Who Must File an Income Tax Return in India?

There are several common myths surrounding Income Tax Return filing in India, leading many individuals to skip this important compliance step. For instance, some believe that since there’s no tax liability up to ₹7 lakhs under the new tax regime, filing ITR is not required unless income exceeds that threshold. Others assume that if their employer has already deducted TDS and issued Form 16, there’s no further action needed on their part. However, both assumptions can lead to missed opportunities, compliance issues, or even penalties. Let’s break down the reality of who must file an ITR, and why it matters even when your tax payable is zero. Lets understand the following Practical issues of A Story of Ramesh, Priya, and Nitin. Let’s walk with them through this journey of discovery — and see who really needs to file an ITR.

Why Income Tax Return Filing Is More Than Just a Rule

You don’t just file ITR to pay taxes — you do it to:

Claim tax refunds 💸
Show income for visa, loan, or rental agreements 🌍
Carry forward business or capital losses 📉
Avoid unnecessary scrutiny or notices 🔍

Let’s explore when it becomes legally mandatory to file your return.

Ramesh’s Case — Income Above Exemption Limit

Meet Ramesh, a 35-year-old salaried employee from Pune. He earns ₹4.8 lakh a year and thinks,
“I don’t need to file ITR. My employer already deducts TDS — isn’t that enough?”

1. Earning Over ₹2.5 Lakh (or ₹3L / ₹5L for senior citizens)

Since Ramesh earns ₹4.8 lakh before deductions, he must file ITR — even if his employer has deducted TDS.

✅Take away: If your gross total income before deductions exceeds ₹2.5 lakh, you must file — no excuses.

Priya’s Surprise — She Must File Too

Now meet Priya, a homemaker who recently sold inherited land, and received ₹3.5 lakh as long-term capital gain.
She thinks, “I don’t have a salary, why would I ever need to file a tax return?”

2. Capital Gains from Sale of Property or Shares

Even though Priya is a homemaker, her capital gain income crosses ₹2.5 lakh.

✅Take away: Capital gains (short-term or long-term) are taxable, and filing ITR is mandatory if such gains push total income above the basic limit.

Nitin’s Confusion — Why a Loan Needs Your ITR

And then there’s Nitin, a 27-year-old freelancer earning ₹2.2 lakh, who took a personal loan and was asked for his ITR by the bank.
“But I don’t even cross the basic exemption limit!”, he exclaimed.

3. Voluntary Filing = Strong Financial Proof

Nitin’s bank needed proof of stable income for his loan.
While he wasn’t mandated to file, by filing ITR, he shows clear financial credibility — useful for:

Personal loans
Visa applications
Startup registrations
Renting property

Unexpected Scenarios Where ITR Filing Is Mandatory

Let’s now meet a few others:

Neha deposited ₹1.2 Cr in her current account

As per Section 139(1) Proviso, if you deposit ₹1 crore+ in a current account in a year — ITR filing is mandatory, even with NIL taxable income.

Arjun took his parents on a ₹2.5 lakh foreign trip

If your foreign travel expenses in a year cross ₹2 lakh — you must file ITR, even if your income is below ₹2.5 lakh.

Kavita paid ₹1.2 lakh electricity bill last year

If your annual electricity consumption exceeds ₹1 lakh, again — ITR filing is mandatory.

You own assets or bank accounts abroad

This one’s important. Even if your income is below taxable limits, if you own foreign assets or have signing authority in foreign bank accounts, you must file ITR.