ITR: How to spot and fix mismatches in Form 16 and Form 26AS before filing your tax return
Form 16 is a certificate issued by employers that furnishes details about the TDS (Tax Deducted At Source). However, Form 26AS also mentions TDS information. So, what exactly is the difference between the two?
Form 16 is a TDS certificate issued by the employer and mentions details regarding TDS deduction on salary. On the other hand, Form 26AS is issued by the government and gives broader details that encompass TDS deducted at multiple sources of income and TCS (Tax Collected At Source) collected by different collectors linked to your PAN.
FORM 16 FORM 26AS Issued by the employer Issued by the Income Tax Department Shows details of TDS deducted by the employer
Provides details on- Tax Deducted at Source (TDS)
Tax Collected at Source (TCS)
Advance Tax / Self-Assessment Tax
Income Tax Refund
TDS Defaults
Specified Financial Transactions
Verify your PAN number in both documents. Verify and match the salary income in Form 16 and Form 26AS. Check if the TDS deducted in Form 16 matches the TDS details in Form 26AS.
'Form 16 shows payments from employers under different heads and the TDS deducted against your salary. For instance, if you are in the old tax regime and you get LTA, HRA, or any other exempt item, you must verify whether it is reflected in the Form 16. If you haven't submitted documents like rent agreement or rent receipts to the finance department of your company, they will deduct higher TDS. Similarly, all the exempt items like health insurance, tuition fees etc. should be reflected accurately. If you have submitted the documents to the employer and still excess TDS is deducted, you must get in touch with your employer. The employer will have to revise its annual TDS return. If you have switched jobs, look out for the tax treatment on items like gratuities or leave encashment,' said Balwant Jain, tax & investment expert.
'In Form 26AS, ensure that TDS by the employer, TDS on bank interest, and advance/self-assessment tax are reflecting properly. In Form 16, verify that your PAN, employer details, salary breakup, deductions, TDS and taxable salary are showing properly. Also, combine Form 16 from multiple employers, if any, to avoid income mismatch at the time of ITR filing. This ensures correct tax credit and accurate return filing,' said Abhishek Soni, CEO, Tax2Win.
If both documents differ in the information, the employee should raise it with the employer or deductor responsible for deducting TDS from their income. "A mismatch in Form 26AS can occur due to various reasons. If the deductor quotes an incorrect PAN, the TDS won't reflect—this requires the deductor to revise the TDS return. Sometimes, TDS is deducted but not deposited to the government; in such cases, the deductor must pay and update the return. In case the amount of salary is not reported correctly by the employer, the wrong amount will reflect in 26AS. Contact your employer to rectify the same," Soni explained.
While filing your income tax return, matching both the documents ensures there's no under-reporting or overstating of income. Hence, matching Form 16 with Form 26AS is crucial to file your return accurately. In case of a discrepancy, the taxpayer may receive a defective return notice from the income tax department.
"It is important to match Form 16 and Form 26AS to ensure accurate reporting of income and TDS while filing your income tax return. Form 16 shows tax deducted by your employer, while Form 26AS reflects the actual tax deposited with the government. Any mismatch may result in the denial of TDS credit, incorrect tax liability, or a delay in the refund. Matching both forms helps identify errors, under-reported income, or duplicate entries and prevents notices, scrutiny, or penalties from the Income Tax Department," said Soni.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
&w=3840&q=100)
Business Standard
43 minutes ago
- Business Standard
ITR declared invalid? CBDT offers relief for those with technical glitches
