Misconception in Filing tax returns

This is true that having a PAN is a must for filing tax returns. Without PAN, the tax department will not accept your returns.

Many taxpayers seem to be under the impression that having a PAN makes it mandatory for them to file the tax return. This is not true.

Filing a tax return is obligatory, if and only if one earns an income above the basic exemption limits. For FY 08-09, these are Rs 1.50 lakh, Rs 1.85 lakh and Rs 2.25 lakh for non-senior men, non-senior ladies and senior citizens respectively. So, if your income is under the tax threshold applicable to you, irrespective of whether you have been allotted a PAN or not, you need not file a tax return.

Note that the term 'income' in the above paragraph refers to gross income i.e. your income before reducing any tax deductions. This was a change that was carried out by FA05. Earlier, if your income after considering deductions such as PPF, NSC, Mediclaim, etc. was above the basic exemption, then filing tax return was mandatory. Now, income before considering the deductions under Chapter VI-A, Sec. 10A, Sec. 10B and Sec. 10BA will have to be considered.

Let's take the case of Mr Pathak, a senior citizen. His income statement is as under:

ParticularsRs
Income from bank interest, pension etc 3,40,000
Less : PPF, NSC & Mediclaim 1,20,000
Net income after deductions 2,20,000

Earlier, Pathak would not have been liable to file his tax return as his net income did not exceed the basic exemption limit of Rs 2,25,000.

However, now, income before deduction is to be considered and that is Rs 3,40,000 in his case. This amount being more than Rs 2,25,000, Pathak will compulsorily need to file the tax return.

Note that in both the cases, the tax payable by Pathak remains nil. Putting it differently, though he is not liable to pay any tax to the government, Pathak will need to file a nil tax return. Read full article from Source