Section 139(1) Of Income Tax Act

Filing income tax returns is an important aspect of every citizen’s life and civic duty. However, it can be a confusing subject for many people. Filing returns is a must-do for every person whose income exceeds the minimum tax exemption limit. The Income Tax Return (ITR) form contains a section called section 139(1) which has been in the news in the recent past. But what is section 139-1 of the Income Tax Act and why is it important?

What is Section 139(1) of Income Tax Act?

Income tax returns must be filed either on or before the due date of the ITR when the total annual income of an individual or firm is in excess of the maximum tax-free amount. The current maximum tax-free amount is Rs 2.5 lakh, when your income exceeds Rs 2.5 lakh you have to file your returns. However, if they have failed to file their returns within the due date, then they can file their ITR under the guidelines of Section 139 1 of the Income Tax Act.

So Section 139 of the Income Tax Act deals with the following provisions

• Section 139 (1) deals with mandatory returns and voluntary returns
• Section 139 (3) deals with filing ITR in case of loss
• Section 139 (4) deals with the late filing of ITR
• Section 139 (5) deals with filing revised ITRs
• Section 139 (4a) deals with the ITR of charitable and religious trusts
• Section 139 (4b) deals with ITRs to be filed by political parties
• Section 139 (4c) and Section 139 (4d) deals with ITRs to be filed entities claiming exemption under Section 10
• Section 139 (4e) deals with the filing of ITR by business trusts
• Section 139 (4f) deals with the filing of ITR by investment funds
• Section 139 (9) of the Income Tax Act deals with defective ITRs

What are the due dates of Section 139(1) of the Income Tax Act?

Persons who do not need to have their books of accounts assessed and audited should file their income tax returns by July 31 of every assessment year. This category may include the following:

• An employee or salaried person
• A professional or self-employed person
• A freelancer
• A consultant

Persons and entities who need to have books of accounts assessed and audited should file their income tax returns by September 30 of every assessment year. This category may include the following:

• A professional or self-employed person
• A company
• A consultant
• A working partner who is employed with a company or firm is required to have their books of accounts audited

What is the importance of Section 139(1) of the Income Tax Act?

Section 139 1 of the Income Tax Act deals with both mandatory income tax returns and voluntary income tax returns.

Under Mandatory returns, the following entities or persons have to file a mandatory ITR

• Any public, private, foreign, or domestic company or firm located in and/or conducting their business within the country
• Any individual whose total income exceeds the maximum exemption limit
• Any resident of India who has assets located outside the country (this includes financial interests in a foreign entity) or any resident who has the signing authority for an account-based out of the country
• All firms including Limited Liability Partnerships (LLPs) and Unlimited Liability Partnerships
• All Association of Persons (AOP), Hindu Undivided Families (HUF), and Body of Individuals (BOI) if their aggregate income exceeds the exemption limit

Under Voluntary returns, the individuals or entities are not mandatorily required to file their returns. Even so, if they file their returns, though they are voluntary, they are considered valid tax returns.

What is the importance of the seventh provison to Section 139(1) of the Income Tax Act?

In an effort to broaden its tax base and nab tax evaders, the government of India has added new criteria for filing tax returns under Section 139(1) of the Income Tax Act. This criterion was added as the seventh proviso of Section 139(1) of the Income Tax Act. This went into effect on April 1, 2020. Under this proviso, certain classes of individuals or entities, if they carry out high-value transactions as mentioned in the section, will have to file income tax returns even if they fall within the tax exemption limit.

Who needs to file tax returns under the seventh proviso of Section 139(1) of the Income Tax Act?

Under the seventh proviso of section 139(1) of the Income Tax Act, the following persons, and entities:

• An individual
• Body of Individuals
• Association of Persons
• HUF or Hindu Undivided Family
• Artificial juridical person

Which transactions are covered under the seventh proviso of Section 139(1) of the Income Tax Act?

If a person or entity has done any of the mentioned “high-value transactions” within the timeframe of the FY, then they will need to file an income tax return

1. Total expenses for foreign travel has exceeded Rs 2 lakh: If you have spent over Rs 2 lakh on foreign travel for yourself or any other person, then you will have to file an ITR
2. Total deposit amount in your current accounts is in excess of Rs 1 crore: If the total deposit amount in a single or multiple current accounts exceeds Rs 1 crore then you have to file an ITR under the seventh proviso of Section 139 1 of Income Tax Act. The deposits made into these accounts could be in any mode such as online transfer, cash, cheque, and so on.
3. You have paid electricity bills in excess of Rs 1 lakh: If your total expenditure on electricity bills exceeds Rs 1 lakh then you must file an income tax return. The caveat is that the expenditure must be for electricity consumed by the individual concerned. So if you are staying away from your parents but are paying their electricity bills, you cannot file ITR on their high-value electricity bills are you live away from them.
4.  It is also applicable for other high-value transactions as prescribed by the CBDT or the Central Board of Direct Taxes: To date, the CBDT has not prescribed any further transactions or conditions.

If an individual or entity fulfills even one of the above conditions they will need to file an ITR. It is not necessary that all the above conditions have to been fulfilled.

How to file an ITR under the seventh proviso of Section 139(1) of the Income Tax Act

On the Income Tax Return Form, under the ‘Part A-General Information’ section, there is a column with the query ‘Are you filing return of Income under the seventh proviso of Section 139 (1) but otherwise not required to furnish return of income?’

• Click ‘no’ if it does not apply you
• Click ‘yes’ if you have done any of the mentioned “high-value” transactions as specified under the provisions of the specified section and if your annualized income is within the tax exemption

Conclusion

Though income tax filing can seem like a daunting task, it has become more accessible than ever with e-filing. For those who fall within the tax-exempt slab, it will be easy to tell if you have had any high-value transactions. In that case, you must file ITR to avoid any unnecessary complications later on.