ITR 2020-21: Made high value expenses? No exemption from tax filing

Income tax department in its ongoing efforts to reduce the income tax evasion and bring many eligible taxpayers under the formal ITR filing universe, made the changes in ITR filing rules in the Finance Bill 2019 which will be applicable for the income earned during financial year 2019-20. As per the new rules many individual taxpayers exempted from filing income tax return under various rules, will now be required to file their ITR.

All individuals are required to file income tax return if their total taxable income is above basic exemption limit of Rs 2.5 lakh. Therefore, ITR filing was not mandatory for any person with income less than Rs 2.5 lakh. In case of senior citizens this exemption was much higher at Rs 3 lakh while for very senior citizens above the age of 80 years this exemption was Rs 5 lakh. So, a senior citizen with taxable income below Rs 3 lakh and a very senior citizen with taxable income below Rs 5 lakh are not required to file ITR.

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However, this will change now. As per Naveen Wadhwa, DGM, Taxmann, ITR filing is mandatory if a person is covered under the Seventh Proviso to Section 139(1). Thus, a person, who is otherwise not required to file the return as his income does not exceed the maximum exemption limit, shall file the return of income if during the previous year he has made some specific expenses above certain limits. Here are the conditions in which tax filing is mandatory now:

Deposit of Rs 1 crore in current account

The first expense which has now come under I-T net is deposit into current account. "If taxpayers have deposited more than Rs 1 crore during the previous year in one or more current accounts then they need to disclose that in ITR," says By Kapil Rana, Founder & Chairman, HostBooks.

The nature of deposit is not only limited to cash deposits but also to other forms of deposits such as cheque or an online transfer.

This provision only covers deposits into orcurrent accounts, not savings or other bank accounts. Moreover, this includes aggregate deposits during the year into all current accounts held in all types of banks including co-operative banks.

Expense of above Rs 2 lakh on foreign travel

Expenses made on foreign travel have also been brought under this provision. "If a taxpayer has incurred expenditure for travel to a foreign country for himself or for any other person of an aggregate amount of more than Rs 2 lakh then he needs to disclose that in ITR," says Rana of HostBooks.

These expenses do not have to be in foreign currency as even the expenses made in domestic currency will be covered under this head. As there is no distinction made on the type of travel, this rule will apply both on personal as well as business trip.

Consumption of electricity of Rs 1 lakh

The next expense which has now come under IT lens is consumption of electricity. "If taxpayer has incurred expenditure on consumption of electricity of an aggregate amount of more than Rs 1 lakh during the previous year then he needs to disclose that in ITR," says Rana.

Since the provision emphasises only on consumption, the expenses incurred on getting the electricity connection and deposits made for this connection will not be included in calculation of consumption. The provision will apply to both the individual or a commercial connection.

Consumption being the main criteria, it will not make any difference if the electricity connection is in someone else's name. Therefore, tenants being the consumer of electricity on all rented or leased properties will have to disclose their electricity consumption if it goes above Rs 1 lakh in a year.

Lower income due to rollover benefit of capital gains

Many times, the taxable income of the taxpayers comes below the basic exemption limit due to rollover of capital gain due to which they could choose not to file ITR. However, this will no longer be the case as they will now have to file the ITR.

"It is also proposed to provide that a person whose income becomes lower than maximum amount not chargeable to tax due to claim of rollover benefit of capital gains shall also be required to furnish the return," said Finance Minister Nirmala Sitaraman in her Budget Speech on July 5, 2019. This year this rule is applicable for taxpayers filing ITR for their income of the financial year 2019-20.