Wondering if you should file a Nil ITR? Here is how it helps

Who should file a Nil ITR?

A nil ITR can be filed by individuals whose income falls below the taxable limit after all applicable deductions and rebates or those who do not have any tax liability. Do note that for individuals under 60 years of age, the exemption limit under the old tax regime is Rs.2.5 lakh and Rs.3 lakh under the new tax regime.

Benefits of Filing ITR

Essential proof of income for visa applications

Your ITR is an official document that accounts for your income during a financial year, and is, thus, considered as proof of your income. If you’re traveling abroad and the necessary visa calls for proof of your income, embassies typically request for ITRs for the last three years to establish your income stability. So, if you’re planning a trip abroad, make sure you file your tax returns on time. It can also help portray you as a law-abiding citizen and hopefully improve your chances of being granted a visa.

Helps in securing loans

When you approach a lender for a loan, they would typically request you to furnish proof to establish your financial stability. Your ITR gives an account of your income, existing liabilities, and investments, and helps the lender gauge your repayment capacity. Thus, submitting your salary slips and ITRs can help improve your chances of securing the loan.

Enables you to claim tax refunds

When you file your ITR, you become eligible for claiming refunds against any surplus tax you may have paid. Even if your income is below the taxable limit, you may end up paying tax via tax deducted at the source (TDS) on salary income or interest earned. For this excess tax which you’ve paid, you can seek a refund by filing your income tax returns. Doing so also gives you a chance to claim deductions on investments and expenses under Sections 80C, 80D, etc., which can lower your taxable income.

Allows you to carry forward losses

Filing your income tax returns before the set deadline allows you to carry forward losses from stock market investments or business activities. You can carry forward these losses for as many as eight consecutive financial years. Thus, filing a Nil ITR can help offset future gains and income against the capital losses incurred. This brings down your income or gains in the future, thereby reducing your future tax liability.

Inculcates financial discipline and establishes your credibility

Filing your ITR every financial year will familiarise you with the process while helping you keep track of your tax liability. Filing your ITR on time also presents you as a credible individual to lenders and credit bureaus. Moreover, it may help qualify you for various government benefits and schemes, such as scholarships or subsidies, which often require the submission of an ITR. The process to file a Nil ITR is similar to that for filing regular ITR. You must login to the official website of the Income Tax Department using your registered user ID and password.

Once logged in, click on e-filing and enter the details required, including your income, account details, deduction details, Aadhaar, Form 16 information, etc. The website will then automatically compute your income tax. If you fall in the non-taxable income bracket, the website will display that no tax has to be paid by you. File your return with the Income Tax Department and finish the process by either sending your ITR-V to CPC Bengaluru or e-verifying your ITR.