Exempt from filing returns?

Here is a list of FAQs from the CBDT for those of you who have been wondering if you were exempt from filing your tax returns this year.

What is the purpose of the exemption notification and who are proposed to be exempted from the requirement of filing of the return?

The primary objective of this notification is to exempt those salaried taxpayers from the requirement of filing income-tax returns, who have (i) total income not exceeding Rs 5,00,000, and (ii) the total income consists only of income chargeable under the head 'Salaries' and interest income from savings bank account if such interest income does not exceed Rs. 10,000.

Further, such salaried taxpayer would be eligible for exemption from filing a return of income only if tax liability has been discharged by the employer by way of Tax Deducted at Source (TDS) and the deposit of the same to the credit of the Central Government. For this purpose, taxpayer has to intimate his interest income to the employer during the course of the year.

Here's an example.

(i) If an individual has salary income of Rs 4,90,000 and interest income from savings bank account not exceeding Rs 10,000, then the taxpayer would be exempt from the requirement of filing income-tax returns since the total income from both the above sources does not exceed five lakh rupees.

(ii) A taxpayer having salary income of Rs 4,98,000 and interest income from savings bank account of Rs 2,000, would also be eligible.

(iii) A taxpayer having salary income up to Rs 5,00,000 and nil interest income would also be eligible.

(iv) A taxpayer having salary income of Rs 5,50,000, interest income from savings bank account of Rs 8,000, and who has claimed deduction of Rs 70,000 under section 80C would also be eligible.

(v) A taxpayer having salary income of Rs 6,10,000, interest income from savings bank account of Rs 10,000 and who has claimed deduction of Rs 1,00,000 under section 80C, a deduction of Rs 20,000 under 80CCF (Infrastructure Bonds) and a further deduction of Rs 15,000 under section 80D (Health Insurance Premium) would also be eligible.

Will a salaried taxpayer with a total income of less than Rs 5,00,000 and claiming a refund of Rs 3,000 be eligible?

No.

Is having a valid PAN a precondition for being covered by the notification?

Yes.

Can an individual with income under the head “Salaries” from more than one employer take benefit of the notification?

No.

Will this notification cover taxpayers with ‘loss from house property', which is often reported by employees to their employer?

No. Under the existing procedure, an employer can give credit to the employee for a claim for loss under the head “income from house property” under section 24 made by the employee. As a result, a salaried employee's total income may reduce to less than Rs 5,00,000 as loss from the head “income from house property” would have been set-off against salary income. In this case, the taxpayer is not exempted from filing his return of income.

Does savings bank account include other banking accounts like fixed deposits or recurring deposits accounts?

No. The benefit of the notification is available to taxpayers whose interest income comprises of interest earned on savings bank account only.

Circular No. 8/2010, states that employer, while deducting TDS from salary of an employee cannot allow deduction u/s 80G except donations made to the Prime Minister's Relief Fund, the Chief Minister's Relief Fund or the Lt. Governor's Relief Fund. Will the notification cover only these cases?

Yes. An individual cannot avail the exemption under this notification if the claim of deduction for donations under section 80G is for donations other than those mentioned in Circular No. 8/2010.

Will a salaried individual with agricultural income, which is exempt from tax, be covered within the ambit of the notification?

A salaried individual with agricultural income exceeding five thousand rupees shall be out of the ambit of the notification.