ITR as their total income would not exceed not exceed Rs 5 lakh.

However, Income Tax department Notification mentioned above and clarification given by government subsequently have certain conditions such as interest income from Savings Bank should be less than Rs.10,000, No exemption if taxable income is restricted to Rs.5 lakh only because of Loss on House property.

Also there is a confusion persists still on the exact meaning of “Total Income”. As far as the meaning of “Total Income” is concered a plain reading of notification may lead us to Gross Total Income before any deductions. However, IT department itself clarified this point categorically in its FAQ to the effect that Total Income for the purpose of exempting an assessee will be salary income and Interest Income after deductions under Chapter VIA of Income tax Act.

We given in this article a summary view as to who are all exempted from filing ITR in the backdrop of original income tax notification no: 9/2012 as well as clarification given by IT department in the form of FAQ

In a press release in Press Information Bureau, citing its Notification No: 9/2012 dated 17.02.2012, Ministry finance has explained about the exemption it has granted for Salaried Employees for filing Income Tax Returns for the year 2012-13.

The Exemption will be applicable to Salaried Employees who have earned only salary income and interest income from savings bank. Further following conditions should be satisfied to get the exemption from filing ITR.

The interest income from Savings Bank should be less than Rs.10,000/-

The total income (including interest income from Savings Bank) should not exceed Rs.5 lakh.

Explanation:

  • SALARY INCOME INCLUDES :- PAY, DP, Band pay, Grade pay, DA, OTA, BONUS, CCA, Honorarium, Children Education Allowance Received, Pension, Subsistence Allowance, Government’s Contribution in New Pension Scheme, Transport Allowance above Rs.800/- per month.
  • House Rent Allowance to the extent not exempted under Section 10 (13A) of Income Tax Act.

The total income is nothing but Salary Income plus Interest Income less all deductionsunder Chapter VIA of Income tax Act. The deductions under Chapter VI A are al ldeductions under Section 80C, CCC, CCD, 80 CCD(2), 80D, 80 DD, 80 DDB, 80 E, and 80 GG. To know more about the eligibility for deductions under these sections, click the following link.

Check here for the details for various deductions available under Chapter VI A

To illustrate, even if the Total annual income of an employee (Salary income + Bank Interest restricted to Rs.10,000) before all deductions is Rs. 7,00,000/, he need not file Income Tax return, if his income after deductions detailed above has not exceeded Rs.5 lakh.

No exemption if taxable income is restricted to Rs.5 lakh only because of Loss on House property:

Further, if an employee claims loss from House property under Section 24 of Income Tax Act(which would arise if he has paid interest for housing loan but has no income from the house property), for the purpose of claiming exemption from Income tax return, his Total income after all deductions under Chapter VI A should not exceed Rs.5 lakh, without taking into account the loss from house property. So, if the taxable income of an employee is less than Rs.5 lakh only after deduction of loss from house propertyunder Section 24 of the Income Tax Act, he/she may not be eligible for the exemptionfrom filing ITR. Though this aspect has not been discussed in the Notification No: 9/2012, Income Tax Department has published a detailed FAQ (Frequently Asked Questions) in which detailed explanation has been given in respect of this aspect.

Click here to read the FAQ provided by Income Tax Department on exemption from filing ITR

The other conditions applicable the claiming exemption from filing ITR are:

1. Declaration of PAN to employer.

2. Deduction of Income Tax properly by

Employer after report of income by employee.

3. Issue of Form 16 and payment of Tax deducted from employee in to Government Account

4. No refund involved

5. Income from only one employer.

Text of Government Clarification for exemption on filing ITR for Salaried Employees

Exemption of Salaried Employees from Requirement of Filing of Returns for Assessment Year 2012-13

Central Board of Direct Taxes (CBDT) vide its Notification No. 9/2012 dated 17th February, 2012 has exempted salaried employees from the requirement of filing the returns for assessment year 2012-13. The exemption is applicable only if all the following conditions are fulfilled:-

  • Employee has earned only salary income and income from savings bank accountand the annual interest earned from savings bank account is less than Rs. 10 thousand.

  • The total Income of the employee does not exceed Rs. 5 Lakh (Total Income means Gross Total Income Less deductions under Chapter VIA).

  • The Employee has reported his PAN to the employer.

  • Employee has reported his income from interest on savings bank account to employer.

  • Employee has received Form 16 from his employer.

  • Total Tax Liability of employee has been paid off by employer by way of TDS and employer has deposited TDS with central government.

  • Employee has no refund claim.

  • Employee has received salary only from one employer.

  • Employee has not received any Notice from Income Tax Department for filing ofIncome Tax return.

Full text of Notification No: 09/2012 dated 17.02.2012

NOTIFICATION NO. 9/2012 [F. No.225/283/2011-ITA(II)], dated 17-2-2012

S.O……….. (E). – In exercise of the powers conferred by sub-section (IC) of section 139 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby exempts the following class of persons, subject to the conditions specified hereinafter, from the requirement of furnishing a return of income under sub-section (1) of section 139 for the assessment year 2012-13, namely:-

1. Class of persons. -An individual whose total income for the relevant assessmentyear does not exceed five lakh rupees and consists of only income chargeable to income-tax under the following head,-

(A)  “Salaries”;

(B)  “Income from other sources”, by way of interest from a saving account in a bank, not exceeding ten thousand rupees.

2. Conditions,- The individual referred to in para 1,-

 (i)  has reported to his employer his Permanent Account Number (PAN);

(ii)  has reported to his employer, the incomes mentioned in sub-para (B) of para 1 and the employer has deducted the tax thereon;

(iii)  has received a certificate of tax deduction in Form 16 from his employer which mentions the PAN, details of income and the tax deducted at source and deposited to the credit of the Central Government;

(iv)  has discharged his total tax liability for the assessment year through taxdeduction at source and its deposit by the employer to the Central Government;

(v) has no claim of refund of taxes due to him for the income of the assessmentyear, and

(vi)  has received salary from only one employer for the assessment year.

3. The exemption from the requirement of furnishing a return of income tax shall not be available where a notice under section 142(1) or section 148 or section 153A or section 153C of the Income-tax Act has been issued for filing a return of income for the relevant assessment year.

4. This notification shall come into force from the date of its publication in the Official Gagget