Do You Need to File the Return of Income?

Filing a Return of Income (ROI) is a crucial obligation under the Income Tax Act, 1961, in India. It ensures compliance with tax laws, helps claim refunds, and maintains a record of your financial activities. But do you need to file one? The answer depends on your income, entity type, and specific circumstances. Let’s break it down person-wise to understand who is mandatorily required to file a Return of Income for AY 2025-26, based on the latest provisions.

Who Must File a Return of Income?

The Income Tax Act, 1961, mandates certain individuals, companies, partnership firms (including LLPs), and other persons to file their returns, regardless of income levels or tax liability. Here’s a detailed look:

1. Companies

• Mandatory Filing: All companies, whether private, public, or one-person companies (OPCs), registered under the Companies Act, 2013, must file a Return of Income, irrespective of profit or loss. This applies even if the company has no taxable income or is exempt under Section 11 (e.g., charitable trusts).

• Form: Typically, Form ITR-6 is used, unless exempt under specific sections.

• Reason: Companies are subject to corporate tax and must comply with Section 139(1) to report financial activities, including under the Minimum Alternate Tax (MAT) if applicable.

2. Partnership Firms (Including LLPs)

• Mandatory Filing: All partnership firms, including Limited Liability Partnerships (LLPs) registered under the LLP Act, 2008, must file a Return of Income, regardless of profit, loss, or tax liability.

• Form: Form ITR-5 is applicable for firms and LLPs.

• Reason: Firms are taxable entities under Section 139(1), and filing is compulsory to report partnership income, even if exempt or losses are incurred. LLPs with a turnover above ₹1 crore (or ₹10 crore for digital transactions) may also require a tax audit.

3. Individuals

• Mandatory Filing: Individuals must file a Return of Income if they meet any of the following criteria for AY 2025-26:

  • Income Exceeds Basic Exemption Limit: Total income (after deductions) exceeds ₹3 lakh under the new tax regime, or applicable limits under the old regime (e.g., ₹2.5 lakh general, ₹3 lakh senior citizen).

  • Foreign Assets or Income: Owns foreign assets (e.g., property, bank accounts) or has foreign income, regardless of amount.

  • Tax Audit Requirement: Business or professional income exceeds ₹1 crore (or ₹10 crore for digital transactions), requiring a tax audit under Section 44AB.

  • Loss to Carry Forward: Incurred a loss (e.g., capital loss) they wish to carry forward to future years.

  • High TDS/TCS: Received TDS/TCS exceeding ₹25,000 (₹50,000 for seniors) without sufficient income to justify it.

  • Cash Deposits: Deposited ₹20 lakh or more in current accounts or ₹1 crore in savings accounts during FY 2024-25.

  • Expenditure on Foreign Travel/Credit Card: Spent ₹7 lakh or more on foreign travel or ₹10 lakh on credit cards.

  • Directorship or Unlisted Shares: Is a director in a company or holds unlisted equity shares.

• Form: ITR-1 (Sahaj) for basic cases, ITR-2 to ITR-4 for others, based on income sources.

• Reason: Section 139(1) and related provisions ensure individuals with significant financial activity or liability file returns for transparency and compliance.

4. Any Other Person

• Mandatory Filing: This category includes Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Body of Individuals (BOIs), Artificial Juridical Persons (AJPs), and trusts (other than those exempt under Section 11). Filing is mandatory if:

  • Income Exceeds Exemption Limit: Total income exceeds the basic exemption limit (₹2.5 lakh for HUFs, similar to individuals).

  • Business/Profession: Engages in business or profession with turnover exceeding ₹1 crore (or ₹10 crore digitally), requiring a tax audit.

  • Foreign Assets: Holds foreign assets or earns foreign income.

  • Loss Carry Forward: Wishes to carry forward losses.

  • Specific Transactions: Involves high cash deposits, foreign travel, or credit card spending as above.

• Form: ITR-5 for HUFs/AOPs/BOIs/AJPs, ITR-7 for trusts.

• Reason: These entities are taxable under the Act and must report income to comply with Section 139(1) and avoid penalties.

Why Filing is Important?

Even if not mandatorily required, filing a Return of Income can help claim refunds, carry forward losses, or establish financial credibility. Non-filing when mandatory attracts penalties under Section 271F (₹5,000, or ₹1,000 if income is below ₹5 lakh).

Conclusion

Whether you’re an individual, company, partnership firm, or other entity, understanding your obligation to file a Return of Income is the first step toward financial compliance. For AY 2025-26, assess your income, transactions, and entity type against the Income Tax Act provisions. If unsure, consulting a professional can ensure you meet all requirements seamlessly.

Stay informed with more tax insights on our blog, and feel free to explore resources to guide your next steps. Have questions? Request a Consultation to discuss your specific needs.

Published on: June 25, 2025