In a relief to thousands of aggrieved taxpayers, the Central Board of Direct Taxes (CBDT) has extended the deadline for processing income tax returns (ITRs) that were wrongly declared invalid by the Centralised Processing Centre (CPC), Bengaluru. Under the fresh relaxation, electronically filed ITRs up to March 31, 2024, but later marked 'invalid' will now be reprocessed and validated under Section 143(1) by March 31, 2026. This applies to returns filed for Assessment Years up to 2023–24, provided the taxpayer had verified them on time. Tax experts say this correction addresses technical glitches and procedural lapses that unfairly blocked refunds or triggered compliance issues for honest filers. Why were some ITRs marked invalid despite being filed properly? Discrepancies in form selection, verification delays, and system errors are among the top reasons, explains Suresh Surana, chartered accountant. 'A salaried person who filed ITR-1 despite having small capital gains found her return marked invalid. Her refund was delayed, and she lost deductions and faced interest under Section 234A,' he shares. Kinjal Bhuta, chartered accountant, advocate and treasurer at the Bombay Chartered Accountants Society, adds that sometimes returns filed on the due date are verified a day later due to portal lags and are then treated as invalid. 'There have been cases where even OTP-verified returns were later shown as defective. By the time the assessee realised, the deadline to fix it had passed,' she says. What does this CBDT relaxation mean in practice? According to Surana, the relief is critical as it now allows the CPC to reprocess affected returns and issue intimations under Section 143-1. 'It helps taxpayers get their long-pending refunds, plus interest. But those without PAN-Aadhaar linkage may still face blocks,' he cautions. Tarun Garg, Director, Deloitte India, calls the move a 'welcome signal' to taxpayers. 'For many senior citizens or small taxpayers, refunds are part of annual budgeting. With this circular, they might finally receive what's due,' he says. To check eligibility: -Log in to your income tax e-filing portal -Look for 'invalid return' status in your filed ITRs -If eligible, no fresh filing is needed; just wait for CPC updates Fixing the system: An implicit admission? All three experts believe the circular indicates system-level lapses at the CPC. Bhuta says, 'Technical issues are increasingly common. This is a much-needed acknowledgement and should push for better safeguards.' Surana suggests more proactive alerts and redressal options, especially for taxpayers without CAs. Garg adds, 'The system is strong but not flawless. This circular shows CBDT is willing to course-correct when automation misfires.'
Economic Times
an hour ago
- Economic Times
NRI Taxation: Mutual funds capital gain, TDS rules; STCG, LTCG tax rules from equity, debt, international, hybrid MFs and others
ET Online In FY 2024-25 (AY 2025-26), there were changes in the capital gain tax regime affecting almost all asset classes. The new capital gains rule will impact the non-residents who have invested in Indian mutual funds. NRIs filing ITR for the FY 2024-25 (AY 2025-26) need to be careful about the date of sale/redemption. This is important because for FY 2024-25, both the old and new capital gains rules will apply, depending on the date of sale/transfer. ET Wealth Online spoke to Naveen Wadhwa, Vice President of Research and Advisory at to get his views on these taxation rules. The following article will discuss the taxation rules for mutual fund gains that apply to NRIs, as well as the tax deducted at source (TDS) that would have been deducted from their gains in FY 2024-25 (AY 2025-26). Also read | Latest capital gain tax rules for equity mutual funds, debt mutual funds, international mutual funds TDS rules on mutual fund redemptions for NRI investors When an NRI investor withdraws money from any mutual fund scheme, tax is deducted from the amount they redeem. The net proceeds (which is the gross redemption amount minus TDS) are then credited to the NRI's bank account. The TDS is submitted to the government against the NRI's PAN. Naveen Wadhwa says: "TDS on mutual fund redemption is applicable for NRI investors only. No tax is deducted on mutual fund redemptions made by resident individuals. The TDS rate will depend on the category of mutual funds from which the money is withdrawn." Also Read | Capital gains tax rules for house property, listed equity, unlisted shares, others TDS on equity mutual fund investments of NRI An NRI investing in equity mutual funds in India will have to pay TDS on redemption. According to Wadhwa, "For FY 2024-25, TDS on equity mutual fund redemption deducted will depend on the date of sale. If the redemption happened on or before July 22, 2024, TDS on STCG will be deducted at 15% and LTCG at 10%. On the other hand, if the redemption happened on or after July 23, 2024, TDS on STCG will be deducted at 20% and LTCG at 12.5%. The TDS on LTCG will occur only if the long-term capital gains exceed Rs 1.25 lakh in a financial year." Also read | Is LTCG exemption