An employer typically calculates their employees’ tax liability and deducts the desired tax amount during the relevant financial year. If the income tax has already been paid and the employee does not intend to get a refund, is there a need for that employee to file an income tax return (ITR)?
“Most salaried individuals have a common notion that since TDS is being deducted from their salary and they are not looking for claiming any refund, they are not required to file ITR. However, this is wrong and may result in a notice from the income tax department,” says Kalpit Khandelwal, Partner, Aekom Legal, a law firm.
Read More: ITR Filing 2024: Step-by-Step Guide To File Income Tax Returns And Choose Right ITR Form
When do salaried individuals need to file ITR?
Individuals with a total income during FY 2023-24 (AY 2024-25) above the basic exemption limit are required to file ITR. This also means that every salaried employee whose total income is above the basic exemption limit for FY 2023-24 (AY 2024-25) needs to file income tax return by July 31, 2024. This deadline applies to individuals who are not liable for income tax audit. The basic exemption limit is Rs 2.5 lakh under the old tax regime and Rs 3 lakh under the new tax regime for individuals below the age of 60 years.
If TDS was deducted from your salary income, your employer issues Form 16. Form 16 is a certificate of TDS deduction issued by employers to their employees. If TDS was not deducted from your salary, you need to use salary slips or other income proofs to file ITR.
There are certain exceptions to the income exemption limit rule, which means that an individual is still required to file ITR, even if the gross income does exceed the applicable basic exemption limit. Such exceptions include:
- Annual savings bank deposit is more than Rs 50 lakh in one or more accounts;
- Business income and deposits being more than Rs 1 crore in one or more current accounts;
- Business turnover is more than Rs 60 lakh;
- Professional income exceeding Rs 10 lakh;
- Electricity bill above Rs 1 lakh;
- TDS /TCS deducted is more than Rs 25,000;
- Foreign travel spending is more than Rs 2 lakh;
- Having assets in a foreign country or is a beneficiary of a foreign asset.
“These conditions mentioned above are specified in the Seventh Proviso to Section 139(1)(b) [read with Rule 12AB],” says Khandelwal.
Hitesh Jain, Associate Partner, N. A. Shah Associates LLP says that salaried individuals can rely on Form 16 only to compute income from salary. “However, while filing return of income, he/she should take into account all the incomes which he/she has earned during the financial year. All taxpayers while computing total income and tax liability for the fiscal year must take into account all income that has been earned during the financial year,” he says.
Read More: ITR Filing For Senior Citizens: Is This Mandatory? Here’s All You Need To Know
When do salaried individuals need to pay income tax at the time of ITR filing even if TDS was deducted from their salary/income
The deduction rate of TDS from salary might not always reflect the real income tax rate applicable for the respective salaried employee. Khandelwal explains when this happens.
“There can be a scenario where the correct TDS amount is not being deducted from the employee’s salary. For Instance, an employee worked for 6 months in Company X, making Rs 1 lakh per month and 6 months in company Y, also making Rs 1 lakh per month. Company X will deduct TDS on X’s salary assuming an annual Income of Rs 12 Lakh per annum, duly taking the benefit of exemption limit of Rs 2.5 lakh per annum. However, in most cases, company Y may deduct TDS on the employee’s salary assuming total Income of Rs 6 lakh only (also taking benefit of Rs 2.5 lakh basic exemption limit). This results in lower deduction of taxes,” he says.
According to Khandelwal, you can make good on this shortfall by depositing self-assessment tax at the time of ITR filing or by communicating with the new company’s HR about this so that necessary arrangements can be made in tax liability calculations.
As per Jain from N. A. Shah Associates LLP, “It may be possible that a salaried individual is under the tax bracket of 30% and TDS has been deducted by the employer @30% rate. Further, if he has interest income/dividend income on which TDS has been deducted @ 10% then in this case he/she has to file an income tax return and discharge this 20% tax liability.”
Read More: ITR filing FY 2023-24: How to pay income tax using your credit card? A step-by-step guide
How is gross total income calculated?
As per Jain, here is how gross total income is calculated for an individual salaried taxpayer with no business income:
| Serial number | Particulars | Amount |
| 1. | Income from salary | |
| a) | Basic Salary as per section 17(1) | Rs xxx |
| b) | Add: Perquisites as per section 17(2) | Rs xx |
| c) | Add: Profit in lieu of salary as per section 17(3) | Rs xx |
| d) | Less: Allowances to the extent exempt under section 10 | (Rs xx) |
| e) | Less: Deduction under section 16 | (Rs xx) |
| Income from Salary (a+b+c-d-e) | Rs xxx | |
| 2. | Income from House Property | |
| a) | Gross Annual Value/Rent Received | Rs xxx |
| b) | Less: Municipal Taxes | (Rs xx) |
| c) | Net Annual Value (a-b) | Rs xx |
| d) | Less: Standard deduction under section 24(a) | (Rs xx) |
| e) | Less: Interest on borrowed capital under section 24(b) | (Rs xx) |
| Income from House Property (c-d-e) | Rs xxx | |
| 3. | Income from Capital Gains | Rs xxx |
| 4. | Income from Other Sources | Rs xxx |
| 5. | Gross Total Income (1+2+3+4) | Rs xxxx |
