Should You File ITR Without Taxable Income?

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File Nil Income Tax Return Benefits
Filing Income Tax Return even without taxable income is beneficial

Do you know that you know that you can file an income tax return (ITR) even if you don’t have a taxable income? Do you know that filing an income tax return regardless of income has certain benefits? This blog post explains the benefits that you get by filing an ITR. Perhaps it may help you even decide so as to whether you should file one!

Let me get this straight: yes, you can file the income tax return even when your income is below the taxable income threshold (₹2,50,000/- as of now). This is known as a Nil-Income Tax Return or nil return to put simply. But why would anyone want to file an ITR when they don’t have any obligation to pay income tax? Before we get into this, first let us see who is required to file the Income Tax Return compulsorily?

Mandatory Filing of Income Tax Return:

  • You need to file an income tax return if you have paid an electricity bill of ₹1 lakh or more during the year.
  • if you have incurred foreign travel expenditure in excess of ₹2 lakhs or more during the year.
  • If you have deposited ₹1 crore or more in one more current account of banks during the year.

Apart from the above, the income tax mandates the following categories of taxpayers to file ITR even if gross total income is less than the taxable limit.

  • if your total sales, turnover, or gross receipts of business exceed ₹60 lakh or more during the year.
  • total gross receipts from profession exceed Rs. 10 lakh
  • The aggregate of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) is 25,000 or more.
  • Deposits in one or more savings bank accounts are greater than ₹50 lakh or more during the year.
  • If you have any assets located in foreign countries, you need to compulsorily file an income return.

In the above circumstances, you need to file a Nil return and it is mandatory. But in most other cases, it is up to you to decide whether or not to file an income tax return, if your income is below the taxable income limit of ₹2,50,000. But, it is a good practice to file such a nil return because you stand to gain the following benefits:

Benefits of Filing a Nil ITR:

  • An income Tax return is the only proof of income earned by you during the year that is accepted by law. Even the Supreme Court has held that motor accident claims should be decided on the basis of the income tax returns filed as per Section 166 of the Motor Vehicles Act, 1988.
  • If you want to get a loan or buy insurance, they mostly ask for your Income Tax Return. Filing an ITR, even if it is a nil return, thus helps in such situations.
  • If you are entitled to a refund, you should file an income tax return to get a refund.
  • If you apply for a visa from any country, you must furnish a copy of an ITR. So if you are planning to get a visa, make sure you file your ITR.
  • If you have any losses to carry forward, you should file an ITR. The losses may be business or capital losses incurred on the sales of shares, mutual funds, property, etc. Only by filing an ITR, you can carry forward such losses to future years and set off against future income.

When to file a Nil ITR:

  • It should be filed on or before the due date specified under section 139(1) of the I-T Act for individuals and HUF. This is July 31st, 2022 (unless the extension is granted) .
  • You can also file a belated income tax return as specified under section 139(4) of the I-T Act on or before March 31st of the next year with a late fee of Rs.1,000/- if your gross total income is less than Rs. 5 lakhs as per Section 234 of I-T Act.
  • However, if your income is below 2.5 lakhs, there can be no levy of late fees as per Section 234 of I-T Act.
  • If you want to carry forward losses, you should file the return within the deadline prescribed for filing the original return.

Conclusion:

Filing a nil return conveys a message to the income tax department that you don’t have any taxable income. It also helps you in many circumstances to decide your income level by banks/insurance companies and other agencies. However, some state government departments have linked subsidies under various schemes to the filing of income tax returns. Sometimes they flag you even for filing of nil ITR. So weigh the pros and cons of filing a nil income tax return and choose accordingly.

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