Understanding Section 139 of the Income Tax Act, 1961

Section 139 of the Income Tax Act, 1961 is crucial for anyone who earns taxable income in India. Whether you’re an individual, freelancer, business owner, or part of a charitable or religious organisation, knowing the requirements and deadlines under Section 139 can save you from costly penalties. Failing to file your Income Tax Return (ITR) on time can lead to fines, legal issues, and a disrupted financial plan. Stay ahead and ensure you're fully compliant with tax laws, so you don't miss out on essential benefits or face unexpected charges.

Here’s a breakdown of the key sub-sections under Section 139 of the Income Tax Act, 1961, detailing the requirements and deadlines for filing Income Tax Returns:

Section 139(1) of the Income Tax Act, 1961 outlines the mandatory and voluntary requirements for filing Income Tax Returns (ITR). It applies to individuals, businesses, and entities that are required to submit their returns to ensure compliance with tax regulations. 

Who Needs to File an ITR Under Section 139(1)

Mandatory Filing

Certain individuals and entities are obligated to file their ITR under Section 139(1) if their total income exceeds the taxable exemption limit. Here’s who falls under this category:

• Individuals: Anyone whose total income exceeds the exemption limit must file their return by the due date

• Entities: All entities, whether private, public, domestic, or foreign, doing business in India or with operations in India must file returns

• Firms: This includes Limited Liability Partnerships (LLPs) and Unlimited Liability Partnerships (ULPs)

• Residents with foreign assets: Any individual who holds assets or has financial interests outside India must file their return, even if the income is not earned in India

• Hindu Undivided Families (HUFs), Associations of Persons (AOPs), and Bodies of Individuals (BOIs): These groups must file if their total income surpasses the prescribed exemption limit

Exemptions Under Section 139(1c)

There are certain exemptions available for individuals who meet specific criteria. These exemptions are granted by the Central Government, and the notification must be placed before Parliament for 30 days before they become effective. If both Houses of Parliament agree, the exemption is granted, otherwise, the notification becomes ineffective.

Voluntary Returns Under Section 139(1)

In some cases, individuals or entities are not required by law to file an ITR but may choose to do so voluntarily. Filing a voluntary return is perfectly valid and can be beneficial for various reasons, such as:

• Tax planning: To ensure correct tax liabilities are reported and any eligible refunds are received

• Compliance: Some individuals may want to keep their tax records updated for future financial activities or loan applications

It is important to note that voluntary returns do not carry any penalties but must still comply with the Income Tax Act’s filing requirements.

When is the Filing of an ITR Mandatory

Income Exceeds Exemption Limit: Individuals whose income exceeds the threshold must file by the due date.

• Business or Employment in India: Any company, firm, or individual operating in India

• Foreign Assets or Accounts: Residents with foreign financial interests or assets must file ITRs

• HUFs, AOPs, BOIs: These groups must file returns if their income exceeds the exemption limit

Section 139(3) of the Income Tax Act, 1961 covers the filing of Income Tax Returns (ITR) when an individual or entity sustains a financial loss in the previous year. While it may not always be mandatory for individuals, it is crucial for companies and firms to file their returns when they incur a loss to ensure they can carry it forward to offset future income.

When is Filing an ITR Mandatory for Losses

For Individuals

• If an individual incurs a loss in the previous financial year, filing an ITR is not mandatory, except under certain circumstances

• However, if the individual wants to carry forward the loss (e.g., capital gains or business profits), they must file the return within the due date

For Companies and Firms

• Mandatory filing is required for companies and firms if the loss is under ‘Profits and Gains of Business and Profession’ or ‘Capital Gains’

• Filing an ITR is necessary to carry forward the loss and offset it against future income, but it must be filed on time

Types of Losses and Their Carry Forward Provisions

Loss from Capital Gains or Business Profits

If an individual, company, or firm incurs a loss under ‘Capital Gains’ or ‘Profits and Gains of Business and Profession,’ they must file the return on time. This ensures the loss can be carried forward to offset future income.

Loss from House Property

Losses incurred from ‘House or Residential Property’ can be carried forward even if the ITR is filed after the due date. This offers flexibility for individuals and firms dealing with real estate-related losses.

Losses from Other Sources

Losses from other sources, such as business or professional losses, cannot be carried forward unless the ITR is filed within the due date. However, losses under house property are an exception.

