Key takeaways
What this article covers, in order:
- Rule 1: your income is above the basic exemption limit
- Rule 2: high-value spending or deposits, even on low income
- Rule 3: you hold assets or signing authority outside India
- Rule 4: companies and firms always file
- Worked example: a Pune engineer who owes no tax but must file
- When filing is worth it even if it is not required
Filing an income-tax return is mandatory if your income for the year, before deductions such as 80C and 80D, exceeds the basic exemption limit, which for FY 2025-26 is ₹4 lakh under the default new regime. It is also mandatory, whatever your income, if you deposited more than ₹1 crore in current accounts, spent more than ₹2 lakh on foreign travel or more than ₹1 lakh on electricity, had TDS and TCS of ₹25,000 or more (₹50,000 for senior citizens), deposited ₹50 lakh or more in savings accounts, or hold assets abroad as a resident. Companies and firms must file every year regardless of income or loss.
Paying zero tax does not mean you can skip the return. The rules below apply to income earned between 1 April 2025 and 31 March 2026, which is assessment year (AY) 2026-27.
Rule 1: your income is above the basic exemption limit
The core test in section 139(1) is whether your total income, computed before Chapter VI-A deductions (80C, 80D, 80G and the rest) and before capital-gains exemptions under sections 54 to 54GB, exceeds the maximum amount not chargeable to tax. For FY 2025-26:
- New regime (the default): ₹4,00,000 for every individual, whatever their age.
- Old regime, below 60: ₹2,50,000.
- Old regime, 60 to 79: ₹3,00,000.
- Old regime, 80 and above: ₹5,00,000.
Zero tax after rebate still means you must file
Under the new regime, a resident individual with taxable income up to ₹12 lakh gets a rebate under section 87A of up to ₹60,000, which wipes out the tax. For a salaried person, the ₹75,000 standard deduction stretches that to about ₹12.75 lakh of salary. But the rebate reduces tax, not income. If your income is above ₹4 lakh, you must file even though you owe nothing.
Rule 2: high-value spending or deposits, even on low income
The seventh proviso to section 139(1) requires a return, even if your income is below the exemption limit, if during the year you:
- deposited more than ₹1 crore in aggregate in one or more current accounts;
- spent more than ₹2 lakh on foreign travel, for yourself or anyone else;
- spent more than ₹1 lakh on electricity.
Rule 12AB, notified by CBDT in April 2022, adds more triggers. You must file if:
- your business turnover exceeded ₹60 lakh;
- your professional gross receipts exceeded ₹10 lakh;
- TDS and TCS together came to ₹25,000 or more (₹50,000 or more for a resident aged 60 or above);
- your deposits in one or more savings bank accounts added up to ₹50 lakh or more.
Rule 3: you hold assets or signing authority outside India
A resident (other than "not ordinarily resident") who holds any asset located outside India, including a financial interest in a foreign entity, is a beneficiary of such an asset, or has signing authority over a foreign account, must file a return even if their income is below the exemption limit. RSUs in an overseas employer's stock plan and a foreign bank account kept from a stint abroad both count. There is a narrow exception for someone who is only a beneficiary of a foreign asset whose income is already taxed in another person's hands.
Rule 4: companies and firms always file
A company or a partnership firm (including an LLP) must file a return every year, whether it made a profit, a loss or nothing. Trusts, political parties and research institutions have their own filing provisions and use ITR-7.
Worked example: a Pune engineer who owes no tax but must file
Nikhil, 29, is a mechanical engineer in Pune earning a salary of ₹11,50,000 in FY 2025-26. He has no other income and stays in the new regime.
- Taxable income: ₹11,50,000 less the ₹75,000 standard deduction = ₹10,75,000.
- Tax at slab rates: nil on the first ₹4,00,000; 5% on the next ₹4,00,000 = ₹20,000; 10% on the remaining ₹2,75,000 = ₹27,500. Total ₹47,500.
- Rebate under section 87A: his taxable income is within ₹12 lakh, so the rebate (up to ₹60,000) covers the full ₹47,500. Tax payable: nil.
- Must he file? Yes. His income of ₹10,75,000 is well above the ₹4,00,000 limit. The rebate removes the tax, not the obligation.
A contrast: a Kochi retiree who does not have to file but should
Leela, 68, lives on interest of ₹2,90,000 a year from bank FDs. That is below both the ₹4 lakh new-regime limit and the ₹3 lakh old-regime senior-citizen limit. Her bank deducted ₹29,000 of TDS because she did not submit Form 15H, which is below the ₹50,000 senior-citizen TDS trigger. She is not required to file, but filing is the only way to get the ₹29,000 back as a refund.
When filing is worth it even if it is not required
- To claim a TDS refund, as in Leela's case.
- To carry forward losses. Capital losses and business losses can be carried forward only if the return for the year of the loss is filed by the due date.
- To build a record of income. Banks, lenders and visa offices routinely ask for past returns as proof of income.
- To report exempt income cleanly, such as a small tax-free equity gain, so that your AIS and your filings agree.
What happens if you should have filed and did not
- Late fee: filing after the due date attracts a fee under section 234F of up to ₹5,000, or ₹1,000 if total income does not exceed ₹5 lakh.
- Interest: unpaid tax attracts interest under section 234A for the delay, alongside any advance-tax interest.
- Lost losses and refunds: losses for that year cannot be carried forward, and refunds wait until you file.
- Notices: the department sees your TDS, high-value transactions and bank interest through AIS, so non-filing with reportable activity tends to be noticed.
Deadlines still open for AY 2026-27
As of November 2026, the original due dates for non-audit cases have passed: 31 July 2026 for ITR-1 and ITR-2, and 31 August 2026 for non-audit business and professional income. Audit cases have until 21 November 2026 after a CBDT extension. Anyone can still file a belated return until 31 December 2026. After that, an updated return (ITR-U) remains possible for up to 48 months from the end of the assessment year, but only to report more income and pay additional tax, not to claim a refund or a loss.
What changes from April 2026
Income earned from 1 April 2026 falls under the Income-tax Act, 2025, which replaces "previous year" and "assessment year" with a single "tax year". The Income Tax Department has said the new Act imposes no new tax. FY 2025-26 income, covered here, stays under the 1961 Act.
Common mistakes
- Testing against income after deductions. 80C and similar deductions do not bring you under the filing limit.
- Treating the 87A rebate as an exemption from filing. It is not.
- Forgetting the non-income triggers. A foreign holiday over ₹2 lakh or ₹50 lakh passing through savings accounts can create an obligation on modest income.
- Assuming a loss-making business need not file. A firm or company always files, and an individual must file on time to keep a loss.
hellobooks< / a > -helps">How HelloBooks helps
HelloBooks does not file income-tax returns. For business owners and professionals, though, several of the filing triggers above, such as turnover over ₹60 lakh, professional receipts over ₹10 lakh, current-account deposits and TDS credits, are figures that come straight from your books. HelloBooks keeps them in view all year: bank feeds and reconciliation show what passed through each account, the P&L shows turnover and profit as they build up, and TDS deducted by your customers is reconciled against Form 26AS. Your CA then has clean figures for the return, and you know early whether you have to file.
This is general information as of November 2026, not tax or legal advice. Check the official source or a qualified CA for your situation.
