Many taxpayers assume that filing an income tax return (ITR) is necessary only if they have taxable income or an income above the basic exemption limit. As a result, individuals with an annual salary below ₹4 lakh often believe they can skip filing their return altogether, which is not the case.
The Income-tax Act prescribes several situations where filing an ITR is mandatory regardless of the amount of tax payable. Apart from income, certain high-value financial transactions and specified reporting requirements can also trigger the obligation to file a return. Failing to do so in such cases could attract notices, penalties, or other compliance issues.
Large bank deposits
The also mandate ITR filing for individuals who make high-value deposits in their bank accounts during a financial year. This requirement applies even if their taxable income is below the basic exemption limit.
If an individual deposits ₹50 lakh or more in one or more savings accounts in the previous financial year, it is mandatory for them to file an income tax return.
Similarly, if the aggregate deposits in one or more current accounts exceed ₹1 crore in a financial year, filing an ITR is compulsory.
Foreign travel and electricity bills
Mandatory filing also applies in cases where an individual incurs expenses exceeding ₹2 lakh on foreign travel for themselves or any other person during a particular financial year.
Likewise, paying an electricity bill greater than ₹1 lakh in a single bill or on aggregate within a financial year requires individuals to file tax return.
Foreign assets trigger mandatory filing
If an individual has an asset or is a beneficiary of an asset that is located in a foreign country, they are required to file an ITR.
It is also applicable if the person has signing authority in an account which is located outside the country.
There is no monetary threshold for this requirement. Even holding shares of a foreign parent company through employee stock options () or having signing authority in an overseas account is required to be disclosed in tax return.
Nil tax after rebate? You may still have to file ITR
A common misconception among salaried taxpayers is that if their Form 16 shows nil tax liability after claiming the Section 87A rebate, they can choose to skip filing their income tax return.
However, Section 87A is a tax rebate, meaning it only reduces the amount of tax payable for eligible resident individuals, it does not waive the requirement to file ITR if any mandatory filing condition under the Income-tax Act applies.
Claim refunds of excess TDS
Filing an ITR is also mandatory if the total tax deducted at source () or tax collected at source (TCS) during the financial year is ₹25,000 or more. For senior citizens, this threshold is ₹50,000.
Apart from meeting this compliance requirement, filing a return is necessary to claim refunds of excess TDS, maintain an official record of income, and preserve the benefit of carrying forward eligible business or capital losses.
What happens if don’t file ITR in such cases?
Under section 234F of the Income Tax Act, taxpayers must pay a late‐filing penalty if they fail to file their ITR on time. The amount depends on the person’s total income and the time of filing.
For the assessment years 2025‐26 and 2024-25, taxpayers with an income of ₹5 lakh and less will have to pay a ₹1,000 penalty if they miss the due date but pay before 31 December. For people with an income or more than ₹5 lakh, the penalty is ₹5,000 under the same conditions.
However, there is no late filing fee if your income is below the basic exemption limit, since its non‐taxable income. This varies by situation as certain requirements (such as foreign assets) might require you to file an ITR even if your income is small.
If tax remains unpaid, interest under Section 234A may continue to accrue until the tax dues are cleared. Non-filing can also delay income tax refunds, prevent taxpayers from carrying forward eligible business or capital losses, and create hurdles while applying for home loans, education loans, or visas, where ITR acknowledgements are often accepted as proof of income.