Losses Being Offset Within the Same Year

A taxpayer can offset a loss against income from a different category within the same fiscal year. This is permitted even if the ITR is filed after the due date.

Why is Filing for Loss Important

• Filing for a loss return allows you to carry forward the loss, which can reduce your tax liabilities in the future

• This is especially beneficial for businesses and individuals with fluctuating income over the years

• Unabsorbed depreciation can also be carried forward in certain cases, reducing taxable income in future years

Section 139(4) of the Income Tax Act, 1961 allows taxpayers to file a belated return if they miss the due date specified under Section 139(1). This return must be filed before the assessment year ends or the assessment is completed, whichever comes first.

If the ITR is filed after the due date, taxpayers are subject to a penalty under Section 234F:

• ₹5,000 penalty if the return is filed late

• ₹1,000 penalty if the total income does not exceed ₹5 Lakhs

   

However, penalties do not apply if the return was not mandatory under Section 139(1), such as for individuals with income below the exemption limit.

Section 139(5) of the Income Tax Act, 1961 allows taxpayers to file a revised Income Tax Return (ITR) if they realise there were errors or omissions in the original filing. This provision helps correct mistakes made in the initial return.

When Can a Revised Return Be Filed

• A taxpayer discovers an error or omission in their original return

• It must be filed within one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier

Conditions for Filing a Revised Return

• The original return must have been filed within the due date specified under Section 139(1)

• Belated returns cannot be revised under Section 139(5)

How Does a Revised Return Work

• The revised return replaces the original return from the date it was filed

• Once filed, the original return is considered withdrawn, and the revised return becomes valid

What Can Be Corrected in a Revised Return

• Revised returns can correct unintentional mistakes like omitted income or incorrect deductions

• Intentional concealment or false statements are not allowed, and fraudulent filings attract penalties

Section 139(5) provides taxpayers the opportunity to correct honest mistakes in their ITR, ensuring accurate tax records and avoiding penalties for unintentional errors.

Section 139(4A) of the Income Tax Act, 1961 outlines the filing requirements for charitable and religious organisations. These organisations must file their Income Tax Returns (ITR) if they earn income from specific sources and their total income exceeds the exemption limit.

Who Must File Under Section 139(4A)

Organisations that are charitable or religious trusts are required to file their ITR if they meet certain conditions:

• Income from Property Held in Trust: If the organisation receives income from property held in trust for charitable or religious purposes, it must file an ITR if the income exceeds the exemption limit

• Voluntary Contributions: If the trust or organisation receives voluntary contributions as per Section 2(24)(iia), they must file a return if their total income exceeds the taxable threshold

Exemption Under Sections 11 and 12

• Tax Exemption: Public charitable or religious institutions often seek tax exemptions under Section 11 and Section 12 of the Income Tax Act

• Filing Requirement: Even if the organisation qualifies for exemptions, it must file its return if the total income, before exemptions, surpasses the basic taxable limit

How to File the Return

• Form ITR-7: Organisations must file their return using Form ITR-7, designed specifically for trusts and institutions seeking exemptions

• Deadline: The return must be filed within the deadline specified under Section 139(1) of the Income Tax Act, electronically with a digital signature or other prescribed methods

• Mandatory Filing: If the income exceeds the prescribed limit, filing the return is mandatory to claim exemptions under Section 11 and Section 12

Section 139(4B) requires political parties to file Income Tax Returns (ITR) if their income exceeds the exemption limit, regardless of benefits under Section 13A.

When Must Political Parties File ITR

• Income Exceeds Exemption Limit: A political party must file an ITR if its total income exceeds the taxable exemption limit, excluding provisions of Section 13A.

• Chief Executive Officer’s Responsibility: The Chief Executive Officer (often the Secretary) must file the return in the prescribed format and verify it as required.

Filing Requirements

• Mandatory Filing: Political parties must file returns if their income exceeds the exempt limit, even if they qualify for exemptions under Section 13A

• Form and Verification: The return must be filed in the prescribed form and verified according to the legal requirements

Why is Filing Important for Political Parties

• Transparency and Accountability: Filing the ITR ensures financial transparency and accountability in political financing

• Legal Compliance: The provisions of the Income Tax Act apply as if the return were filed under Section 139(1)

Sections 139(4C) and 139(4D) of the Income Tax Act, 1961 apply to institutions claiming tax exemptions under Section 10. These sections mandate the filing of Income Tax Returns (ITR) if the institution’s income exceeds the exemption limit, regardless of other exemptions.

