“Income Tax- When you should and shouldn’t file for ITR as an Indian citizen?”

Income Tax- When you should or shouldn't file for ITR

Income Tax- Before jump into the details first let’s understand few basics. Whether you are self-employed, salaried, Students, House wife’s you may earnings from freelance work, stock market investment, or somewhere part-time job. You often got a question in your mind “Should I apply for ITR file? Should I pay tax for my income?”

Regardless of who you are and what you do, you will have to pay for income tax if your gross total income crosses the basic exemption limit.  

What is Gross Total Income & basic exemption limit?

There are income tax computations like Income from salaries, house properties (rentals), business, capital gains, or short-term capital gains & other resources. The addition of these is known as Gross Total income.

If you comes under the general category the exemption limit is 2.5 lakh rupees.

If your age is between “60 to 80 then, the exemption limit is 3 lakh rupees.

And if you’re above 80, then the exemption limit is 5 lakh rupees.

When you should or shouldn’t file for ITR?

Here is the interesting part. If your income or annual gross total income crosses the exemption limit after deductions under part VIA like under Section 80C, 80CCD, 80D, 80G, 80TTA, and 80TTB exceeds the amount of essential exemption.

Suppose, you are a housewife whose age is 34. You may have invested in some stocks & you work as a freelancer. You have earned from the investment as a short-term gain of rupees 1,20,000 rupees. And from freelance work, you have earned another 80,000 rupees. These amounts you have earned in a single financial year. So, the total amount is 2 lakh rupees which are under the basic exemption limit. Now you don’t have to apply or submit your ITR file.

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Let’s assume another scenario, where your total annual income from stocks and freelance work is around 2,65,000 rupees. This is above the exemption limit of 2.5 lakh rupees. But your Total income or the GTI(Gross Total Income) is deducted of rupees 30,000 rupees under 80C or 80CCD then you don’t have to File for ITR.

But If your GTI is maybe 3,50,000 rupees and after the deduction, it came around 2,80,000 rupees then you will have to file for the ITR.

Now you may have a doubt that “ok so I will file for ITR because my total annual income is above 2.5 lakh rupees after the deduction also. But the tax will be applicable on which amount, my total income 3.5 lakh or after the deduction amount which is 2.8 lakh?”

The amount you will get after the deduction from Gross Total Income (GTI)” that amount will be your taxable amount. So in the case of our above example, your taxable amount will be 2.8 lakh rupees.