on equity, equity mutual funds Rs 1 lakh or Rs 1.25 lakh while filing ITR for FY 2024-25 (AY 2025-26)?For the current FY 2025-26, TDS on equity mutual fund redemption will be deducted at the rate of 20% for STCG and 12.5% for LTCG, provided long-term capital gains exceed Rs 1.25 lakh in the financial year. TDS on non-equity mutual fund investments of NRI Non-equity mutual fund investments include debt mutual funds, hybrid mutual funds, international mutual funds, and so says, "For FY 2024-25, TDS on redemption from non-equity mutual will be deducted at 30%. This will apply to debt mutual fund, hybrid mutual funds and others. However, for the current FY 2025-26, the TDS rules will be different. This will happen due to a change in the definition of specified mutual funds. As per the TDS rules applicable from April 1, 2025, TDS will be deducted at 30% for redemptions made from debt mutual funds. For redemptions done from international mutual funds, hybrid funds and others, TDS will be deducted at 12.5% for LTCG and at 30% for STCG. However, if the redemption is done on or before July 22, 2025, TDS will be deducted at 20% for LTCG and at 30% for STCG." TDS on mutual fund redemptions for NRI investors Type of Fund Redemption Date Type of Gain TDS Rate Equity Mutual Fund On or before July 22, 2024 STCG 15% Equity Mutual Fund On or before July 22, 2024 LTCG (> ₹1.25 lakh) 10% Equity Mutual Fund On or after July 23, 2024 STCG 20% Equity Mutual Fund On or after July 23, 2024 LTCG (> ₹1.25 lakh) 12.50% Equity Mutual Fund From April 1, 2025 onwards STCG 20% Equity Mutual Fund From April 1, 2025 onwards LTCG (> ₹1.25 lakh) 12.50% Debt Mutual Fund From April 1, 2025 onwards All Gains 30% Hybrid/International/Other Non-Equity Funds On or before July 22, 2025 STCG 30% Hybrid/International/Other Non-Equity Funds On or before July 22, 2025 LTCG 20% Hybrid/International/Other Non-Equity Funds On or after July 23, 2025 STCG 30% Hybrid/International/Other Non-Equity Funds On or after July 23, 2025 LTCG 12.50% Tax on dividends from mutual funds received by NRIs An investor is required to choose one of the two options - Growth or Distributed income under the dividend option. If the NRI investor has chosen the dividend option, then the dividend will be credited to their bank account post TDS says, "TDS will apply to dividends received from mutual funds. Tax will be deducted at a rate of 20% on dividends. This TDS rate is the same irrespective of the type of mutual fund from which the dividend is received. NRIs should remember that every rupee earned by them in India is subject to TDS."It is important to note that dividends are taxable in the hands of an investor. Under the current rules, dividends are taxed at the income tax slabs applicable to their income. Also Read | Four ITR filing changes that NRI should know Mutual fund capital gains rules for NRI investors Here's a look at the capital gain taxation rules for equity mutual funds, debt mutual funds, hybrid mutual funds, international mutual funds, and other types of mutual funds, applicable to NRI investors. New capital gains tax rule for equity mutual funds The capital gains tax rule for equity mutual funds is the same for resident individuals and NRIs. For FY 2024-25 (AY 2025-26), the tax rate will depend on the date of sale of equity. New STCG, LTCG tax rules from July 23, 2024: For NRIs, capital gains from equity mutual funds will be considered short-term capital gains (STCG) if the mutual funds are sold on or before the completion of one year. The STCG from equity mutual funds will be taxed at 20% plus cess. These new rules will be applicable to equity mutual funds sold on or after July 23, 2024. Capital gains from equity mutual funds will be considered long-term capital gains (LTCG) if they are sold after holding them for a year. The LTCG from equity mutual funds will be taxed at 12.5% plus cess. These new rules will apply to equity mutual funds sold on or after July 23, points out that "the income tax laws allow the NRI taxpayers to claim LTCG exemption on the listed shares and equity mutual funds. For FY 2024-25, NRIs can claim LTCG exemption of Rs 1.25 lakh on the long-term capital gains arising from the sale of listed shares and equity mutual funds." Old STCG, LTCG tax rules apply till July 22, 2024: If an NRI sold equity mutual funds between April 1, 2024, and July 22, 2024, the old STCG and LTCG tax rules will apply. According to the old rules, capital gains from equity mutual funds will be considered short-term capital gains (STCG) if the mutual funds are sold on or before the