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  9. What Is a Nil Return: When Should You File Nil ITR?

What Is a Nil Return: When Should You File Nil ITR?

Updated on: 02 Jul, 2024 11:42 AM

A person earning an income less than Rs. 2.5 lakh in the financial year, usually has this notion that he need not file the income tax return. However, it should be noted that even if it is not compulsory for an Indian citizen to pay income tax and file the ITR if his annual earnings are less than the basic exemption limit, it is recommended to file a Nil tax return as it helps in many ways. There is no separate process or form for filing nil income tax returns, and the entire process is similar to filing a normal return. The form to be used also remains the same. If you are someone whose income is below the basic exemption limit, then this article is for you. This article explores the benefits and process of filing a nil income tax return.

Contents

What is a Nil Tax Return?

A nil income tax return is filed by a person whose taxable income falls below the basic exemption limit. It acts as a declaration to the Income Tax Department that you are not liable to pay any tax as your total income is below the basic exemption limit. Here, it is important to note that the Income Tax Department does not make it mandatory to file ITR for individuals falling below the basic exemption limit. Therefore, individuals filing a nil return do it at their own will.

When a Nil Income Tax Return is Required to be Filed?

An individual can opt to file a Nil tax return when:

To show income tax return as proof of Income.

There are various instances in which you have to present your ITR as proof of your income. Some of these include applying for a passport or a visa. An Income Tax return can also serve as income proof when applying for a loan from a bank or financial institution.

To claim a refund

The total income without accounting for deductions can be more than the basic exemption limit, but deductions might be below the basic exemption limit. In such a case, if you have paid more tax than required, you might have to file an ITR to claim a refund of the excess tax paid.

To carry forward losses

To set off your capital losses with the capital gains in the upcoming assessment year you are required to file your current income tax return, even if there is no taxable income.

Note:- Even if none of the above scenarios apply, filing a Nil ITR can still be beneficial. It creates a record of your income tax filing history, which can be useful for future financial needs.

How to file NIL Income Tax Return

The procedure of filing a Nil ITR is the same as filing a regular ITR. Tax2win’s AI-integrated ITR filing platform makes it extremely easy to file your ITR. With Tax2win, you can file it in less than 4 minutes.

Tax2win offers two types of ITR-filing options -

  • DIY ITR Filing - If you are someone whose annual income is below the basic exemption limit and have little knowledge about taxation, you can opt for filing your ITR on your own.
  • Expert-Assisted ITR Filing - If you are a complete novice when it comes to taxes and don’t know how to file your ITR, you can also hire an online CA to ensure accurate tax filing.

Read here to find out how to file ITR through Tax2win

Alternatively, you can also file your ITR using the Income Tax Portal.

Benefits of filing NIL Income Tax Return

Filing Nil ITR is beneficial in the following ways:

  • Authentic Proof of Your Income: It serves as a legal document mentioning all the details of your financial status. It is considered a solid proof of income and is accepted by each and every financial institution.
  • To claim a refund: Sometimes, TDS is deducted from the income earned even if the total income during a financial year is below the exemption limit. To claim such a deduction, an individual must mandatorily file an income tax return.
    File ITR
  • Legal proof while applying for loans: Bankers usually ask for the last three to five years of income tax returns while approving any kind of loan. A nil tax return can help in such a situation as it will act as a legal document.
  • Applying for a Visa: A NIL tax return can act as legal proof of income when it comes to a VISA application. It is compulsory, even if you didn’t have any income, for instance, to show the returns filed over the last three years when applying for a Schengen Visa.
  • Carry-forward of losses: Filing a return, even if it's a Nil return, becomes mandatory if an individual has suffered losses and wants to carry forward it to the next year.
  • Maintain Records: Filing a Nil ITR creates a record of your income tax filing history. This can be useful for your own reference or for future financial needs.

Can One Avoid Filing Nil ITR?

It is mandatory for those whose total income is more than Rs. 2,50,000. However, we recommend that you should file your income tax return, even though it is not mandatory if your total income isn’t over Rs. 2,50,000. Further, the basic exemption limit has been increased to Rs 3 lakh from Rs 2.5 lakh under the new tax regime.

ITR filing for FY 2023-24 has begun. File your ITR Now!

Frequently Asked Questions

Q- Do I have to file a NIL return for a company?

Yes, you have to file a nil return for your company, even if the company has no revenue or activity.

Q- Do I have to file a NIL return for a company even If my company does not have a bank account?

Yes, it is mandatory for a company to file a NIL return even If the company does not have a bank account. Bank accounts must be opened to file the ITR.

Q- What is the late fee/penalty for a nil income tax return?

Late fees or penalties are not applicable on NIL income tax returns. These are applicable when gross total income exceeds basic exemption limits.

Q- What happens if you file a nil income tax return after the due date?

If you filed NIL tax returns after the due date, then you will not be able to carry forward losses (other than house property loss) to the next assessment year.

Q- What documents are required to file a nil income tax return online?

The following documents should be kept handy before filing the Nil ITR - PAN, Bank account details and Salary details, Aadhaar, Form 16, Investment details, etc.

Q- How can an NRI file a nil income tax return?

ITR-2 needs to be filed by Non-Resident taxpayers. They can not file the ITR -1.

Q- Is it mandatory to file a nil income tax return?

No, It is not mandatory to file a NIL return.

Q- Which income tax form is applicable for filing nil return?

Income tax form applicability for filing Nil returns depends on your source of income. Normally, you can file the ITR-1.

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CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.