Nil ITR Filing: While the Income Tax rules do not require individuals to file an Income Tax Return (ITR) if their income is below the basic exemption limit of Rs 2.5 lakh (Rs 3 lakh for senior citizens for AY 2023-24), there are several advantages to filing a Nil ITR even if your income is below the taxable threshold.
Section 139(1) of the Income Tax Act does not require individuals with incomes below the basic exemption limit of Rs. 2.5 lakhs (or Rs. 3,00,000 or Rs. 5,00,000 for senior citizens and super senior citizens, respectively) to file a tax return, according to Dr. Suresh Surana, founder of the tax consulting firm RSM India.
However, taxpayers are required to file ITR if they engaged in the following activities during the applicable fiscal year.
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- Deposited an amount or aggregate of the amounts exceeding Rs 1 crore in one or more current accounts maintained with a banking company or a co-operative bank.
- Incurred expenditure of an amount or aggregate of the amounts exceeding Rs 2 lakh for himself or any other person for travel to a foreign country.
- Incurred expenditure of an amount or aggregate of the amounts exceeding Rs 1 lakh towards consumption of electricity.
According to Dr Surana, taxpayers who do not meet the aforementioned requirements may voluntarily file tax returns, even if they are Nil returns, i.e. ITRs filed when income is below the base exemption limit.
Saakar S Yadav, Director and Founder of myITreturn.com, explains, “Even if an individual has no income or their total income is below the taxable threshold, they may still be required to file a Nil Income Tax Return (ITR) under certain conditions.”
Nil ITR Filing: Benefits of submitting no ITR
According to experts, there are several advantages to filing a Nil ITR when your income is below the tax exemption threshold.
- Income tax returns serve as evidence of income submitted to the Indian government authorities in an authorised format.
- Submission of ITR returns to lending banks and/or other similar institutions can facilitate the loan approval procedure.
- In cases of international travel, the visa authorities typically require recent tax returns.
- Students applying for scholarships may be required to submit copies of their tax returns.
- In order to claim the benefit of loss carryover, it is required to file a return of income.
- Refunds for TDS/TCS and rebates can only be claimed when income tax returns are filed.
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When should a Nil ITR be filed?
According to Yadav, a Nil ITR should be filed in the following scenarios:
- Amount or sum of quantities exceeding Rs 1 crore deposited in one or more current accounts in the preceding year.
- For travel to a foreign country, you or any other individual incurred expenses in excess of Rs 2 lakh.
- Those with assets located outside of India.
- Individuals with the authority to sign on foreign accounts.
- Individuals claiming a tax refund for TDS (Tax Deducted at Source) deducted on their income, even if their income falls below the taxable threshold.
- If a taxpayer incurs a loss during a fiscal year (such as a capital loss, business loss, or home property loss), they may be required to file a Nil ITR in order to carry forward the losses for future set-off against profits.
- The number of taxpayers filing a zero-tax ITR or Nil ITR has increased from 2.9 crore in FY 2019-20 to 5.16 crore in FY 2022-23, according to the Finance Ministry.
The deadline for filing the Income Tax Return, including the Nil ITR, for AY 2023-24 for taxpayers whose accounts are not subject to audit is July 31. If you have not yet filed, do so immediately rather than requesting an extension.