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What is Seventh proviso to section 139(1)

what-is-seventh-proviso-to-section-139-1

Finance (No. 2) Act, 2019 has inserted a new seventh proviso to section 139(1) to provide for mandatory filing of return of income for undertaking certain high-value transactions even though the person is otherwise not required to file a return of income due to the fact that total income is below the basic exemption limit.

The provision is called the seventh proviso because it is placed after the existing sixth proviso to section 139(1).


Currently, a person other than a company or a firm is required to furnish the return of income only if his total income exceeds the maximum amount not chargeable to tax, subject to certain exceptions. Therefore, a person entering into certain high-value transactions is not necessarily required to furnish his return of income. In order to ensure that persons who enter into certain high-value transactions do furnish their return of income, section 139 of the Income Tax Act, 1961 is amended so as to provide that a person shall be mandatorily required to file his return of income, if during the previous year, such a person undertakes certain high-value transactions.


Section 139(1) provides for filing of return of income and prescribes the due date of filing of return of income. Certain exceptions have been given in the above-mentioned rules by way of proviso.


In her Budget speech, while presenting the Union Budget 2019 on 5th July 2019, Finance Minister Nirmala Sitaraman announced for compulsory filing of return for persons who undertake certain high-value transactions during a financial year. 




The extract of the budget speech is reproduced below-


Compulsory filing of return: It is proposed to make return filing compulsory for persons, who have deposited more than Rs. 1 crore in a current account in a year, or who have expended more than Rs. 2 lakh on foreign travel or more than Rs. 1 lakh on electricity consumption in a year or who fulfils the prescribed conditions, in order to ensure that persons who enter into high value transactions also furnish return of income. It is also proposed to provide that a person whose income becomes lower than maximum amount not chargeable to tax due to claim of rollover benefit of capital gains shall also be required to furnish the return.


The case of mandatory filing of return of income in the case of a person whose income is below the maximum amount not chargeable to tax due to claim of rollover benefit of capital gains is outside the purview of the seventh proviso to section 139(1).


The following seventh proviso to section 139(1) is enacted into law in the following manner-


Provided also that a person referred to in clause (b), who is not required to furnish a return under this sub-section, and who during the previous year—

(i)  has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or

(ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or

(iii) has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or

(iv)  fulfils such other conditions as may be prescribed,

shall furnish a return of his income on or before the due date in such form and verified in such manner and setting forth such other particulars, as may be prescribed.


This sub-section refers to sub-section 1 of section 139. Section 139(1) provides for furnishing of return by every person specified therein.


The seventh proviso to section 139(1) provides for furnishing of return by a person referred to in clause (b) of the said sub-section (1), who is not required to furnish a return under the said sub-section, if such person has undertaken the following high value transactions during the previous year —


1. Deposit of Rs. 1 crore or more in current accounts: All types of deposits whether in cash or by cheque or online fund transfer are covered. The deposit is not restricted to cash deposits only. Further, only the deposit in one or more current accounts is included. Savings Accounts and other accounts are outside the purview of this provision. The aggregate deposits in all the current accounts maintained in all of the banks including co-operative banks are required to be considered for determining the threshold of Rs. 1 crore. 


2. Expenditure on foreign travel for more than Rs. 2 Lakh: It covers all the expenditure incurred by a person for travel to a foreign country for himself or any other person. Hence, the person who incurs the expenditure may or may not travel to a foreign country. It is not clarified what will constitute ‘foreign travel expenditure’. However, it should be noted that the legislation has used the expression ‘for travel to a foreign country’ and not the expression expenditure ‘on foreign travel’. It is not necessary that the expenses should be incurred in foreign currency. Further, it is immaterial whether the travel to a foreign country is a business trip or a personal leisure trip.


