What is the Seventh Proviso to Section 139 (1)?

What is the Seventh Proviso to Section 139 (1)?. The Seventh Proviso to Section 139(1) of the Income Tax Act, 1961 mandates certain individuals to file Income Tax Returns (ITR) even if their income is below the basic exemption limit, provided they have undertaken specified high-value financial transactions during a financial year.
As per the Seventh Proviso to Section 139(1), you must file ITR if you have:

Deposited more than Rs.1 crore in one or more current accounts with a bank or co-operative bank.

Incurred expenditure of over Rs.2 lakh for yourself or any other person for foreign travel.

Spent more than Rs.1 lakh on electricity consumption during the year.

Even if your total income is below the taxable threshold, you are required to file ITR if you meet any one of these conditions.
What is Seventh Proviso?
The Seventh Proviso to Section 139(1) of the Income Tax Act, 1961 mandates that certain individuals must file an Income Tax Return even if their income is below the taxable limit, provided they engage in high-value transactions. These include depositing over Rs.1 crore in a current account, spending more than Rs.2 lakh on foreign travel, or incurring over Rs.1 lakh in electricity bills in a financial year. This provision, introduced by the Finance (No. 2) Act, 2019, aims to widen the tax base by tracking individuals with significant financial activity, regardless of their reported income.
Who Must File a Return of Income After the Amendment to the Seventh Proviso to Section 139(1)?
Under the amended provisions of Section 139(1) of the Income Tax Act, 1961, the following categories of persons are mandatorily required to file their Income Tax Return (ITR):
Companies and Firms
A company or a firm is required to file a return of income in every case, regardless of whether it has earned any income or not.
Any Other Person (Other than a Company or a Firm)
An individual, HUF, or other entity (not being a company or a firm) must file a return of income if their total income exceeds the basic exemption limit. However, after the insertion of the Seventh Proviso to Section 139(1), such persons are also required to file a return even if their income is below the exemption limit, if any of the following high-value transactions have been undertaken during the previous year:

Deposits of Rs.1 crore or more in one or more current accounts with a bank or co-operative bank. Note: Savings accounts are excluded.

Expenditure exceeding Rs.2 lakh for traveling to a foreign country for oneself or for any other person.

Electricity expenses exceeding Rs.1 lakh during the financial year.

