- Date : 08/09/2021
- Read: 4 mins
Filing ITR as a homemaker can be a legal requirement as well as a benefit.
The general assumption is that housewives don’t have an active source of income, so they need not file Income Tax Returns (ITR). However, there may be many scenarios where filing ITR may be required by law, and at other times where you can benefit from filing returns even if you don’t have any tax liability.
Let’s take a look at six scenarios why a homemaker should consider filing IT returns
1. Income from investments
Your parents or spouse may have made investments in your name, either for your financial security or to minimise the household’s tax liability. Over time, such investments in bank deposits, post office schemes, mutual funds, stocks, etc. could accumulate and generate substantial interest or dividend income.
If the total investment income from all sources exceeds Rs 2.5 lakh in a financial year, you will need to file your ITR. The exemption limit is Rs 3 lakh for homemakers above 60 years and below 80 years of age, and Rs 5 lakh for those above 80 years.
Related: Top 6 Most Common Mistakes to avoid when filing IT returns
2. Gifts
You may receive gifts in cash and/or kind on occasions such as birthday and festivals from family and friends. If the aggregate value of gifts in a financial year exceeds Rs 50,000, the entire amount becomes taxable under the head ‘income from other sources’ as per Section 56(2) of the IT Act. Non-disclosure of gifts can result in a penalty ranging from 50% to 200% of the tax assessed.
However, gifts received on certain occasions, like at the time of marriage, are exempt from tax irrespective of the value of total gifts received. Similarly, gifts and inheritance from specific relatives like spouse, parents, siblings, uncle, aunts, and grandparents are exempt from tax.
3. Sale of capital assets
Profits generated from sale of capital assets in your name (land, house, stocks etc.) will attract capital gains tax depending on the quantum of earnings and holding period. While long-term capital gains on sale of stocks are applicable after one year (for profits above Rs 1 lakh), the tenure is three years for immovable property. If the total profits exceed the basic exemption threshold, you will have to report capital gains and pay tax thereon.
In case of immovable assets, you can consider cost of indexation to reduce tax liability or reinvest profits (up to 50 lakh) in government-specified bonds prescribed under Section 54EC. While such capital investment will not be taxed, interest income from these bonds will be chargeable under the head of ‘other income’ and taxed as per your applicable slab. Inaccurate reportage or concealing actual income can attract a penalty between 100% to 300% of the tax evaded as per section 271(C).
Related: What documents are needed for tax filing?
4. Loan application
If you wish to avail of a personal loan, car loan, or business loan in the future, it would be advisable to file your returns regularly. As a part of assessing loan eligibility, most private banks and financial institutions will require you to furnish ITR for the previous 1-3 years. The ITR acts as a proof of income and will be considered for underwriting and assessing applicable interest rate.
5. Visa application
Even though it is not mandatory, furnishing ITR for the previous 2-3 years as a part of your visa application docket improves your chances of securing a travel visa quickly. It allows the officer to see that you are a law-abiding citizen, possess the financial means to fulfil your trip, and have adequate assets in your home country to return.
6. Claiming tax refunds
If your taxable income in a financial year is below the stated threshold and tax has been deducted at source (TDS) from investments such as interest income from bank deposits, you can claim a refund by filing your ITR for the financial year.
The general assumption is that housewives don’t have an active source of income, so they need not file Income Tax Returns (ITR). However, there may be many scenarios where filing ITR may be required by law, and at other times where you can benefit from filing returns even if you don’t have any tax liability.
Let’s take a look at six scenarios why a homemaker should consider filing IT returns
1. Income from investments
Your parents or spouse may have made investments in your name, either for your financial security or to minimise the household’s tax liability. Over time, such investments in bank deposits, post office schemes, mutual funds, stocks, etc. could accumulate and generate substantial interest or dividend income.
If the total investment income from all sources exceeds Rs 2.5 lakh in a financial year, you will need to file your ITR. The exemption limit is Rs 3 lakh for homemakers above 60 years and below 80 years of age, and Rs 5 lakh for those above 80 years.
Related: Top 6 Most Common Mistakes to avoid when filing IT returns
2. Gifts
You may receive gifts in cash and/or kind on occasions such as birthday and festivals from family and friends. If the aggregate value of gifts in a financial year exceeds Rs 50,000, the entire amount becomes taxable under the head ‘income from other sources’ as per Section 56(2) of the IT Act. Non-disclosure of gifts can result in a penalty ranging from 50% to 200% of the tax assessed.
However, gifts received on certain occasions, like at the time of marriage, are exempt from tax irrespective of the value of total gifts received. Similarly, gifts and inheritance from specific relatives like spouse, parents, siblings, uncle, aunts, and grandparents are exempt from tax.
3. Sale of capital assets
Profits generated from sale of capital assets in your name (land, house, stocks etc.) will attract capital gains tax depending on the quantum of earnings and holding period. While long-term capital gains on sale of stocks are applicable after one year (for profits above Rs 1 lakh), the tenure is three years for immovable property. If the total profits exceed the basic exemption threshold, you will have to report capital gains and pay tax thereon.
In case of immovable assets, you can consider cost of indexation to reduce tax liability or reinvest profits (up to 50 lakh) in government-specified bonds prescribed under Section 54EC. While such capital investment will not be taxed, interest income from these bonds will be chargeable under the head of ‘other income’ and taxed as per your applicable slab. Inaccurate reportage or concealing actual income can attract a penalty between 100% to 300% of the tax evaded as per section 271(C).
Related: What documents are needed for tax filing?
4. Loan application
If you wish to avail of a personal loan, car loan, or business loan in the future, it would be advisable to file your returns regularly. As a part of assessing loan eligibility, most private banks and financial institutions will require you to furnish ITR for the previous 1-3 years. The ITR acts as a proof of income and will be considered for underwriting and assessing applicable interest rate.
5. Visa application
Even though it is not mandatory, furnishing ITR for the previous 2-3 years as a part of your visa application docket improves your chances of securing a travel visa quickly. It allows the officer to see that you are a law-abiding citizen, possess the financial means to fulfil your trip, and have adequate assets in your home country to return.
6. Claiming tax refunds
If your taxable income in a financial year is below the stated threshold and tax has been deducted at source (TDS) from investments such as interest income from bank deposits, you can claim a refund by filing your ITR for the financial year.
