Who Must File ITR in 2026 (and What Happens If You Don't)

One of the most common questions we hear: "My salary is below the exemption limit, do I still need to file ITR?"

The honest answer: Probably yes. The rules around mandatory ITR filing in India go well beyond just "did you earn taxable income?". Let's break it down.

The basic rule (and why it misleads people)

Under Section 139(1), every person whose total income before deductions exceeds the basic exemption limit must file ITR. For FY 2025-26:

• New Regime: Basic exemption = ₹4,00,000
• Old Regime: Basic exemption = ₹2,50,000

Most people stop reading here and assume they're exempt. This is where the misunderstanding starts.

The 7th proviso rules (mandatory filing even with zero tax)

You must file ITR for FY 2025-26 even if your income is below the exemption limit IF any one of these applies:

Other categories that MUST file

• NRIs with India-source income above ₹2.5 lakh
• Anyone claiming a refund (TDS deducted by employer/bank that you want back)
• Anyone wanting to carry forward a loss (capital loss, business loss, F&O loss)
• Anyone applying for a visa (most embassies want last 3 years' ITR)
• Anyone applying for a home loan / business loan (lenders ask for last 2-3 years' ITR)
• Anyone planning to apply for credit cards above ₹50K limit

What happens if you don't file?

Section 234F imposes a flat late filing fee:

• Income up to ₹5 lakh: ₹1,000 penalty
• Income above ₹5 lakh: ₹5,000 penalty

Plus the following consequences:

1. Interest under 234A — 1% per month on unpaid tax from due date till actual filing
2. Loss of carry-forward — F&O losses, capital losses cannot be carried forward to next year
3. Refund delay — if you don't file, you can't claim refund. Money you've already paid stays with the government.
4. Visa / loan rejections — embassies and banks ask for ITRs as proof of income
5. Notice from IT Department — Section 142(1) compulsory notice can lead to prosecution under Section 276CC (up to 7 years imprisonment in severe cases)

The "I'll file next year" trap

Many people assume they can "file later" or even "skip a year and file two years together". This is not how it works in India.

• The belated return deadline for FY 2025-26 is 31 December 2026. After that, you cannot file the return at all (except via ITR-U Updated Return with penalty up to 50% extra tax).
• Once the IT Department flags you as a non-filer, you'll receive Section 142(1) and 148 notices that compel you to file with penalties.
• Each missed year compounds — penalties stack, refunds disappear, and your TDS credits get more complicated to claim.

What if I have zero tax liability — do I still file?

If you fall under any of the mandatory categories above, yes, file even with zero tax. Filing is about reporting, not just paying. Your ITR is your financial track record — banks, embassies, future employers, even insurance companies refer to it.