Mandatory furnishing of return of income by certain persons

Budget 2019-20 Budget Speech on 05.07.2019

Compulsory filing of return: It is proposed to make return filing compulsory for persons, who have deposited more than Rs. 1 crore in a current account in a year, or who have expended more than Rs. 2 lakh on foreign travel or more than Rs. 1 lakh on electricity consumption in a year or who fulfils the prescribed conditions, in order to ensure that persons who enter into high value transactions also furnish return of income. It is also proposed to provide that a person whose income becomes lower than maximum amount not chargeable to tax due to claim of rollover benefit of capital gains shall also be required to furnish the return.

Memorandum of Clause 39 of Finance Bill 2019

Currently, a person other than a company or a firm is required to furnish the return of income only if his total income exceeds the maximum amount not chargeable to tax, subject to certain exceptions. Therefore, a person entering into certain high value transactions is not necessarily required to furnish his return of income. In order to ensure that persons who enter into certain high value transactions do furnish their return of income, it is proposed to amend section 139 of the Act so as to provide that a person shall be mandatorily required to file his return of income, if during the previous year, he

(i) has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current account maintained with a banking company or a co-operative bank; or
(ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or
(iii) has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or
(iv) fulfils such other prescribed conditions, as may be prescribed.

Further, currently, a person claiming rollover benefit of exemption from capital gains tax on investment in specified assets like house, bonds etc., is not required to furnish a return of income, if after claim of such rollover benefits, his total income is not more than the maximum amount not chargeable to tax . In order to make furnishing of return compulsory for such persons, it is proposed to amend the sixth proviso to section 139 of the Act to provide that a person who is claiming such rollover benefits on investment in a house or a bond or other assets, under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB of the Act, shall necessarily be required to furnish a return, if before claim of the rollover benefits, his total income is more than the maximum amount not chargeable to tax.

These amendments will take effect from 1st April, 2020 and will, accordingly apply in relation to assessment year 2020-2021 and subsequent assessment years.

[Clause 39]

Clause 39 of Finance Bill 2019

Amendment of section 139

39. In section 139 of the Income-tax Act, in sub-section (1), with effect from the 1st day of April, 2020,––

(a) in the sixth proviso, after the word, figures and letters “section 10BA”, the words, figures and letters “ or section 54 or section 54B or section 54D or section 54EC or section 54F or section 54G or section 54GA or section 54GB” shall be inserted

(b) after the sixth proviso, and before Explanation 1 the following proviso shall be inserted, namely:––

“Provided also that a person referred to in clause (b), who is not required to furnish a return under this sub-section, and who during the previous year––

(i) has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or

(ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or

(iii) has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or

(iv) fulfils such other conditions as may be prescribed

shall furnish a return of his income on or before the due date in such form and verified in such manner and setting forth such other particulars, as may be prescribed.”;

(c) after Explanation 5, the following Explanation shall be inserted, namely:––

‘Explanation 6.—For the purposes of this sub-section,—

(a) “banking company” shall have the meaning assigned to it in clause (i) of the Explanation to section 269SS;

(b) “co-operative bank” shall have the meaning assigned to it in clause (ii) of the Explanation to section 269SS.’.

Explanation of Clause 39 of Finance Bill 2019

Clause 39 of the Bill seeks to amend section 139 of the Incometax Act relating to return of income

Sub-section (1) of the said section provides for furnishing of return by every person specified therein. It is proposed to insert a proviso in the said sub-section so as to provide for furnishing of return by a person referred to in clause (b) of the said sub-section (1), who is not required to furnish a return under the said sub-section, if such person during the previous year —

(i) has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current account maintained with a banking company or a co-operative bank ; or

(ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or

(iii) has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or

(iv) fulfills such other conditions as may be prescribed. It is further proposed to amend the said sub-section so as to provide for furnishing of return by a person who is claiming rollover benefit of capital gains, for investment in a house or a bond or any other asset under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB.

These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 20202021 and subsequent years.

Examples of Deposit in Current Account

ITR Mandatory in AY 2020-21 , As amount deposited Exceeds Rs 1 Crore

Examples of Expenses on Foreign Travel

ITR Mandatory in AY 2020-21 , As amount of expenses Exceeds Rs 2 Lakh

Examples Expenses on Electricity

Mr Ram

ITR Mandatory in AY 2020-21 for Mr Ram , As Amount of expenses exceeds Rs 1 Lakh