Before the Amendment:
Earlier, individuals were required to file an income tax return only if their total income exceeded the threshold prescribed in the tax slab. This meant that even if someone conducted significant financial transactions, they were not mandatorily required to file an ITR, provided their income remained below the taxable limit.
After the Amendment:
With the introduction of the Seventh Proviso, persons engaging in certain high-value transactions are now compulsorily required to file their income tax return even if their income does not exceed the basic exemption limit.
This amendment significantly impacts individual taxpayers, especially those referred to in clause (b) of the proviso (i.e., persons other than a company or a firm), and aims to widen the tax base and enhance reporting of financial activities.
How to Apply the Seventh Proviso to Section 139(1)
The Seventh Proviso to Section 139(1) mandates certain individuals to file an Income Tax Return (ITR) even if their income is below the taxable limit, provided they have undertaken high-value financial transactions. Here's how to apply it:
1. Evaluate Applicability
Evaluate applicability by checking if you engaged in high-value transactions such as depositing over Rs.1 crore in current accounts, spending Rs.2 lakh on foreign travel, or paying Rs.1 lakh in electricity bills. If yes, and your income is below the taxable limit, you must file ITR under the Seventh Proviso.
2. Select the Correct Option While Filing ITR
While filing your ITR, select “Yes” to the question asking if you are filing under the Seventh Proviso to Section 139(1). Then, choose the correct reason—such as high bank deposits or foreign travel—from the dropdown menu. This ensures your return is correctly categorized for compliance purposes.
3. Maintain Supporting Records
Although no documents are submitted with the ITR, it is essential to retain supporting records like bank statements, travel invoices, electricity bills, and Form 26AS. These documents serve as proof if the Income Tax Department seeks clarification or initiates scrutiny related to your return filed under the Seventh Proviso.
4. File Within Due Date
Ensure you file your Income Tax Return under the Seventh Proviso within the prescribed due date, typically July 31 for individuals. Late filing may attract penalties under Section 234F. Timely compliance not only avoids fines but also helps maintain a clean financial and legal record with the Income Tax Department.
Key changes in ITR forms
Here are the key updates to India’s ITR forms for Assessment Year 2025–26 (Financial Year 2024–25), designed to improve accuracy, transparency, and taxpayer convenience:
ITR-1 & ITR-4 Accept LTCG
ITR 1 and ITR 4 now allow reporting of long-term capital gains (LTCG) up to Rs.1.25 lakh, making it easier for small investors to file returns without switching forms.
Separate Gains Sections
Capital gains in ITR forms are now reported separately for periods before and after specified dates, helping taxpayers accurately apply updated tax rates and comply with revised capital gain rules.
Share Buy-Back Reporting
Income from share buy-backs must now be reported under “Income from Other Sources” in ITR forms, and related capital losses can be claimed separately to ensure proper tax treatment and adjustment.
TDS Section Disclosure Mandatory
ITR forms now require taxpayers to mention the specific TDS section (e.g., 192, 194A) for each deduction, ensuring accurate matching with Form 26AS and enhancing transparency in tax reporting.
Enhanced Deduction Details
ITR-1 and ITR-4 now require detailed disclosure for deductions under Sections 80C, 80D, 80E, etc., including document or policy numbers, ensuring accurate claims and better validation by the tax department.
Landlord PAN Mandatory for HRA
To claim House Rent Allowance (HRA), ITR forms now mandate providing the landlord’s PAN if annual rent exceeds Rs.1 lakh, ensuring transparency and preventing false deduction claims in tax filings.
Raised Asset-Liability Threshold
The threshold for disclosing assets and liabilities in ITR-3 and ITR-4 has been raised from Rs.50 lakh to Rs.1 crore, easing compliance for small taxpayers and reducing unnecessary reporting.
No More Aadhaar Enrolment IDs
Taxpayers can no longer use Aadhaar Enrolment IDs while filing ITR. Only valid Aadhaar numbers or PAN must be provided, ensuring verified identification and eliminating temporary enrolment references during return filing.
Extended Due Dates
The due date for filing ITR-1 and ITR-4 has been extended to September 15, giving taxpayers additional time to file returns accurately and comply with updated disclosure requirements.
Conclusion
Seventh Proviso to Section 139(1) of the Income Tax Act, 1961 plays an important role in widening the tax base by mandating return filing based on high-value financial transactions rather than income alone. It ensures that individuals who engage in significant economic activities—such as large bank deposits, foreign travel, or high electricity consumption—report their financial dealings, even if their income is below the basic exemption limit. This provision enhances transparency, promotes accountability, and aligns with the government’s objective of curbing tax evasion. Therefore, individuals must assess their financial transactions carefully each year and file their Income Tax Return under this proviso, if applicable, to stay compliant and avoid penalties or scrutiny.
If you have any queries regarding Company Registration, Trademark Registration, and Business Licence, then you can connect with Compliance Calendar LLP experts through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.
FAQs
Q1. What is the Seventh Proviso to Section 139(1) of the Income Tax Act?
Ans. The Seventh Proviso mandates that individuals must file an Income Tax Return even if their income is below the taxable limit, provided they have undertaken specified high-value transactions during the financial year.
Q2. Which transactions trigger filing under the Seventh Proviso?
Ans. You must file ITR if you have:

Deposited Rs.1 crore or more in current accounts

Spent over Rs.2 lakh on foreign travel

Paid electricity bills exceeding Rs.1 lakh
 Other criteria include high business turnover, TDS/TCS amounts, and large deposits in savings accounts.

Q3. Is income above the exemption limit still required to apply this proviso?
Ans. No. The Seventh Proviso applies only when your income is below the basic exemption limit, but you have conducted specific high-value transactions.
Q4. What happens if I don’t file ITR under the Seventh Proviso?
Ans. Non-filing may lead to penalties under Section 234F, notices from the Income Tax Department, and issues with financial activities like applying for loans or visas.
Q5. Does the Seventh Proviso apply to companies and firms?
Ans. No. Companies and firms are already required to file ITR mandatorily, irrespective of income or transactions. The Seventh Proviso specifically applies to individuals and entities other than companies and firms.
Q6. Where do I report the Seventh Proviso applicability while filing ITR?
Ans. While filing your return, the ITR form will ask if you're filing under the Seventh Proviso to Section 139(1). Select “Yes” and choose the appropriate reason—such as high-value deposits or foreign travel.
Q7. Do I need to submit proof of transactions when filing under this proviso?
Ans. No documents need to be attached with the return. However, you must maintain relevant records (bank statements, bills, etc.) in case the Income Tax Department requests verification or initiates a scrutiny.Top of Form

The Seventh Proviso to Section 139(1) of the Income Tax Act, 1961 mandates certain individuals to file Income Tax Returns (ITR) even if their income is below the basic exemption limit, provided they have undertaken specified high-value financial transactions during a financial year.