Section 139(4C): Filing for Institutions Claiming Exemption Under Section 10

Section 139(4C) requires institutions to file their return if their total income exceeds the taxable exemption limit, excluding any other exemptions under Section 10. These institutions include:

• Scientific Research Associations: Institutions engaged in scientific research

• Institutions Under Section 10(23A): Certain associations qualifying for tax benefits

• News Agencies: News agencies receiving tax benefits

• Educational and Medical Institutions: Universities, hospitals, and educational institutions

These institutions must file their ITR in the prescribed form, verifying it according to the requirements.

Section 139(4D): Filing for Universities, Colleges, and Certain Institutions

Section 139(4D) applies to universities, colleges, and other institutions not covered under other provisions. These institutions must file an ITR if they have income or loss, similar to other taxpayers.

• Institutions with unconditionally exempt income under Section 10 may use the relevant ITR form for filing

Both Section 139(4C) and Section 139(4D) ensure institutions claiming exemptions under Section 10 remain compliant when their income exceeds the exemption limit.

Section 139(4F) of the Income Tax Act, 1961 applies to investment funds mentioned in Section 115UB. This section outlines the filing requirements for these funds, ensuring they comply with tax regulations related to income or loss.

Who Must File Under Section 139(4F)

• Investment Funds: Any investment fund covered under Section 115UB that is not required to file a return under other provisions of the Income Tax Act.

• Filing Requirements: These funds must file their Income Tax Return (ITR) for each previous year, reporting their income or loss, even if exempt from filing under other sections

What Does Section 139(4F) Require

• The return filed under Section 139(4F) is treated as if filed under Section 139(1), the general filing requirement for Income Tax Returns (ITR)

• All provisions of the Income Tax Act will apply to the filing as though it is a return required under Section 139(1)

Section 139(9) of the Income Tax Act, 1961 addresses defective returns when required documents or information are missing or incomplete in a filed Income Tax Return (ITR). If the return is deemed defective, the taxpayer is notified by the Assessing Officer (AO) and given an opportunity to correct the issues.

What Makes a Return Defective

A return is considered defective if the following documents are missing or incorrect:

• Completed ITR Form: The return must be filed in the prescribed form

• Tax Computation: A statement showing the computation of payable taxes must be included

• Proof of Tax Claims: Provide documentation for taxes paid, such as TDS, self-assessment tax, and advance tax

• Audit Report (Section 44AB): Attach the audit report under Section 44AB, if applicable

• Financial Statements: If the taxpayer’s accounts are audited, include the balance sheet and audited profit and loss accounts

Procedure for Rectifying a Defective Return

• Notification from AO: If the Assessing Officer finds the return defective, they will send a notice to the taxpayer highlighting the issues

• Time to Correct: The taxpayer is given 15 days from the notice date to rectify the defects, with the option to request an extension

• Extension of Time: The extension can be granted upon the taxpayer's request, giving them extra time to fix the issues

Documents Required to Avoid a Defective Return

To prevent your return from being deemed defective, ensure the following documents are included:

• Income Statement: Include Profit and Loss, Manufacturing, Trading accounts, and a balance sheet

• Personal Accounts: Provide personal accounts of partners in a partnership firm or members in AOP/BOI, if applicable

• Audit Reports: Include the audit report and balance sheet for audited accounts, if applicable

• Cost Audit Report: Submit the relevant cost audit report if undergoing a cost audit

If the taxpayer does not maintain books of account, they must submit a statement of gross receipts, turnover, bank balance, expenses, and net profit.

Section 139 of the Income Tax Act, 1961 outlines various deadlines for filing Income Tax Returns (ITR) based on the type of taxpayer and specific conditions. These deadlines are crucial to ensure timely compliance and avoid penalties. Here are the key deadlines for filing ITR:

July 31st

This is the standard deadline for individuals and entities that do not require an audit. It applies to the following taxpayers:

• Salaried employees who do not have additional sources of income

• Self-employed individuals or professionals who do not require an audit of their books

• Freelancers or consultants without the need for an audit

This deadline is often extended to August 31st by the tax authorities in case of any delays or unforeseen circumstances.

September 30th

Taxpayers who are required to undergo an audit of their financial accounts must file their returns by September 30th. This deadline is applicable to:

• Business entities whose accounts need to be audited.

• Self-employed individuals or professionals with a mandatory audit requirement.

• Partners in a firm or consultants who need an audit of their accounts.