3. Expenditure on the consumption of electricity for more than Rs. 1 Lakh: The expenditure on the consumption of electricity is only covered under this provision. Expenses incurred for getting the electricity connection or deposits made with electricity authority are not covered. Further, it is immaterial whether the consumption of electricity is due to commercial usage or personal usage, expenses on both are covered. It is also not necessary that the expenses are incurred on the electricity connection which is in the name of the person himself. The provision covers where the expenses incurred for the consumption of electricity even if the connection is in the same of someone else but the electricity must be consumed by the person concerned. Further, if the person has more than one electric connection, all the expenses will be aggregated to determine the threshold limit of Rs. 1 Lakh.


4. Other prescribed conditions: CBDT is empowered to prescribe other conditions or high-value transactions under this seventh proviso. Till date, no such conditions have been prescribed. 


Note: It is not necessary that all the conditions have to be fulfilled. Fulfilling any one of the above-mentioned condition is sufficient to file a return of income. 


These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent years.


Further, a person referred to in clause (b) refers to a person other than a company or a firm. The seventh proviso to section 139(1) is not applicable to a company and a firm. It applies only to a person covered in section 139(1)(b) which includes an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person.


ITR Forms for AY 2020-21: The notified ITR forms ITR-1 to ITR-5 for the assessment year 2020-21 contains information on seventh proviso to section 139(1). These changes have been incorporated in the ITR forms for AY 2020-21. If a person is not required to file a return of income since his income is below the basic exemption limit but has undertaken the above-mentioned high value transactions, then such a person should file the appropriate ITR form.


For instance, if a salaried individual has income from salary and bank interest only which is less than Rs. 2,50,000 but has paid electricity bills for more than Rs 1 lakh in FY 2019-20. In such a case, he has to file ITR-1.


Are you filing return of income under Seventh proviso to section 139(1)


The ITR forms in ITR-1 to ITR-5 have incorporated new fields in the Part-A General Information section with the title ‘Are you filing return of income under Seventh proviso to section 139(1) but otherwise not required to furnish return of income?’.

This information is required to be given when the taxpayer is filing ITR-1 under Seventh proviso to section 139(1) only and otherwise not required to furnish return of income.

If the answer to the above query is in affirmative, then exclusive reporting is required for the followings-

(i) If amounts of deposit exceeds Rs. 1 Crore in one or more current accounts, then report the actual amount of deposit.

(ii) If expenditure on travel to a foreign country for self or for any other person exceeds Rs. 2 Lakh, then report the actual amount of deposit.

(iii) If incurred more than Rs. 1 lakh on electricity consumption, then report the actual amount of deposit.

These information are required to be given if any of the reply is in affirmative i.e. if any of the conditions are satisfied.


Update:

Based on queries received from readers, the option to select ‘Yes’ or ‘No’ for the 7th proviso is presented in the following table under the given circumstances-

SituationWhich Option to select in ITR for 7th ProvisoRemarks
If Gross Total Income is more than the basic exemption limit Rs. 2,50,000/ 3,00,000/ 5,00,000Always select “No”
This is because the assessee is compulsorily required to file ITR.
Even if the assessee satisfies anyone or more of the condition specified in the seventh proviso to section 139(1), no amount is required to be filled.
If Gross Total Income is NOT more than the basic exemption limit Rs. 2,50,000/ 3,00,000/ 5,00,000If the assessee satisfies any one or more of the conditions specified in the seventh proviso to section 139(1)
Select “Yes”
and fill the amount in the appropriate column(s).
Since such a person is not compulsorily required to file ITR
Even if such a person was filing ITR voluntarily for earlier years, he should select ‘YES’
If the assessee DOES NOT satisfy any one or more of the conditions specified in the seventh proviso to section 139(1)Select “No”
Such a person is not required to file ITR even under 7th proviso to section 139(1)
He may file ITR voluntarily and select No in the option.

Further readings:

Is there any Extension to TDS Return Due Date For Quarter 1 FY 2020-21 ITR Filing Due Date for AY 20-21 Extended but with Interest 

Key Changes in ITR forms (ITR 1 to ITR 7) for AY 2020-21

Changes proposed in Income-Tax by the Finance Bill 2019



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50 Comments

  1. Very Informative Sir. My question is that even the regular tax payer also required to select 7th Proviso ? Because mfg units (Prop. Company) having turnover around Rs. 1 Cr., electricity bill would be more than Rs. 1 lakh in a year naturally. Please clarify the applicability in such case.