completion of one year. The STCG from equity mutual funds will be taxed at 15% plus cess. Capital gains from equity mutual funds will be considered long-term capital gains (LTCG) if the mutual funds are sold after one year. The LTCG from equity mutual funds will be taxed at 10% plus cess. Wadhwa says, "Irrespective of whether LTCG is taxed under old or new rules, an NRI will be able to claim exemption of Rs 1.25 lakh from FY 2024-25 (AY 2025-26)." New STCG, LTCG tax rule for debt mutual funds There are two important dates to keep in mind when calculating capital gains from debt mutual funds - the purchase date and the sale date. Here's how an NRI can calculate capital gains from debt mutual funds for ITR filing for FY 2024-25 (AY 2025-26). Debt mutual fund sold in FY 2024-25, but investments made on or after April 1, 2023 Budget 2024 did not make any changes to the capital gains tax rules for debt mutual funds. This is because the rules for taxing capital gains from debt mutual funds were changed from April 1, 2023. According to the latest rules, gains from debt mutual funds are taxed on the basis of income tax slabs that apply to your income, regardless of the holding period. But keep in mind, this rule only applies to investments in a debt mutual fund made on or after April 1, 2023. Debt mutual fund sold in FY 2024-25, but investments made till March 31, 2023 There might be times when an NRI invested in debt mutual funds on or before March 31, 2023. In this case, the application of the capital gains rule will depend on the sale date. Debt mutual funds sold till July 22, 2024 For debt mutual fund investments made till March 31, 2023, and sold on or before July 22, 2024, the capital gains will either be termed as STCG or LTCG. Capital gains will be termed as STCG if the debt mutual funds are sold on or before the completion of 36 months (three years). STCG will be taxed at the income tax slabs applicable to your gains from debt mutual funds will be referred to as LTCG if these are sold after 36 months (three years).LTCG on these debt mutual funds will be taxed at 20% with indexation process of adjusting the purchase price to account for inflation by inflating costs is called indexation. Debt mutual funds sold on or after July 23, 2024 For investments in a debt mutual fund made till March 31, 2023, and sold on or after July 23, 2024, the capital gain rules are says, "Debt mutual funds sold on or after July 23, 2024 (if they were purchased till March 31, 2023), will have no indexation benefit. The LTCG from these debt mutual funds (sold after the completion of two years) will be taxed at 12.5% without indexation. STCG from these debt mutual funds (if sold on or before the completion of two years) will be taxed at income tax slabs." Also Read: No indexation benefit on these debt mutual funds New STCG, LTCG tax rule for hybrid mutual funds There are three types of hybrid mutual funds - conservative, balanced and aggressive. The securities held by the fund manager in the scheme's portfolio will determine the taxation of a hybrid mutual fund. Aggressive hybrid mutual funds: As per SEBI guidelines, these mutual funds should have an allocation of 65-80% to equities and between 20% and 35% to debt and other instruments, such as cash. Balanced hybrid mutual fund: As per SEBI guidelines, balanced hybrid mutual funds should have an allocation of 40% to 60% in equity and debt. No arbitrage would be permitted in this scheme. Conservative hybrid mutual funds: These funds will have an allocation of between 75% and 90% to debt instruments and between 10% and 25% to equities, as per SEBI guidelines. Wadhwa says: "For income tax purposes, aggressive mutual funds are taxed in the same fashion as normal equity mutual funds. This is because the portfolio of these schemes has a minimum equity allocation of 65% or more."If NRI has redeemed an aggressive equity mutual fund in FY 2024-25, then knowing the date of redemption is essential for determining the correct tax rate. If redeemed on or before July 22, 2024, the LTCG will be taxed at 10%. On the other hand, if redeemed on or after July 23, 2024, the LTCG will be taxed at 12.5%. The tax rate will apply if the LTCG exceeds Rs 1.25 lakh in a financial balanced and conservative equity mutual funds are considered non-equity mutual funds for income tax purposes. This is because the equity holdings in these schemes are below 65%. Wadhwa says, "Capital gains from balanced and conservative mutual funds will be taxed at income tax slabs, irrespective of holding period. However, this rule will apply to the