Avoid Filing ITR? See Who Is Legally Exempt in India [Latest Rules 2025]

Why Understanding ITR Exemption Eligibility and Rules Matters for Taxpayers in India

Knowing the ITR exemption rules is essential for every taxpayer. It helps you avoid penalties for non-filing by ensuring you understand when you’re not required to submit an Income Tax Return. Staying informed about these rules can save you from unnecessary legal trouble and fines.

Additionally, understanding ITR exemption eligibility allows you to claim tax benefits correctly. You can maximize deductions, rebates, and refunds without confusion. This ensures you don’t miss out on potential savings.

Even if you're not obligated to file, knowing these exemptions helps you decide if voluntary ITR filing is worth it. For example, filing may be beneficial if you’re applying for a loan or visa. It can also help in carrying forward losses to offset future income.

Lastly, understanding the latest rules ensures you're always compliant with changing tax laws. It’s crucial to stay updated on income tax return filing exemptions to avoid tax-related issues.

ITR Filing Due Date & Penalty (FY 2024-25)

Who Is Not Required to File an ITR in India?

You are not required to file an ITR if your situation matches any of the following scenarios, as per the Income Tax Department’s latest rules:

1. Income Below the Exemption Limit

If your total gross income before any deductions (like Section 80C) is:

• Below ₹2.5 lakh (Old Regime) or ₹4 lakh (New Regime), and
• You don’t meet any of the other mandatory filing conditions

Then, you are exempt from filing an ITR.

2. Senior Citizens Aged 75 and Above – Section 194P

If you are a resident senior citizen aged 75 or above, you are exempt from ITR filing if all of the following conditions are met:

• You earn only pension income and interest income from the same bank.
• You declare your income to the specified bank using Form 12BBA.
• The bank deducts the applicable TDS after allowing deductions under Chapter VI-A and rebates under Section 87A.

No ITR filing is required in such cases.

3. Agricultural Income Only

If you earn only agricultural income, and:

• It is less than ₹5,000 – no filing needed.
• It is more than ₹5,000, but your non-agricultural income is below the basic exemption limit – still not mandatory to file ITR.

If you have other income like rent, salary, or capital gains, filing may be required.

4. Income Below ₹4 Lakh Under the New Tax Regime

The new tax regime offers a ₹4 lakh exemption limit as of Budget 2025. So, salaried individuals, freelancers, or pensioners earning less than ₹4 lakh annually under the new regime are not required to file an ITR, unless they fall into other conditions mentioned below.

Tips:  Even if exempt, filing ITR voluntarily helps build financial credibility.

When Filing ITR Is Mandatory Even With Low Income

There are certain high-value transactions and conditions where ITR filing is mandatory, regardless of your income level. Below are the scenarios where you must file an ITR:

• High-Value Financial Transactions:
  • Deposits in one or more current accounts exceeding ₹1 crore
  • Foreign travel expenses exceeding ₹2 lakh annually
  • Annual electricity bill payments exceeding ₹1 lakh
• TDS or TCS Thresholds:
  • If TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) exceeds ₹25,000 (₹50,000 for senior citizens), you must file an ITR.
• Foreign Assets or Income:
  • If you have foreign assets or income, you must file an ITR.
  • This includes being a signatory in any foreign bank account or investing in foreign assets.
• Business and Professional Income:
  • If your business turnover exceeds ₹60 lakh or professional receipts exceed ₹10 lakh, filing ITR is mandatory.
• Company Directors and Unlisted Shares:
  • If you are a director in a company or hold unlisted equity shares in an Indian company, you are required to file an ITR.

Basic Exemption Limits for Income Tax Filing in India for FY 2024-25

The basic exemption limit refers to the minimum income level up to which individuals are not required to file an Income Tax Return (ITR). For FY 2024-25, the exemption limits are as follows:

Note: The New Tax Regime exemption limit has been raised to ₹4 lakh in Budget 2025 to provide relief to low-income earners. Under the Old Tax Regime, the exemptions vary based on age and income levels.

When Filing ITR Is Mandatory – Even With Low Income

Even if your income is below the basic exemption limit, you may still be legally required to file an Income Tax Return (ITR) under certain conditions. Here are the key scenarios where ITR filing is mandatory, regardless of your income level:

• High-Value Financial Transactions:
  • Deposits of ₹1 crore or more in one or more current bank accounts
  • Expenses exceeding ₹2 lakh on foreign travel during the financial year
  • Electricity consumption bills exceeding ₹1 lakh annually
• TDS or TCS Deducted:
  • If TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) is ₹25,000 or more during the financial year (₹50,000 or more for senior citizens)
• Foreign Assets or Income:
  • Ownership or financial interest in foreign assets or bank accounts
  • Income generated from any foreign source
  • Being a signatory in a foreign bank account
• Business or Professional Income:
  • Business turnover exceeds ₹60 lakh
  • Professional income exceeds ₹10 lakh in the financial year
• Other Mandatory Scenarios:
  • You are a director in a company
  • You hold unlisted equity shares of an Indian company
  • You want to carry forward a loss or claim a tax refund
  • You have received a notice from the Income Tax Department

Benefits of Filing ITR in 2025 Even If Not Mandatory

Filing your Income Tax Return (ITR) in 2025 comes with several financial, legal, and personal advantages. Whether you're a salaried employee, student with income, freelancer, or senior citizen, here’s why you should consider filing voluntarily:

Even if you earn below the exemption limit, filing ITR voluntarily in FY 2024-25 is a smart move. It enhances your financial footprint, protects you from legal risks, and unlocks a range of benefits—especially as India moves toward digitized and transparent taxation.

Here’s a clean list of benefits of filing ITR in 2025, even if not mandatory:

1. Helps in loan approvals (home, auto, education, personal, business)
2. Required for visa applications (USA, UK, Canada, Schengen, etc.)
3. Enables carry forward of capital or business losses
4. Allows claim of tax refunds for excess TDS deducted
5. Serves as valid proof of income and address
6. Reduces chances of income tax notices or legal scrutiny
7. Builds financial profile for future planning and credibility
8. Required for certain registrations (GST, MSME, startups)
9. Mandatory for opening current accounts in some banks
10. Needed for high-value investments in stocks, mutual funds, or property
11. Useful for applying for high-premium insurance policies
12. Helps in availing subsidies or participating in government tenders
13. Creates a documented financial history over the years
14. Ensures smooth processing of legal and compliance matters
15. Supports PAN-Aadhaar linking, property deals, and KYC updates

Frequently Asked Questions (FAQs)