    ReplyDelete
    Replies
    1. Since you have to file ITR due to income criteria, you are not covered by this seventh proviso. You have NOT to select this option. You should file your ITR as you have filed in the preceding year ignoring this provision. This provision is applicable only for those who are not required to file return of income due to lower than basic exemption limit income but incurred more than Rs 1 lakh in electricity bill.
      Since you are already filing return of income this is not applicable to you.
      Hope this clarifies.

      Delete
  2. paid Rs two lakh plus to travel agency for foreign trip but not yet travelled . Do I come under the seventh proviso to sec 139(1)

    ReplyDelete
  3. paid Rs two lakh plus to travel agency for foreign trip but not yet travelled . Do I come under the seventh proviso to sec 139(1)

    ReplyDelete
  4. i have one house property , which is in joint ownership with my spouse. and my annual income is around 10 lakhs ans other conditions as mentioned in ITR-1 have been satisfied ? Pls let me know which ITR form i should file ?

    ReplyDelete
    Replies
    1. File ITR-1.
      Read this
      https://www.taxcorner.co.in/2020/06/key-changes-in-itr-forms-itr-1-to-itr-7-for-ay-2020-21.html

      Delete
  5. My salary income annual below 2 lac
    And i salect option with no
    Am i right salected of seventh proviso 139 (1)?

    ReplyDelete
    Replies
    1. If you have not undertaken the mentioned three cases of high value financial transactions then you are right.

      Delete
  6. My total income is 4,00,000/- and i select "NO"
    Am I selected the right option

    ReplyDelete
    Replies
    1. Yes since you are under obligation to file the return

      Delete
  7. SIR the return of my wife filled in 7 proviso under section 139(1) by place
    yes however no amount more than 1 crore was deposited
    and no electricity bill of more than 1 lakh was paid
    and no foreign travel was taken ... but by mistake i filed yes
    and itr submitted what should i do now?????

    ReplyDelete
  8. i am a Government employee and my gross salary isRs. 646546/-.Which option i should select for 7th proviso under section 139(1).yes or no.

    ReplyDelete
  9. Sir my income is .near about 1200000. Which option should I select yes or no

    ReplyDelete
    Replies
    1. No since you have to mandatory file income on your income

      Delete
  10. Hi i haven't earned any head income in India in the FY2019-20 but have got a let out property. However the income from property is far below the taxable income slab. Would i need to file the ITR still?

    ReplyDelete
    Replies
    1. you have earned rental income which is chargeable under the head 'income from house property'. If your income exceeds the basic exemption limit then you are required to file return of income. Read this article for more on requirement to file return of income-
      https://www.taxcorner.co.in/2020/07/section-139-provisions-for-filing-return-of-income.html

      Delete
  11. 1. For example my gross income 12,82,000 and my house electricity bill 1,05,000 then what should I fill yes or no.

    2. For example my gross income 12,82,000 and my house electricity bill less than 1 lakh then what should I fill yes or no.

    ReplyDelete
    Replies
    1. Yo have to file return for your income. So you have to select No for both the given option 1 and 2.

      Delete
  12. Very informative analysis done by your team, thank you for your efforts.. As per this proviso ,expenditure to be considered only for those who had travel IN & Out India or any other country to country travel details also to be considered ..Like in case of NRI (having Indian Citizenship and Income less than that limit) , If he had done a trip from & to India and also From London to US, Australia, etc etc.. and he resides and earn in London but also visit India and earn some income here too.

    ReplyDelete
  13. Sir I have only interest income from my FD Rs 42000 and TDS deducted Rs 4214.So what option I will choose Section 139 Yes or no.