mutual fund investments made on or after April 1, 2023. For investments made on or before March 31, 2023, the taxation rule will depend on the date of sale. This is similar to debt mutual fund taxation as mentioned above." Capital gain rules for gold mutual funds The capital gains rules for gold mutual funds are the same as those for debt mutual funds. It's worth mentioning that gold mutual funds in India typically invest in gold ETFs (Exchange-Traded Funds).Wadhwa says: "In case of gold mutual funds, the capital gains taxation rules depend on the date of purchase and redemption. LTCG from Gold mutual fund investments made on or before March 31, 2023, and redeemed on or before March 31, 2025, will be taxed at 20% without indexation and STCG at the applicable tax rate. However, for gold mutual fund investments made on or after April 1, 2023, and redeemed on or before March 31, 2025, the capital gains will be taxed according to the income tax slabs. This is applicable for FY 2024-25 (AY 2025-26)." Capital gain rules from international mutual funds International mutual funds invest in the equities of foreign companies listed on foreign stock exchanges. Wadhwa says, "The equity taxation rules will not apply to international mutual funds. This is because international mutual funds invest in equities that are not listed on the Indian stock exchanges. Hence, capital gains from international mutual funds will be subject to the same rules as those from gold mutual funds. An NRI investor must be aware of the dates of investment and sale to determine the correct rules and tax rates for capital gains taxation. This is applicable for FY 2024-25 (AY 2025-26)." Mutual fund capital gains tax rules for NRI Mutual Fund Type Condition STCG Tax Rate LTCG Tax Rate Equity Mutual Fund Sold on or before July 22, 2024 15% + cess 10% + cess (Exemption: ₹1.25 lakh) Equity Mutual Fund Sold on or after July 23, 2024 20% + cess 12.5% + cess (Exemption: ₹1.25 lakh) Debt Mutual Fund Investment made on or after Apr 1, 2023 Slab rate Slab rate Debt Mutual Fund Investment till Mar 31, 2023; Sold on or before Jul 22 Slab rate (≤ 36 months) 20% with indexation (> 36 months) Debt Mutual Fund Investment till Mar 31, 2023; Sold on or after Jul 23 Slab rate (≤ 2 years) 12.5% without indexation (> 2 years) Aggressive Hybrid Fund Equity ≥ 65% Same as Equity MF Same as Equity MF Balanced/Conservative Hybrid Fund Investment on or after Apr 1, 2023 Slab rate Slab rate Balanced/Conservative Hybrid Fund Investment on or before Mar 31, 2023 Same as Debt MF Same as Debt MF Gold Mutual Fund Invested ≤ Mar 31, 2023; Redeemed ≤ Mar 31, 2025 Slab rate 20% without indexation Gold Mutual Fund Invested ≥ Apr 1, 2023; Redeemed ≤ Mar 31, 2025 Slab rate Slab rate International Mutual Fund Same as Gold Mutual Fund Same as Gold MF Same as Gold MF Fund of Funds (FoF) ≥65% in equity/equity ETF Same as Equity MF Same as Equity MF Fund of Funds (FoF) <65% in equity Based on purchase/sale date Based on purchase/sale date ETFs Sold on or before July 22, 2024 15% 10% ETFs Sold on or after July 23, 2024 20% 12.50% Specified MF (from Apr 1, 2025) Investment after Apr 1, 2025; Debt <65% Slab rate 12.5% (after 2 years) Specified MF (from Apr 1, 2025) Investment between Apr 1, 2023 – Mar 31, 2025 Slab rate Slab rate Specified MF (from Apr 1, 2025) Investment till Mar 31, 2023 Slab rate (≤2 years) 12.5% without indexation (>2 years) Capital gain rules from Fund of Funds (FoF) mutual funds According to SEBI, "A Fund of Funds (FoF) invests in other funds. Investment in these funds helps investors spread their risks across various markets and asset classes while benefiting from professional fund management. A Fund of Funds is essentially a "fund made up of funds." It pools money from investors and invests it in a collection of other mutual funds, or exchange-traded funds (ETFs). By doing so, it provides a diversified investment portfolio managed by experts."Wadhwa says, "For NRIs, the taxation of FoF mutual funds is the same as hybrid mutual funds. This means that if FoF mutual funds allocate a minimum of 65% of the scheme's money in equity mutual funds or equity ETFs, then such FoF mutual fund will be taxed as an equity mutual fund. On the other hand, if the FoF mutual fund invests a minimum of 65% of the scheme in debt or any other instruments, then capital gains taxation will depend on the date of sale and purchase. This is applicable for FY 2024-25 (AY 2025-26)." An NRI can invest in Exchange Traded Funds (ETFs) through their demat accounts. Investments in ETFs are made via stock exchanges, as they