As per the Seventh Proviso to Section 139(1), you must file ITR if you have:

Deposited more than Rs.1 crore in one or more current accounts with a bank or co-operative bank.
Incurred expenditure of over Rs.2 lakh for yourself or any other person for foreign travel.
Spent more than Rs.1 lakh on electricity consumption during the year.

Even if your total income is below the taxable threshold, you are required to file ITR if you meet any one of these conditions.

What is Seventh Proviso?

The Seventh Proviso to Section 139(1) of the Income Tax Act, 1961 mandates that certain individuals must file an Income Tax Return even if their income is below the taxable limit, provided they engage in high-value transactions. These include depositing over Rs.1 crore in a current account, spending more than Rs.2 lakh on foreign travel, or incurring over Rs.1 lakh in electricity bills in a financial year. This provision, introduced by the Finance (No. 2) Act, 2019, aims to widen the tax base by tracking individuals with significant financial activity, regardless of their reported income.

Who Must File a Return of Income After the Amendment to the Seventh Proviso to Section 139(1)?

Under the amended provisions of Section 139(1) of the Income Tax Act, 1961, the following categories of persons are mandatorily required to file their Income Tax Return (ITR):

Companies and Firms

A company or a firm is required to file a return of income in every case, regardless of whether it has earned any income or not.

Any Other Person (Other than a Company or a Firm)

An individual, HUF, or other entity (not being a company or a firm) must file a return of income if their total income exceeds the basic exemption limit. However, after the insertion of the Seventh Proviso to Section 139(1), such persons are also required to file a return even if their income is below the exemption limit, if any of the following high-value transactions have been undertaken during the previous year:

Deposits of Rs.1 crore or more in one or more current accounts with a bank or co-operative bank. Note: Savings accounts are excluded.
Expenditure exceeding Rs.2 lakh for traveling to a foreign country for oneself or for any other person.
Electricity expenses exceeding Rs.1 lakh during the financial year.

Before the Amendment:

Earlier, individuals were required to file an income tax return only if their total income exceeded the threshold prescribed in the tax slab. This meant that even if someone conducted significant financial transactions, they were not mandatorily required to file an ITR, provided their income remained below the taxable limit.

After the Amendment:

With the introduction of the Seventh Proviso, persons engaging in certain high-value transactions are now compulsorily required to file their income tax return even if their income does not exceed the basic exemption limit.

This amendment significantly impacts individual taxpayers, especially those referred to in clause (b) of the proviso (i.e., persons other than a company or a firm), and aims to widen the tax base and enhance reporting of financial activities.

How to Apply the Seventh Proviso to Section 139(1)

The Seventh Proviso to Section 139(1) mandates certain individuals to file an Income Tax Return (ITR) even if their income is below the taxable limit, provided they have undertaken high-value financial transactions. Here's how to apply it:

1. Evaluate Applicability

Evaluate applicability by checking if you engaged in high-value transactions such as depositing over Rs.1 crore in current accounts, spending Rs.2 lakh on foreign travel, or paying Rs.1 lakh in electricity bills. If yes, and your income is below the taxable limit, you must file ITR under the Seventh Proviso.

2. Select the Correct Option While Filing ITR

While filing your ITR, select “Yes” to the question asking if you are filing under the Seventh Proviso to Section 139(1). Then, choose the correct reason—such as high bank deposits or foreign travel—from the dropdown menu. This ensures your return is correctly categorized for compliance purposes.

3. Maintain Supporting Records

Although no documents are submitted with the ITR, it is essential to retain supporting records like bank statements, travel invoices, electricity bills, and Form 26AS. These documents serve as proof if the Income Tax Department seeks clarification or initiates scrutiny related to your return filed under the Seventh Proviso.

4. File Within Due Date

Ensure you file your Income Tax Return under the Seventh Proviso within the prescribed due date, typically July 31 for individuals. Late filing may attract penalties under Section 234F. Timely compliance not only avoids fines but also helps maintain a clean financial and legal record with the Income Tax Department.