This deadline may also be extended at the discretion of the government in special circumstances.

Under Section 139 of the Income Tax Act, 1961, taxpayers are required to file accurate Income Tax Returns (ITR). If the return contains errors or missing information, it may be deemed defective. The Assessing Officer (AO) assigns specific error codes to highlight these issues. Here’s a breakdown of some common error codes under Section 139:

Error Code 14

This error occurs if the assessee provides a negative amount in the Gross Profit or Net Profit sections of the ITR. Such entries result in the return being marked as defective.

Error Code 8

If the assessee files ITR-4S but the presumptive income under Section 44AD is less than 8% of the gross turnover or gross receipts, the return is deemed defective.

Error Code 31

When the taxpayer has income under the head “Profits and Gains of Business and Profession” but fails to include the Balance Sheet and Profit and Loss Account, the return is considered defective.

Error Code 38

This error occurs when tax is determined as payable in the ITR, but the tax has not been paid. The return will remain defective until the payment is made.

How to Avoid These Errors

To avoid these common defective return errors, ensure that:

• All figures provided are accurate and reasonable

• The appropriate forms are filed, especially if using presumptive income under Section 44AD

• All necessary documents, such as the Balance Sheet and Profit and Loss Account, are included

• The tax payable is correctly paid and reflected in the return

Form ITR-7 is an important filing form for individuals, organisations, and entities required to submit their Income Tax Returns (ITR) under specific sub-sections of Section 139. These include Section 139(4A), Section 139(4B), Section 139(4C), and Section 139(4D). Here is a breakdown of the filing process and options available for submitting Form ITR-7.

Who Must File Form ITR-7

Form ITR-7 is applicable to:

• Individuals, institutions, and entities that are required to file returns under Sections 139(4A), 139(4B), 139(4C), or 139(4D) of the Income Tax Act

• These include charitable or religious organisations, political parties, institutions claiming exemptions, and certain business trusts

How to Submit Form ITR-7

Taxpayers can submit Form ITR-7 through various methods:

• Physical Submission: Submit the paper form at the Income Tax Department

• E-Form Submission: File electronically using a digital signature

• Electronic Data Submission: Transmit the data electronically, followed by submitting and verifying the return using ITR-V

• Barcoded Return: File the return with a barcoded submission method

Tips for Filing ITR-7

• Tax Credit Statement: Before filing, taxpayers should ensure that the tax figures, such as TDS (Tax Deducted at Source), advance tax, and self-assessment tax, are accurate. These figures should match the details shown in Form 26AS, the Tax Credit Statement.

Additional Information

Section 139(4E): This section applies to business trusts that need to file returns but are not required to file under other provisions of Section 139

Here’s an overview of the recent amendments to Section 139 of the Income Tax Act, which bring important changes to return filing and revision processes for taxpayers:

Amendment in Sub-section (1)

The words “provisions of section 10A” were replaced with “provisions of clause (38) of section 10 or section 10A” from 1st April 2017.

Amendment in Sub-section (3)

The phrase “or sub-section (2) of section 73A” was added after “sub-section (2) of section 73” in sub-section (3).

Amendment in Sub-section (4)

The revised sub-section (4) allows a taxpayer to file a return before the end of the relevant assessment year or completion of the assessment.

Amendment in Sub-section (5)

The new sub-section (5) allows filing a revised return within one year from the end of the relevant assessment year or before the assessment is completed.

Amendment in Sub-section (9)

The clause (aa) in the Explanation was omitted from sub-section (9).

If the Assessing Officer deems your return defective, they will send a notice requiring you to respond within 15 days. Here is a step-by-step guide on how to address the notice:

1. Access the e-Proceedings Portal: Begin by clicking on ‘Pending Actions’ on your dashboard, then select ‘e-proceedings’

2. No Notice Found?: If no notice is received, the system will show ‘No e-proceedings records.’ If pending actions exist, click on ‘For your action and view Notices’

3. View the Notice: Click on ‘Notice/Letter pdf’ to open the defective return notice.

4. Submit Your Response: After viewing the notice, select ‘Submit a Response’

5. Agree or Disagree: Choose ‘Agree’ or ‘Disagree’ with the notice. If you agree, provide the details for the identified defect

6. Disagree with the Notice: If you disagree, select the relevant option and explain your reasons in the provided text box

7. Attach Documents: If needed, upload attachments if you opted for the offline utility mode to correct the defects