are listed on them. There are various types of ETFs, including those for stocks, debt, gold, and more. The new capital gains rules, announced on July 23, 2024, have simplified the asset class, as listed and unlisted securities, as well as non-financial assets. Based on the asset class, the holding period is determined. Under the new rules, capital gains from listed securities are classified as long-term capital gains (LTCG) if the securities are sold after one year has passed. Otherwise, the gains are short-term capital gains. Capital gains from unlisted securities and non-financial assets are classified as long-term capital gains (LTCG) if the asset is sold after two years from the date of purchase. Otherwise, the gains are short-term capital to Wadhwa, "As ETFs are listed on the stock exchanges, it will follow the rules of listed equity and equity mutual funds for capital gains taxation. This means that ETFs sold on or after July 23, 2024, will be taxed at 12.5%, provided gains are classified as LTCG. STCG will be taxed at 20%. Similarly, ETF units will be taxed at 10% for LTCG and 15% for STCG if sold on or before July 22, 2024. NRI investor will not get the benefit of forex fluctuations as well." Capital gains rule will change for these mutual fund investments from April 1, 2025 The new definition of debt mutual funds in the Income Tax Act came into effect from April 1, 2025. According to the new definition, a debt mutual fund will invest more than 65% of its total proceeds in debt and money market instruments or a fund-of-funds with the underlying having a similar debt investment mix. Earlier, the specified debt mutual fund was defined as a mutual fund where not more than 35% of its total proceeds are invested in the equity shares of domestic companies. Due to this change of definition, taxation of specific mutual fund investments made on or after April 1, 2025, has been impacted. These specific mutual funds are - International mutual funds, Gold mutual funds, Balanced hybrid funds, and fund of funds (where the debt portion is less than 65%).Wadhwa says, "Investments made on or after April 1, 2025, in the specified mutual fund schemes where the debt instruments are less than 65% will have different taxation rules. Under the new rule, gains will be termed LTCG if the mutual fund units are sold on or after the completion of two years. LTCG will be taxed at 12.5%. On the other hand, STCG of these mutual fund units will be taxed at the income tax slabs. For investments made in these mutual fund schemes between April 1, 2023, and March 31, 2025, the gains will be taxed at the income tax slabs, irrespective of the holding period. If investments made in these schemes on or before March 31, 2023, are held, then capital gains mutual fund units sold after the completion of two years will be classified as LTCG. This LTCG will be taxed at 12.5% without the indexation benefit. Else, gains will be termed as STCG and taxed at income tax slabs." N.R. Narayana Murthy Founder, Infosys Watch Now Harsh Mariwala Chairman & Founder, Marico Watch Now Adar Poonawalla CEO, Serum Institute of India Watch Now Ronnie Screwvala Chairperson & Co-founder, upGrad Watch Now Puneet Dalmia Managing Director, Dalmia Bharat group Watch Now Martin Schwenk Former President & CEO, Mercedes-Benz, Thailand Watch Now Nadir Godrej Managing Director, of Godrej Industries Watch Now Manu Jain Former- Global Vice President, Xiaomi Watch Now Nithin Kamath Founder, CEO, Zerodha Watch Now Anil Agarwal Executive Chairman, Vedanta Resources Watch Now Dr. Prathap C. Reddy Founder Chairman, Apollo Hospitals Watch Now Vikram Kirloskar Former Vice Chairman, Toyota Kirloskar Motor Watch Now Kiran Mazumdar Shaw Executive Chairperson, Biocon Limited Watch Now Shashi Kiran Shetty Chairman of Allcargo Logistics, ECU Worldwide and Gati Ltd Watch Now Samir K Modi Managing Director, Modi Enterprises Watch Now R Gopalakrishnan Former Director Tata Sons, Former Vice Chairman, HUL Watch Now Sanjiv Mehta Former Chairman / CEO, Hindustan Unilever Watch Now Dr Ajai Chowdhry Co-Founder, HCL, Chairman EPIC Foundation, Author, Just Aspire Watch Now Shiv Khera Author, Business Consultant, Motivational Speaker Watch Now Nakul Anand Executive Director, ITC Limited Watch Now RS Sodhi Former MD, Amul & President, Indian Dairy Association Watch Now Anil Rai Gupta Managing Director & Chairman, Havells Watch Now Zia Mody Co-Founder & Managing Partner, AZB & Partners Watch Now Arundhati Bhattacharya Chairperson & CEO, Salesforce India Watch Now
Mint
2 hours ago
- Mint