    ReplyDelete
    Replies
    1. If you have incurred the expenditure or deposited the cash above the specified limit then select Yes, else select No.

      Delete
  14. Sir, kindly clarify the above answer. I also fall in the same category where my tax of around 10,000 INR has been deducted only on interest on FDs, no other source of income is there this year. Those 3 sub-heads option not applicable on me. So, option would be No?

    ReplyDelete
  15. My salary is 381200 and I have not done any high value transaction. What would be my answer? Yes or No?

    ReplyDelete
  16. Sir, I would like to focus your attention towards a different situation, which concerned with now. In which the share provided by employer has to be added @ 14% to the income but for the case of state government employees it is admissible to deduct @ 10% u/s 80ccd(2). However nothing has been transferred to the employee but he has to pay the tax on difference of 4% which is not paid to employee. Is it okay. Please guide me sir

    ReplyDelete
  17. Sir my salary income is 5 lack and I have selected option yes in the seventh provision whether I'm right or need to file revised returns

    ReplyDelete
    Replies
    1. You should have selected NO. you may file a revise return

      Delete
  18. MY ANNUAL SALARY INCOME IS 674500 AND I GOT INTEREST 23000 FROM FIXED DEPOSIT, WHAT SHOULD I SELECT YES OR NO

    ReplyDelete
  19. Sir I wrongly select yes is that any problem ? Since I didn't mention yes to other options below

    ReplyDelete
    Replies
    1. If possible file a revised return to correct the mistake

      Delete
  20. Sir. appreciate your efforts in clarifying.I have been filing ITR regular over years and has taxable income.But FY 2019-2020, had a foreign travel for me. What should i answer YES OR NO against question in ITR1 form against filing on section 139(1) provision 7.
    Thankful to your reply.

    ReplyDelete
    Replies
    1. At first, thank you for the compliments.
      You should select NO because you have to mandatorily file return as you have taxable income.
      It is requested kindly to post any comments with your name.

      Delete
  21. My son worked in INDIA till jan2019. From Feb2019 he is working in Singapore. Now he has to efile for FY-2019-20 . His Aadhar is linked but phone number is not validated. So he need to send Ack ITR-V by post.
    Please clarify which option should I choose
    1. son will efile from singapore and post to CPC Bangalore
    2. Son will efile and post to me (father). And I will post to CPC Bangalore
    3. i (father) will efile with sons credentials and post to CPC
    I am bit comfused Please clarify which option is better
    vijayakumar

    ReplyDelete
  22. Thankyou for sharing this wonderfull piece of article..My all doubt got cleared

    ReplyDelete
  23. I highly appreciate and am grateful to you for the fact that you are replying to each and every query patiently. This is very reassuring for non financial individuals esp. those who file their own returns. Many questions are answered while reading queries from others and their answers.
    My all doubts are cleared without asking question.

    ReplyDelete
    Replies
    1. Thank you for your kind words. I am really delighted that readers are finding articles useful.

      Delete
  24. My total income is around 20 lakhs, i have 2 flats, one of which is empty as it is still not livable because of no electricity connection, in the other one I am living. My question is do I have to fill ITR -1 or ITR-2,
    Second do I have to add any notional income for the empty flat.

    ReplyDelete
  25. Is this clause applicable to NRI?

    ReplyDelete
    Replies
    1. Yes. In this case all the clauses should be satisfied in India

      Delete
  26. Dear Sir,
    My name is Pratik. Thank you so much for such a brilliant explanation on this topic. Really appreciate the effort taken by you to explain this topic.
    I have a question. I work in an IT firm and my gross annual income is more than 15 Lacs salary. I had 1 work related foreign travel last year in which the expense was more than 2 lacs. However since the travel was work related, all my expenses were reimbursed by my company upon submission of receipts.
    So in my case should I select Yes or No for the Seventh Proviso?
    Kindly let me know.
    Thanks
    Pratik

    ReplyDelete
    Replies
    1. Dear Sir, Can you please reply to my query.
      Thanks
      Pratik

      Delete