As the Tax season nears, many people are still wondering if they have to file returns if their income is less than the taxable limit. If your total income exceeds the basic exemption limit, filing an Income Tax return (ITR) is mandatory. And if it is below the limit, there are certain types of income, such as capital gains or income from foreign assets, which might still require you to file an ITR. In addition, if the said taxes were deducted at source (TDS) from any income, for instance the interest from a bank deposit, you must file an ITR to claim a refund for the excess TDS or any other tax payments made during the particular financial year.

Furthermore, you can receive a maximum tax rebate of up to Rs 12,500 under the old tax regime. While, under the new tax regime, it can be up to Rs 25,000. Consequently, one does not have to pay any income tax if your income is within the aforementioned specified limits. Having said that, even if your tax liability is reduced to nil due to these rebates, you are still mandated to file an income tax return (ITR) nonetheless.

Let’s Define NIL return

A tax filed when an individual or entity has no income or financial activity to report for a particular period is referred to as the NIL return. It can be termed as an ITR filed specifically to declare to the Income Tax department that no taxes have been paid in the stated financial year.

Why should you file an ITR even if  there is no Income Tax liability?

From claiming a tax refund, getting a visa, to carrying forward capital losses, and many more, there are many benefits of filing an ITR. 

Let us discuss a few of these benefits discussed in precise:

Proof of income: An individual’s ITR serves as an official document that can be used as proof of your income. This can be helpful when someone is applying for loans, visas, or any other financial transactions where there is a need to demonstrate a financial standing.

Claim deductions and refunds: You may have paid taxes through TDS (Tax Deducted at Source) on your salary, interest, or other sources of income  even if your income is below the taxable limit. So, by filing an ITR, you can claim a refund of the excess taxes that were paid.

Adding to it, you can also claim deductions for various investments and expenses. For instance, such as those under Section 80C, 80D, and others. This can significantly aid you in reducing your taxable income further and potentially result in a tax refund.

Easy loan approvals: Serving as authenticated income proof, Income tax returns can make it easier for you to obtain loans from lending institutions.

Carry forward losses: If you have to face any losses be it from stock market investments or business operations, you can carry them forward to the next year; one can set them off against your future income. However, you need to file an ITR first to do this.

Eligibility for government schemes: Some government schemes and benefits, such as scholarships or subsidies, might require you to have filed your ITR as a securance. With this, you can ensure that you are eligible for these benefits by filing your ITR.

Going abroad: The ITR form is one of those important documents required by many countries when he/she applies for a visa. This is due to a history of filing ITRs can help to demonstrate the much needed financial stability; hence making the individual a more viable candidate for a visa.