Who should file ITR with income below ₹2.5 lakh under old and new tax regimes? Check the rules here
As the income tax return (ITR) deadline for FY 2024-25 (Assessment Year 2025-26) approaches, many taxpayers are asking whether ITR submission is necessary if their annual income is less than ₹ 2.5 lakh. It is important to keep in mind that, under the old tax regime, individuals under 60 years of age with income below ₹ 2.5 lakh are not required to file an ITR, until and unless they fall under certain conditions prescribed by the income tax department. Furthermore, in contrast, under the new tax regime, the basic exemption limit has been increased to ₹ 3 lakh. This simply means that individuals with income below this threshold are also exempted from mandatory income tax filing. Going ahead, this exemption limit is expected to rise to ₹ 4 lakh from FY 2025-26 (AY 2026-27) onwards, although no official notification or bill has been issued on the same yet. Even if your income is less than ₹ 2.5 lakh (old regime) or ₹ 3 lakh (new regime), filing becomes mandatory if: You have deposited over ₹ 1 crore in a current account. 1 crore in a current account. Spent over ₹ 2 lakh on foreign travel. 2 lakh on foreign travel. Paid electricity bills exceeding ₹ 1 lakh in a year. 1 lakh in a year. TDS deducted is ₹ 25,000 or more ( ₹ 50,000 for senior citizens). 25,000 or more ( 50,000 for senior citizens). You own foreign assets or have signing authority in a foreign account. Note: The cases discussed above are illustrative in nature. For updated terms and conditions applicable on an individual basis, discuss your case with a certified financial advisor or tax consultant. Filing your ITR voluntarily and promptly despite being exempt provides several advantages: Claim tax refunds : If any TDS has been deducted, filing is essential to claim it back. Once the income tax is filed, the tax department will process your refund, which will be delivered to the bank account mentioned in your tax submission form. : If any TDS has been deducted, filing is essential to claim it back. Once the income tax is filed, the tax department will process your refund, which will be delivered to the bank account mentioned in your tax submission form. Proof of income : ITR acts as credible income proof for financial transactions. Some banking institutions and credit card issuing institutions also permit the submission of ITR documents for carrying out a background check on an individual's income proof. : ITR acts as credible income proof for financial transactions. Some banking institutions and credit card issuing institutions also permit the submission of ITR documents for carrying out a background check on an individual's income proof. Loan or visa approvals : Banks and embassies often ask for ITRs. These documents are utilised even for personal loans and visa approvals. They are crucial as they are backed by the government. : Banks and embassies often ask for ITRs. These documents are utilised even for personal loans and visa approvals. They are crucial as they are backed by the government. Carry forward losses : ITR filing helps in carrying forward capital or business losses. This is crucial because if the income tax return is filed on a consistent basis, the taxpayer can smoothly make sure that they are able to carry forward losses, make capital loss claims in their tax forms and ensure that their overall tax liability is reduced. : ITR filing helps in carrying forward capital or business losses. This is crucial because if the income tax return is filed on a consistent basis, the taxpayer can smoothly make sure that they are able to carry forward losses, make capital loss claims in their tax forms and ensure that their overall tax liability is reduced. Tax compliance history: It builds a good track record with tax authorities. Such a healthy practice also boosts your credit profile and ensures that your credit score remains high when other financial obligations, such as credit card bills and personal loan EMIs, are repaid in a timely manner. In short, for FY 2024-25, if your income is below ₹ 2.5 lakh (old regime) or ₹ 3 lakh (new regime), then you are not required to file an ITR until and unless you meet specific criteria. Still, voluntary filing is always advisable, which is the most prudent practice for long-term financial planning and building credibility. For all personal finance updates, visit here. Disclaimer: This article is for informational purposes only and should not be treated as tax advice. Please consult a certified tax professional for guidance tailored to your financial situation.
