Filing ITR under the 7th Proviso to Section 139 (1)

The Central Board of Direct Taxes mandates everyone to file the income tax return if one’s income exceeds the basic exemption limit. Filing an income tax return every year on time has many benefits even if your annual income is below the minimum taxable limit. Key changes to Indian tax regulations from time to time would impact the process of income tax return filing. The Central Board of Direct Taxes accordingly makes changes in the income tax return forms and notifies the ITR form to be used every year by each category of taxpayers.

This assessment year 2020-21 (the financial year 2019-20), Income Tax Return (ITR) form contains a section in ‘Part A- General Information’ that asks you to tick (yes/no) for ‘Are you filing return of income under the seventh proviso to section 139 (1) but otherwise not required to furnish return of income?’ along with asking you to furnish various information required as per the provision. So, what is this 7th proviso to section 139 (1) is all about?

What is the 7th Proviso to Section 139 (1) of the Income Tax Act, 1961?

As per Section 139 (1) of the Income Tax Act, 1961, income tax return filing is mandatory for a certain class of people mentioned below –

Company or a firm;
A person other than a company or a firm, if his total income during the previous year exceeded the maximum limit not chargeable to income tax.

Section 139 (1) needs you to furnish a return of income in the prescribed form and manner. However, The Finance (No. 2) Act, 2019 has now inserted a new 7th Proviso to Section 139 (1) of the Income Tax Act, 1961 with effect from 1st April 2020. As per the 7th Proviso to Section 139 (1), it is mandatory to file the income tax return for a certain class of people who carries out certain high-value transactions mentioned in the section even though their total income is below the basic exemption limit (who are otherwise not required to file the income tax return).

Who needs to File Income Tax Return under 7th Proviso to Section 139 (1) of the Income Tax Act, 1961?

As per the Income Tax Department and its laws, a person referred to in clause (b) of section 139 (1) is only required to furnish a return under the 7th Proviso to Section 139 (1) of the Income Tax Act, 1961, if such person has undertaken the certain high-value transactions specified in the section during the financial year. That means 7th Proviso to Section 139 (1) of the Income Tax Act is applicable for –

An individual
Hindu undivided family (HUF)
Association of persons
Body of individuals (whether incorporated or not)
An artificial juridical person

Filing income tax returns under 7th Proviso to Section 139 (1) of the Income Tax Act, 1961 is not applicable for a company or a firm, as they are not covered under clause (b) of section 139 (1).

What are the High-Value Transactions Covered under 7th Proviso to Section 139 (1) of the Income Tax Act, 1961?

Furnishing of income tax return is mandatory for a person who is otherwise not required to furnish the return if the person has undertaken the following high-value transactions during the financial year –

The aggregate of deposits in current account/accounts exceeding INR 1 crore

In case deposited amount or aggregate of the amounts deposited into one or more current accounts maintained by the person with banks or co-operative banks is INR 1 crore or more, that person is required to furnish the return under 7th Proviso to Section 139 (1) of the Income Tax Act, 1961. Deposits in any mode such as cash, cheque or online transfer, etc are covered.

The aggregate of expenditures on foreign travel exceeding INR 2 lakhs

In case a person incurs expenditure aggregating to INR 2 lakhs and more on foreign tours and travels, the income tax return needs to be filed under 7th Proviso to Section 139 (1) of the Income Tax Act, 1961. Expenditure incurred for travelling to a foreign country can be for your own travel or for any other person.

The aggregate of expenditure towards consumption of electricity exceeding INR 1 lakh

In case a person incurs expenditure aggregating to INR 1 lakh and more towards consumption of electricity, the income tax return needs to be filed under 7th Proviso to Section 139 (1) of the Income Tax Act, 1961. However, it covers only the consumption expenditure where electricity is consumed by the person concerned.

7th Proviso to Section 139 (1) of the Income Tax Act is also applicable for any other high-value transactions or conditions prescribed by the Central Board of Direct Taxes.

Guide to File Income Tax Return under 7th Proviso to Section 139 (1) of the Income Tax Act, 1961

Part A-General Information section of the income tax return form includes a column that asks you to tick yes/no for the question - ‘Are you filing return of income under the seventh proviso to section 139 (1) but otherwise not required to furnish return of income?’.

Tick ‘NO’ if it is not applicable for you
Tick ‘yes’ if you have undertaken any high-value transactions prescribed as per the provisions of the section and your annual income is below the basic exemption limit.

You can register or log-in (if already registered) to e-Filing Home Page, Income Tax Department, Government of India (incometaxindiaefiling.gov.in) and file your income tax return within prescribed time with some simple and easy steps.

All you need to do is log-in and choose an ITR form notified by the Income Tax Department and the relevant assessment year.
Fill in all the relevant details in the income tax return form such as PAN, ITR form number and your mode of submission, etc
Validate all the details that you have filled in the form.
After validation, the XML file will be generated, a soft copy of which needs to be saved. Then click on the ‘upload return’ tab to upload the saved XML file.
Submit it with your digital signature and verify electronically an acknowledgment form (ITR verification) that is generated after submission.
Post verification, your income tax return will be processed and discrepancies, if any will be brought to notice for explanations from you.

It is important to keep the amendments in view and be compliant with the tax rules.