Key changes in ITR forms

Here are the key updates to India’s ITR forms for Assessment Year 2025–26 (Financial Year 2024–25), designed to improve accuracy, transparency, and taxpayer convenience:

ITR-1 & ITR-4 Accept LTCG

ITR 1 and ITR 4 now allow reporting of long-term capital gains (LTCG) up to Rs.1.25 lakh, making it easier for small investors to file returns without switching forms.

Separate Gains Sections

Capital gains in ITR forms are now reported separately for periods before and after specified dates, helping taxpayers accurately apply updated tax rates and comply with revised capital gain rules.

Share Buy-Back Reporting

Income from share buy-backs must now be reported under “Income from Other Sources” in ITR forms, and related capital losses can be claimed separately to ensure proper tax treatment and adjustment.

TDS Section Disclosure Mandatory

ITR forms now require taxpayers to mention the specific TDS section (e.g., 192, 194A) for each deduction, ensuring accurate matching with Form 26AS and enhancing transparency in tax reporting.

Enhanced Deduction Details

ITR-1 and ITR-4 now require detailed disclosure for deductions under Sections 80C, 80D, 80E, etc., including document or policy numbers, ensuring accurate claims and better validation by the tax department.

Landlord PAN Mandatory for HRA

To claim House Rent Allowance (HRA), ITR forms now mandate providing the landlord’s PAN if annual rent exceeds Rs.1 lakh, ensuring transparency and preventing false deduction claims in tax filings.

Raised Asset-Liability Threshold

The threshold for disclosing assets and liabilities in ITR-3 and ITR-4 has been raised from Rs.50 lakh to Rs.1 crore, easing compliance for small taxpayers and reducing unnecessary reporting.

No More Aadhaar Enrolment IDs

Taxpayers can no longer use Aadhaar Enrolment IDs while filing ITR. Only valid Aadhaar numbers or PAN must be provided, ensuring verified identification and eliminating temporary enrolment references during return filing.

Extended Due Dates

The due date for filing ITR-1 and ITR-4 has been extended to September 15, giving taxpayers additional time to file returns accurately and comply with updated disclosure requirements.

Conclusion

Seventh Proviso to Section 139(1) of the Income Tax Act, 1961 plays an important role in widening the tax base by mandating return filing based on high-value financial transactions rather than income alone. It ensures that individuals who engage in significant economic activities—such as large bank deposits, foreign travel, or high electricity consumption—report their financial dealings, even if their income is below the basic exemption limit. This provision enhances transparency, promotes accountability, and aligns with the government’s objective of curbing tax evasion. Therefore, individuals must assess their financial transactions carefully each year and file their Income Tax Return under this proviso, if applicable, to stay compliant and avoid penalties or scrutiny.

If you have any queries regarding Company Registration, Trademark Registration, and Business Licence, then you can connect with Compliance Calendar LLP experts through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.

FAQs

Q1. What is the Seventh Proviso to Section 139(1) of the Income Tax Act?

Ans. The Seventh Proviso mandates that individuals must file an Income Tax Return even if their income is below the taxable limit, provided they have undertaken specified high-value transactions during the financial year.

Q2. Which transactions trigger filing under the Seventh Proviso?

Ans. You must file ITR if you have:

Deposited Rs.1 crore or more in current accounts
Spent over Rs.2 lakh on foreign travel
Paid electricity bills exceeding Rs.1 lakh

Other criteria include high business turnover, TDS/TCS amounts, and large deposits in savings accounts.

Q3. Is income above the exemption limit still required to apply this proviso?

Ans. No. The Seventh Proviso applies only when your income is below the basic exemption limit, but you have conducted specific high-value transactions.

Q4. What happens if I don’t file ITR under the Seventh Proviso?

Ans. Non-filing may lead to penalties under Section 234F, notices from the Income Tax Department, and issues with financial activities like applying for loans or visas.

Q5. Does the Seventh Proviso apply to companies and firms?

Ans. No. Companies and firms are already required to file ITR mandatorily, irrespective of income or transactions. The Seventh Proviso specifically applies to individuals and entities other than companies and firms.

Q6. Where do I report the Seventh Proviso applicability while filing ITR?

Ans. While filing your return, the ITR form will ask if you're filing under the Seventh Proviso to Section 139(1). Select “Yes” and choose the appropriate reason—such as high-value deposits or foreign travel.

Q7. Do I need to submit proof of transactions when filing under this proviso?

Ans. No documents need to be attached with the return. However, you must maintain relevant records (bank statements, bills, etc.) in case the Income Tax Department requests verification or initiates a scrutiny.Top of Form