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Is It Mandatory To File An Income Tax Return Below Rs 2.5 Lakhs?

In this article we shall take a look at the applicability of the income tax slab structure and the regulation of filing of tax returns


Income tax is a subject which most people do not prefer to discuss unless they are complaining about it. However, it is the cost of doing business and earning an income within the sovereign boundaries of a country. There are two facets of income tax. One is the payment of tax liability or the amount due in the form of taxes and the other is the filing of IT returns which is basically a detailed break up of the table income and the calculation of taxation on such income thereof. Unlike western countries which charge taxation at a flat rate for all citizens, India follows a slab rate system where the rate of taxation is different for different economic groups. And people with an annual income below a certain threshold are completely exempt from taxation. Currently anyone who earns less than ₹ 2.5 lakhs per annum is exempt from taxation. So the question arises. Do people who do not have any tax liability have to file an income tax return? This is the question we will be answering in this article.

What Is an Income Tax Return?

An IT return gives you a complete picture of the total taxable income earned during a year and taxes paid on it. Anyone who earns an income in India is subject to file an income tax return on or before 31st August of the financial year. Generally, most of us have a question: is it compulsory to file an income tax return below 2.5 lakhs? The answer is yes. Even if there is no taxable income, it must be declared in the income tax return that there has been no income above the taxable threshold for the year. Let’s see the exemption and tax slabs in detail. 

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Taxable Income Range (In Rs.) Tax Rate before Budget 2020 Tax Rate Post Budget 2020
0-2.5 lakh Exempted Exempted
2.5-5 lakh 5% 5%
5-7.5 lakh 20% 10%
7.5-10 lakh 20% 15%
10-12.5 lakh 30% 20%
12.5-15 lakh 30% 25%
Above 15 lakh 30% 30%

For individuals aged above 60 years but less than 80 years, the exemption limit is Rs. 3 lakh. For individuals whose age is above 80 years, the exemption limit is Rs. 5 lakh. The income might be at any source as follows:

Head of Income Nature of Income Covered
Income from salary The income from pension and salary are included here.
Income from other sources Includes Income from savings bank account interest, fixed deposits.
Income from house property It is mostly a rental income
Income from capital gains Includes income from the sale of a capital asset like mutual funds, shares, house property
Income from business and profession This is for when you are self-employed, work as a freelancer or contractor, or you run a business. Life insurance agents, doctors, chartered accountants, and lawyers, etc.

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However, an exemption from income tax doesn’t imply exemption from filing a IT returns. A return where the tax liability is zero and the taxable income is below the taxable threshold is called a ‘Nil Return.’ It is compulsory to file IT returns whether you have earned tax except for the super senior citizens i.e 80 and above 80 years. 

Income Tax Return filing

To file IT Returns, one must be enrolled on the e-filing website of the income tax department. For filing the IT returns online, there are specific methods to fill from the website. After completing the form from the e-filing, follow the below 10 steps for ITR filing:

  1. Collect the required documents such as TDS (Tax Deducted at Source), capital gains statements. The documents such as Form 16, salary slips, and interest certificates. These documents will help you compute your gross taxable income and will provide you with the details of the TDS from your income.
  2. Download and analyze Form 26AS – It is your tax passbook which consists of all the details of the tax that has been deducted from your income and deposited against your PAN. 
  3. Rectify the errors in Form 26AS – If the amounts shown in the TDS certificates and Form 26AS do not match, then you must discuss with your deductor to get the errors rectified. The deductor can be your employer, bank or others and ask him to change the details.
  4. Compute total income for the financial year – Total income is computed by adding incomes from five different heads and claiming all the relevant deductions allowed under the Income Tax Act and setting off losses if any.
  5. Compute your tax liability – You have to calculate your tax liability by applying the tax rates as per your income slab.
  6. Calculate final tax payable, if any – Once the above step is completed, deduct the taxes that have been already paid by you through TDS, TCS and Advance Tax during the year.
  7. File IT returns – File ITR after all taxes are paid. While filing your ITR make sure that you are using the correct ITR form to file it. 
  8. Verification of ITR- There are 6 ways to verify your ITR. Out of this, 5 are electronic systems and one is physical verification. You have 120 days to verify it. If you do not verify your ITR, then it will be deemed as you have not filed ITR.
  9. E- verification acknowledgement – You will be receiving an electronic method confirmation from the tax department regarding verification of your ITR.
  10. The IT department will process the return after verification – The income tax department will start processing your tax return. This is to assure you that all the details filled by you are correct as per the Income Tax Act.

E-filing income tax

It’s simple and easy to do e-filing of your tax returns. We have devised a 3 step process for smooth filing.

  1. We collect the required documents from you
  2. The return is prepared according to the information that you have provided
  3. Now, the return is ready for e-filing.


Hence, it is compulsory for ITR filing for income less than Rs 2.5 lakhs. And for the people whose gross total income is above Rs.2.5, it is mandatory to file an ITR. Filing ITR also helps in easy loan approval, claim a tax refund, quick visa processing, and avoid penalties.


Is it mandatory to file income tax returns below 5 lakhs?

Filing an income tax return is not mandatory if your total income is below Rs. 2.5 lakh in the financial year 2022-23. However, there are some exceptions to this rule. For example, you must still file an income tax return if you: Are a resident Indian and have no foreign income. Have capital gains that exceed Rs. 1 lakh. Have claimed deductions or exemptions that require you to file an income tax return. Have received a notice from the Income Tax Department to file an income tax return. Even if you are not required to file an income tax return, it is still advisable. Filing an income tax return can help you: Claim deductions and exemptions that you may be eligible for. Get a refund of any taxes that you have overpaid. Build a good credit history. Avoid penalties from the Income Tax Department.

Who is not required to file an income tax return?

Individuals whose total income is below the basic exemption limit. For the financial year 2022-23, the basic exemption limit is Rs. 2.5 lakh for individuals below the age of 60 and Rs. 3 lakh for individuals who are 60 years of age or above. Individuals with only agricultural income and the total value of such income does not exceed Rs. 5,000. Individuals who are not residents of India. This means that they do not have any income from sources in India. Individuals who have received a notice from the Income Tax Department stating they are not required to file an income tax return. This may be because they have filed a recovery in the previous year and their total income has not changed or because they are not liable to pay income tax under any other circumstances.

Do I need to file an income tax return if my income is less than 5 lakhs?

No, you do not need to file an income tax return if your income is less than 5 lakhs.

What is the penalty for not filing an income tax return if my income is less than 2.5 lakhs?

You must not file an income tax return if your income is less than 2.5 lakhs. However, you may be liable to pay a penalty if you do not file an income tax return. The penalty for not filing an income tax return is: Rs. 500 for the first time Rs. 1000 for the second time Rs. 1000 for every subsequent time The penalty may be waived if you can show that there was a reasonable cause for not filing the return. For example, you may waive the liability if you were sick or unable to file the return due to another extenuating circumstance.

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